I have prepared an Analysis on Determination of Tax and Demand with Relevant Forms under CGST Act, 2017. The tax authorities reviewed from time to time on whether the tax payers are reported their turnovers and paid taxes to the department or not as per GST Law. In this process they can refer relevant sections i.e. from Sec.52 ,Sec.62, Sec.63, Sec.64, Sec.73, Sec.74,Sec.75,Sec.76, Sec.77 and Sec.78 of the CGST Act,2017,to determine tax liability in their notices, and will raise demand with relevant forms like DRC-01A, DRC-01,DRC-02, DRC-03,DRC-04, DRC-05,DRC-06, DRC-07,DRC-07A, DRC-08 and DRC-08A of CGST Act, & Rules,2017.
The CGST Act,2017, authorized the proper officer to determine and demand tax from the taxpayers under the following circumstances:
(i) The proper officer observed that the tax payer is not paid tax on their turnover for a particular tax period, issued notices under Section 73 Or Sec.74 of the CGST Act,2017.
(ii) The proper officer observed that the tax payer short paid tax on their turnover for a particular tax period, issued notices under Section 73 Or Sec.74 of the CGST Act,2017.
(iii) The proper officer observed that the proper officer tax erroneously refunded for a particular tax period, issued notices under Section 73 Or Sec.74 of the CGST Act,2017.
(iv) The proper officer observed that the taxpayer wrongly availed Input Tax Credit (ITC) for a particular tax period, issued notices under Section 73 Or Sec.74 of the CGST Act,2017.
(v) The proper officer observed that the taxpayer wrongly utilized Input Tax Credit (ITC) for a particular tax period, issued notices under Section 73 Or Sec.74 of the CGST Act,2017.
(vi) The proper officer observed that the taxpayer tax collected but not paid to the Government for a particular tax period, issued notices under Section 76 of the CGST Act,2017.
(vii) The proper officer observed that the taxpayer tax wrongly collected and paid to Central Government or State Government for a particular tax period, issued notices under Section 77 of the CGST Act,2017.
We have discussed, now about what are the procedures to be followed by the Proper Officer to be issue notices and raise demands on various situations under GST Law.
1. Section 52 of the CGST Act,2017, states that “Collection of Tax at Source”. As per this section any tax payers failure to Collection of Tax at Source” from his supplier, under that circumstances the proper officer can issue notice as per Sec.52 of the CGST Act,2017 along with penalty.
2. Section 62 of the CGST Act,2017,states that “ Assessment for Non-Fillers of Returns”. If any registered taxable persons are not filling GST returns ,under that circumstances, the proper officer can issue notice under Sec.46 of the CGST Act, 2017, After issuing notice , the proper officer has not received any reply from the registered taxable person, under that circumstances the proper officer can proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of 5 years from the date specified under Sec.44 for furnishing of annual return for the financial year to which the tax not paid relates.
3. Section 63 of the CGST Act,2017, states that” Assessment of Unregistered Person”. Where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of Sec.29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates, under these circumstances the proper officer can issued a notice,
Provided that no such assessment order shall be passed without giving the person an opportunity of being heard,
4. Section 64 of the CGST Act,2017, states that “ Summary Assessment in certain Cases”, the proper officer may, on any evidence showing a tax liability of a person coming to his notice , with the prior permission of Additional Commissioner or Joint Commissioner, proceed to access the tax liability of such person to protect the interest of revenue and issue an assessment Order, if he has sufficient grounds to believe that any delay in doing so may adversely affect the interest of revenue.
5. Section 73 of the CGST Act,2017, states that” Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts”, under that circumstances the proper officer can serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit , requiring him show cause as to why wrongly availed or utilized ITC in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.( This section can be used, when there is no willful intension).
6. Section 74 of the CGST Act,2017, states that” Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts”, under that circumstances the proper officer shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit , requiring him show cause as to why wrongly availed or utilized ITC in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. (This section can be used, when there is willful intension).
7. Section 75 of the CGST Act,2017, states that “ General Provisions Relating to Determination of Tax”
(1). Where the service of notice or issuance of order is stayed by an order of a court of Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in sub-section (2) to (10 ) of Section 73 or sub-Section (2) to (10 ) of Section 74, as the case may be.
