Demands & Recovery under GST | Section 73 | CGST Act 2017

Simplified GST Series –Demands & recovery /Section 73/CGST ACT 2017

Section 73- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts.

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he 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 utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified 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.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.

(4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice

Analysis- Section 73 deals with determination of tax and its demand & recovery under certain

circumstances such as:

• Tax not paid; or
• Tax short paid; or
• Tax erroneously refunded; or
• Input tax credit wrongly availed or utilised.

This section specifically covers determination of such taxes under circumstances of

cases not involving fraud, wilful misstatement or suppression of facts.

• The provision provides for –

            (a) Service of notice by proper officer;

            (b) Notice shall be served on the person who is chargeable with tax, who has –

– Not paid or short paid the tax;

– Received the erroneous refund;

– Wrongly availed or utilized input tax credit;

(c) Such amounts as mentioned above shall be required to be determined along with the applicable interest as per Section 50 and penalty leviable under the provisions of this Act or the rules made thereunder.

• The notice has to be issued at least three months prior to the time limit of three years for issuance of order.

• The proper office shall along with Notice provide a summary in Form GST DRC- 01 specifying therein the details of the amount payable.

Where no notice is required to be issued for demand: Subsequent to issue of a notice under Section 73(1) to a person, where the proper officer finds similar issues for any period, the proper officer may, instead of issuing a detailed notice for such period, serve a statement containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such subsequent period not covered in the earlier notice so issued under section 73(1). Service of such statement shall be deemed to be service of notice as per Section 73(1) on the condition that the grounds relied upon are the same as those mentioned in the earlier notice issued for previous period. The proper office shall along with the statement, provide a summary in  Form GST DRC-02, specifying therein the details of amount payable.

(5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. 

(6) The proper officer, on receipt of such information, shall not serve any notice under Sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. 

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. 

Analysis – Voluntary payment of tax and interest before issue of notice/statement:

Voluntary payment of tax and interest as per Section 50 before issue of notice/statement can be done either

• As per own ascertainment of such tax and interest or;
• As per the ascertainment of tax and interest by the proper officer;
• In accordance with the provisions of the Act;

and the same shall be intimated to the proper officer in Form GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made, in FORM GST DRC–04. Thereafter, the proper officer shall not serve any notice / statement to the extent of such payment. In such situations, there can be no further proceedings with regard to tax and penalty so paid.

• When the amount paid as per the ascertainment of the assessee falls short, the proper officer shall issue a notice for the amount of shortfall.

(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of thesaid notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.

(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund. 

(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax. 

Analysis- In situations where the assessee makes the payment of tax along with interest within 30 days of issuance of Notice / Statement and intimates the proper officer of such paymentin FORM GST DRC-03 the proper officer shall issue an order in FORM GST DRC-05 Concluding the proceedings in respect of the said notice and subsequently no penalty shall be payable.

• In situations where the person files a reply or representation, the proper officer after considering the representation, the proper officer shall issue an order in FORM GST DRC-06, consisting of the amount of tax, interest and penalty (i.e. tax + interest +penalty). The amount of penalty shall be higher of 10% of tax or ` 10,000/-. A summary of such order shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.
• It must be noted that the proper officer is required to pass an order within a period of 3 years from the –
• due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates.
• date of erroneous refund

Summary of penalty provisions- 

If tax, interest and penalty (as indicated in the table below) is paid, then all the proceedings in that respect shall stand concluded-

Provisions of Section 73 very important so any queries/doubts related to above mailed at [email protected].