Summary: Section 75 of the Central Goods and Services Tax (CGST) Act, 2017 outlines the general procedures for determining tax demands under GST. These provisions govern the process when tax authorities identify short payment, non-payment, erroneous refunds, or incorrect input tax credit utilization. Key aspects covered include the exclusion of court or tribunal stay periods from limitation periods for issuing orders, and the treatment of cases where fraud charges are not substantiated, leading to application of less stringent provisions (Section 73 instead of 74) and potentially lower penalties (Section 74A(5)(i)). The section mandates providing taxpayers an opportunity of hearing if requested or if adverse action is proposed, allowing up to three adjournments for valid reasons. Orders must be reasoned and cannot exceed the tax amount or reasons specified in the initial notice. Interest on unpaid tax is payable even if not explicitly stated in the order. The section also sets time limits for issuing orders (as per Sections 73, 74, or 74A), after which the case is deemed concluded, and excludes time spent on pending appeals in similar cases from these deadlines. It clarifies that self-assessed tax shown in returns but unpaid can be recovered directly under Section 79, and ensures that a penalty imposed under Section 73, 74, or 74A for a specific default precludes a second penalty for the same issue under other sections.
Introduction
Demand of Tax Under GST by Tax Authorities
Demand under GST and the recovery provisions will be initiated if there is a failure to pay the tax in compliance with the Goods and Services Tax (GST) laws.
GST is payable on a self-assessment basis. If the assessee pays the tax on self-assessment correctly then there will not be any problem.
If there is any short payment or wrong utilisation of input tax credit, then the GST authorities will initiate demand and recovery provisions against the assessee. Provisions of demand under the GST Act and the consequent recovery provisions are similar to the provisions of the erstwhile Service Tax and Central Excise laws.
The determination of tax under the GST law is a crucial aspect of ensuring
compliance and proper administration of the tax system. Section 75 of the Central Goods and Services Tax (CGST) Act, 2017 lays down the general procedural framework to be followed during adjudication of tax demands, whether arising from short payment, non-payment, erroneous refunds, or wrongful availment of input tax credit. These provisions act as guiding principles for proper officers and protect the rights of taxpayers by ensuring fairness, transparency, and adherence to timelines. This section works in conjunction with Sections 73, 74, and 74A, and deals with issues such as limitation periods, opportunity of hearing, content of orders, limits on tax demands, and procedural safeguards.
Provisions Relating to Determination of Tax by tax authorities
(1) Exclusion of Stay Period
- Meaning: If a court or tribunal puts a temporary stop (stay) on a notice or order, the time of the stay won’t be counted in the overall deadline to decide a tax matter.
- Example: If the limit is 3 years to finalize a case and there is a 6-month stay, those 6 months won’t be counted in the 3 years.
(2) Downgrading Fraud Charges
- Meaning: If higher authorities say fraud wasn’t proven, the case is treated as a regular case (Section 73 instead of 74).
- Example: If fraud was wrongly alleged in a notice under Section 74, it will be treated like a normal tax default (Section 73).
(2A) Penalty Downgrade under Section 74A
- Meaning: If no fraud is proved, a lighter penalty under Section 74A(5)(i) applies instead of 74A(5)(ii).
- Example: A person gets a lower penalty as fraud wasn’t proved.
(3) Time Limit for Fresh Order after Direction
- Meaning: If an appellate authority tells the tax officer to pass a new order, it must be done within 2 years.
- Example: High Court orders re-assessment; the officer must pass the new order within 2 years.
(4) Opportunity of Hearing
- Meaning: A person must be given a chance to be heard if they ask in writing or if any adverse action is planned.
- Example: A taxpayer writes a letter asking to present his case; the officer must allow it.
(5) Granting Adjournments
- Meaning: Officers can postpone hearings if the taxpayer has a valid reason but only up to 3 times.
- Example: A person falls sick; the officer can reschedule the hearing, but not more than 3 times.
(6) Reasoned Orders
- Meaning: The officer must explain the facts and basis of their decision in writing.
- Example: The order must mention what records were checked and why tax is being demanded.
(7) Limits of Tax Demand
- Meaning: Tax demand can’t exceed the amount or reasons mentioned in the notice.
- Example: If the notice says ₹1 lakh due to under-reporting, the final order can’t demand ₹1.5 lakh for a different reason.
(8) Adjustment Post-Appeal
- Meaning: If the tax amount changes after appeal, the interest and penalty also change accordingly.
- Example: Tax reduced from ₹2 lakh to ₹1 lakh by tribunal, penalty and interest also reduce.
(9) Interest Payable
- Meaning: Interest on unpaid tax must be paid even if not explicitly mentioned in the order.
- Example: Tax due is ₹50,000; interest must be paid regardless of whether the order mentions it.
(10) Time-Bound Adjudication
- Meaning: If an order is not issued within the specified time (as per Sec 73(10), 74(10), or 74A(7)), the case is considered closed.
- Example: If the department doesn’t issue the final order within 3 years, the case is deemed closed.
(11) Exclusion of Appeal Time
- Meaning: Time taken in pending appeals in similar cases (which affect revenue) will be excluded from the deadline to issue orders.
- Example: A similar case is under appeal in the Supreme Court, and that time won’t be counted in deadline calculations.
(12) Recovery of Self-Assessed Tax
- Meaning: Even if not covered under Sections 73 or 74, any unpaid tax shown in returns (as per Section 39) can be directly recovered under Section 79.
- Example: You file GSTR-1 showing tax, but don’t pay via GSTR-3B — the government can directly recover it.
(13) No Double Penalty
- Meaning: If a penalty is imposed under Section 73, 74, or 74A, no second penalty for the same default will be applied under other provisions.
- Example: If a person pays ₹10,000 penalty under Section 74, they won’t be penalized again under another section for the same issue.
Conclusion
- Section 75 of the CGST Act serves as the backbone of procedural fairness in tax determination under GST. It ensures that taxpayers are given adequate opportunities to be heard, mandates reasoned and time-bound orders, and protects them from arbitrary demands or double penalties. By laying down clear timelines and safeguards, it balances the enforcement powers of the tax authorities with the legal rights of the assessee. A proper understanding of these provisions is essential for both tax professionals and businesses to manage compliance effectively and to defend their interests during adjudication proceedings.
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