(2). Where any Appellate Authority or Appellate Tribunal or Court concluded that the notice issued under sub-section (1) of Section 74 is not sustainable for the reason that the changes of fraud or any willful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of Section 73.
(3). Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a Court , such order shall be issued within two years from the date of communication of the said direction.
(4). An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty , or where any adverse decision is contemplated against such person.
(5). The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant of time to the said person and adjourn the hearing for reasons to be recorded in writing.
Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.
(6). The proper officer, in his order, shall set out the relevant facts and the basis of his decision.
(7). The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and do demand shall be confirmed on the grounds other than the grounds specified in the notice.
(8). Where the Appellate Authority or Appellate Tribunal or Court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified.
(9). The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.
(10). The adjudication proceedings shall be deemed to be concluded , if the order is not issued within three years as provided for in sub-section (10) of Section 73 or within 5 years as provided for in sub-section (10) of Section 74.
(11). An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its direction which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending , the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in sub-section (10) of Section 73 or sub-Section (10) of Section 74 where proceedings are initiated by way of issue notice under the said sections.
(12). Notwithstanding anything contained in section 73 or section 74 , where any amount of self-assessed tax in accordance with a return furnished under section 39 remains paid, either wholly or partly, or amount of interest [ayable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.
(13). Where any penalty is imposed under Section 73 or Section 74 , no penalty for the same act or omission shall be imposed on the same person under any other provisions of this Act.
8. Section 76 of the CGST Act,2017, States that”:-
(1). Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or Court or any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government ,shall forthwith pay the said amount to the Government , irrespective of whether the supplies in respect of which such amount was collected are taxable or not.
(2). Where any amount is required to be paid to the Government under sub-section (1), and which has not been so paid, the proper officer may serve on the person liable to pay such amount a notice requiring him to show cause as to why the said amount as specified in the notice , should not be paid by him to the Government and why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act.
(3). The proper officer shall, after considering the representation , if any, made by the person on whom the notice is served under sub-section (2) , determine the amount due from such person and thereupon such person shall pay the amount so determined.
(4). The person referred to in sub-section (1) shall in addition to paying the amount referred to in sub-section(1) or sub-section (3) also be liable to pay interest collected thereon at the rate specified under sec.50 from the date such amount was collected by him to the date such amount is paid by him to the Government.
(5). An opportunity of hearing shall be granted where a request is received in writing from the person to whom the notice was issued to show cause.
(6). The proper officer shall an order within one year from the date of issue of the notice.
(7). Where the issuance of order is stayed by an order of the court or Appellate Tribunal, the period of such stay shall be excluded in computing the period of one year.
(8). The proper officer, in his order, shall set out the relevant facts and the basis of his decision.
(9). The amount paid to the Government under sub-section (1) or sub-section (3) shall be adjusted against the tax payable, if any by the person in relation to the supplies referred to in sub-section(1).
(10). Where any surplus is left after the adjustment under sub-section (9) , the amount of such surplus shall either be credited to the Fund or refunded to the person who has borne the incidence of such amount.
(11). The person who has borne the incidence of the amount , may apply for the refund of the same in accordance with the provisions of section 54.
9. Section 77 of the CGST Act,2017, state that” Tax wrongly collected and paid to Central Government or State Government”.
(1). A registered who has paid the Central Government and State Tax or as the case may be, the central tax and the Union Territory Tax on a transaction considered by him to be an intra –State supply, but which is subsequently held to be an inter-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed.
(2). A registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply , shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be , the central tax and the Union Territory Tax payable.
10. Section 78 of the CGST Act,2017, states that “ Initiation of Recovery Proceeding”, any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated:
Provided that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing , require the said taxable person to make such payment within such period less than a period of 3 months as may be specified by him.
Now, discussed bout what are the procedures to be followed by the Proper Officer for demand of Tax with relevant forms on various situations under GST Law.
The proper officer, for recovery of demands ,these following forms can be issued with demand to the taxpayers, i.e. (i) DRC-01A (ii) DRC-01 (iii) DRC-02 (iv) DRC-03 (v) DRC-04 (vi) DRC-05 (vii) DRC-06 (viii) DRC-07 (ix) DRC-07A, (x) DRC-08 (xi) DRC-08 (xii) DRC-08A to recovery of demand from the taxpayers under CGST Act,2017.
