“Uncover the concerns and challenges of GST Rule 88C, introduced through Notification No. 26/2022-Central Tax, in the form of FORM GST DRC-01B. Explore the potential abuse of power, short response time, and initiation of recovery under Section 79. Understand the implications and consider the constitutionality of Rule 88C. Stay informed and protect your rights.”
Since the introduction of GST, a lot many changes are brought in GST system. One such change has been brought in the form of Rule 88C which is inserted in CGST Rules 2017 vide Notification No. 26/2022-Central Tax dt. 26.12.2022. Rule 88C provides that in case of outward supply shown by an assessee in FORM GSTR-1 in respect of a tax period is more than the outward supply shown in GSTR-3B, an intimation in FORM GST DRC-01B will be shown on assessee’s portal and shall also be sent to the assessee on his email ID which the assessee is bound to reply/clarify/deposit tax with interest within 7 days. If assessee doesn’t do so, recovery shall be initiated as per section 79.
Apparently this section seems nothing but another intimation just like DRC-01A, ASMT-10. It seems that GSTR-1 and GSTR-3B will be compared with the help of automated online tools available with department and discrepancy will be intimated to the assessee. However, this section is nothing but another too of abuse of power detrimental to the assessee, less to the departmental officers as well.
Here are 3 points which are the indicative of abuse of power and tool of assessee’s harassment:
1. Comparison of GSTR-1 and GSTR-3B of one tax period: This section compares the outward supply declared in GSTR-1 and GSTR-3B of one tax period. It is crucial to understand here that the outward supply shown in GSTR-1 can be amended/corrected till the due date of filing GSTR-1 of September month of subsequent year or due date of filing annual return, whichever comes earlier. Outward supply of one tax period can be shown in another tax period too. Let’s illustrate this with the help of a live example.
Suppose, outward supply of March month of 2021 was shown Rs. 80/- and tax in GSTR-3B of March 2021 was paid against outward supply of Rs. 100/. Reason may be some sale invoices were missed in GSTR-1 of March 2021 or advance was received etc. Now the invoices of difference of Rs. 20/- of March 2021 were shown in GSTR-1 of April 2021 on which tax was paid in GSTR-3B of March 2021 itself.
Now, department issues an intimation in Part A of DRC-01B for the tax period April 2021 to March 2022 wherein it was intimated that outward supply shown in GSTR-1 of April 2021 was more than outward supply shown in GSTR-3B of April 2021. As from the above illustration, it is quite clear that the difference shown in DRC-01B for tax period 2021-22 actually belongs to tax period 2020-21 on which tax was paid in 2020-21 itself. Here starts the harassment. On the basis of above facts, it is quite clear that there is no difference at all if both the tax period 2020-21 and 2021-22 are taken together, no tax is unpaid, however, the assessee needs to compile the data of previous two Financial Years which obviously takes time and causes unnecessary compliance burden on the assessee. Here automated online tools are nothing but a tool of harassment.
2. Time limit is just 7 days: This compliance burden turns into harassment when a very small window of 7 days is allowed to reply. These are just ‘seven days’, not ‘seven working days’. This needs to understand that assessee has 5/6 days in hand as per the working days of the company/firm.
Now, the cherry on the top is: this intimation will be available on GST portal and on E-mail ID only. There is no requirement to send hard copy. Limitation period starts from the day of availability of intimation on GST portal and on E-mail ID.
There may be cases, where the concerned person to whom mail is sent or who gets information of online intimation may be ill, may be out of India, may be on leave, may not get time to access intimation or may have met with some serious injury or anything due to which he is not in a position to respond within this 7 days period. It may also be possibility that accountant/CA who had handled the data of 2020-21 might have left and data needs to analysed afresh and reason has to be found out.
So, the assessee needs to think of answering this DRC-01B first and think of business later on as if he is running business to reply to department only. So, leave all work aside and get ready for replying the intimation within 7 days’ time period, sorry 5/6 days.
3. Recovery will be initiated as per section 79: This is the biggest cause of concern where inability to reply within 7 days will result into direct recovery of so called tax dues which are actually not payable at all. Section 79 gives direct power to recover money. There is no requirement to issue any notice, wait for any reply or passing of any order. Ex-parte direct recovery will be started against the assessee for no fault of his.
Section 79 allows recovery officer to detain & sell all movable & immovable property including goods, block ITC, direct any person owing money to assessee to directly pay to government instead of assessee, freeze his bank account, insurance money, FD etc. In other words, a person can be left helpless for no fault of his.
Similarly, department officers are also burdened with issuance of such unnecessary intimations and handling their replies and in initiation of recovery proceedings.
Unconstitutionality of Rule 88C: It is quite noticeable that GST collection of government is increasing with every passing month and it is quite unpredictable why the government is so eager to take such drastic steps of recovery without notice with just a notice of 7 days. This eagerness is nothing but abuse of power at the hands of decision makers.
Since this section does not allow ample time to an assessee to reply to DRC-01B and recovery proceedings are also to be initiated without following the rule of ‘Audi alteram partem’, this section is clearly against the Rule of Natural Justice and is unconstitutional. This section further takes away the constitutional right of livelihood, thereby, right of life of assessee as enshrined in Article 21 of Constitution of India. Therefore, constitutionality of this section should be challenged before court of law.
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