1) Form DRC-01A: Form DRC-01A relates to “Intimation of tax ascertained as being payable under Sec.73(5), Sec.74(5) of the CGST Act,2017. This form has been inserted in the rules vide Notification No. 49/2019-Central Tax,dt.9th ,October, 2019, and also notified new sub-rules has been inserted, sub-rule (1A) and sub-rule (2A) in Rule 142 of the CGST Rules, 2017.
As per new rule the proper officer before charging the show cause notice as per Section 73(1) or Section 74(1) shall intimate the details of demand ascertained in Part A of this form. As per sub-rule (2A) the recipient of Part A of Form DRC-01A can intimate the officer about the partial payment which the taxpayer has made and can file reply against Part A of Form DRC-01 A through Part B of Form DRC-01A.
2) Form DRC-01: Form DRC-01 relates to “Summary of Show Cause Notice”. The proper officer can be electronically uploaded as per provisions of rule 100(2) and rule 142(1)(a) of the CGST Rules,2017. Amended Form DRC-01 is substituted vide Notification No.16/2019-Central Tax,dt.29.03.2019 is a summary of the notice issued under Sec.52, Sec.63, Sec.73. Sec.74, Sec.76, Sec.122, Sec.123,Sec.124, Sec.125, Sec.127, Sec.129 and Sec. 130 of CGST Rules,2017.
3) Form DRC-02: Form DRC-02 relates to” Summary of Statement”, Form DRC-02 has incorporated with modifications vide Notification No.16/2019-Central Tax,dt.29.03.2019,w.e.f.1st April,2019, the proper officer after issuing show cause notice under Sec.73(1) or Sec.74(1) of the CGST Act,2017,wants to issue details of tax unpaid or short paid for the same ground but for any other tax period, then he can issue a statement abiding section 73(3) or Sec.74(3) of the CGST Act,2017, uploaded electronically by the officer.
4) Form DRC-03: Form DRC-03 relates to “Intimation of payment made voluntary or made against the show cause notice or Statement”. As per rule 142(2) and Rule 142(3) of the CGST Rules,2017, the payment of admitted tax either voluntary, before service of any notice or after getting show cause notice or statement along with interest with Form DRC-01 and Form DRC-02 respectively is done by From DRC03.
5) Form DRC-04: Form DRC -04 relates to “ Acknowledgment of acceptance of payment made voluntary”, The proper officer after getting the payment made through Form DRC-03 shall issue an acknowledgment accepting payment ,as per Rule 142(2) of the CGStT Rules,2017. Acceptance for one payment by the proper officer will not restrict the taxpayers to make another payment vide Form DRC-03.
6) Form DRC-05: Form DRC-05 relates to “Intimation of conclusion of proceedings”, As per provisi0ons of Rule 142(3) of the CGST Rules, 2017,the proper officer after being satisfied with the payments made by the registered taxable person ,intimating him the closures of proceedings initiated by the proper officer.
7) Form DRC-06: Form DRC-06 relates to “ Reply to Show Cause Notice”. Form DRC-06 can be filed by the taxpayers for giving reply of the show cause notice issued and the summary of details uploaded electronically in Form DRC-01 as per Rule 142(4) of the CGST Rules,2017. If the taxpayers choosing for person hearing then he can communicate the same to the adjudicating authority through this form .
8) Form DRC-07: Form DRC-07 relates to “Summary of the Order”. The proper officer can be uploaded by electronically as per Rule 142(5) of the CGST Rules, 2017, after issuance of the final order under Section 52 or Section 62or Section 63, Section 64, Section 73 or Section 75 or Section 76 or Section 122 or Section 123,or Section 124, or Section 125, or Section 127 or Section 129 or Section 130 .
The amount of tax payable along with interest and penalty is specified in this form. On submission of the Form DRC-07 to the GSTN through an API , a demand ID is generated with creation of liability in the liability registered part-II .
9) Form DRC-07A: Form DRC-07A relates to “Summary of the order creating demand under existing laws”. The CBIC has been included in the rules vide Notification NO.60/ 2018-Central Tax-dated. 30.10.2018 w.e.f.30.10.2018. as per that notification a new sub-rule , sub-rule (A) has been added in rule 142 of the CGST Rules,2017. According to rule 142(A)(1) ,if any amount is recoverable for any of the proceedings launched under any existing law before or after the appointed day, which has not been recovered under that law can be recovered under this Act, and the summary of that order is uploaded by the proper officer in Form DRC-07A, and after the demand of that order is posted in part II of the electronic liability register in form GST PMT-01.
10) Form DRC-08: Form DRC-08 relates to “Summary of Rectification /Withdrawal Order”, The proper officer can upload Form DRC-08 electronically after passing the final order. If the proper officer received an application for rectify or withdrawn the final order which he has passed and uploaded the summary in Form DRC-07. An order can be rectified under Section 161 of the Act. The time limit for rectification of order is 6 months from the date of issue of order.
11) Form DRC-08A: Form DRC-08A relates to “ Amendment / Modification of summary of the order creating demand under existing Laws”. This form has also been included in the CGST Rules,2017 vide Notification No.60/2018-Central Tax,dated.30th Oct’2018 w.e.f.30th Oct’2018. According to new rule, rule 142(A)(2) ,if any order of demand uploaded with summary in DRC-07A is rectified or modified or quashed in any proceeding including proceedings in any proceeding including proceedings in any of the grievance forum i.d. appeal, review or revision, or the recovery is made under the existing law then the proper officer issue the rectified order. The proper officer uploaded summary of the order electronically. Similarly with upload of this form part II of Electronic liability register is updated in form GST PMT-01.
The proper officer can be used these following forms under various circumstances under CGST Law,2017.
Form No. |
Sections |
Rule |
Occasion |
Issuer |
Recipient |
Form DRC-01A |
73(1),73(5) &74(1) 74 (5) |
142(1A), 142(2A) |
“Intimation of tax ascertained as being payable under Sec.73(5), Sec.74(5) of the CGST Act,2017”. |
Part-A-Proper officer, Part-B- Taxpayer/Recipient of Part A |
Part-A, Taxpayer, PART-B-Proper Officer/Issuer of Part-A |
Form DRC-01 |
52,63,73,74,76, 122,123,124,125,127,129 and 130 |
100(2),142(1) |
“Summary of Show Cause Notice”. |
Proper Officer |
Taxpayer |
Form DRC-02 |
73(1),73(3)&74(1) 74 (3) |
142(1)(b) |
“Summary of Statement” |
Proper Officer |
Taxpayer |
Form DRC-03 |
73(1),73(3)&74(1) 74 (3) |
142(2)& 142(3) |
Intimation of payment made voluntary or made against the show cause notice or statement |
Taxpayer |
Proper Officer |
Form DRC-04 |
52,63,73,74,76, 122,123,124,125,127,129 and 130 |
142(2) |
Acknowledgment of acceptance of payment made voluntary |
Proper Officer |
Taxpayer |
Form DRC-05 |
52,63,73,74,76, 122,123,124, 125,127,129 and 130 |
142(3) |
Intimation of conclusions of proceedings. |
Proper Officer |
Taxpayer |
Form DRC-06 |
52,63,73,74,76, 122,123,124, 125,127,129 and 130 |
142(4) |
Reply to the show cause notice. |
Taxpayer |
Proper Officer |
Form DRC-07 |
52,63,73,74,76, 122,123,124, 125,127,129 and 130 |
142(5) |
Summary of the Orders. |
Proper Officer |
Taxpayer |
Form DRC-07A |
52,63,73,74,76, 122,123,124, 125,127,129 and 130 |
142 A(1) & 142(5) |
Summary of the order creating demand under existing Laws. |
Proper Officer |
Taxpayer |
Form-DRC-08 |
52,63,73,74,76, 122,123,124, 125,127,129, 130 &161 |
142(7) |
Summary of rectification /Withdrawal of Order. |
Proper Officer |
Taxpayer |
Form-DRC-08A |
52,63,73,74,76, 122,123,124, 125,127,129 and 130 |
142A(2) & 142 (7) |
Amendment / Modification of summary of the order creating demand under existing Laws. |
Proper Officer |
Taxpayer |
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