Introduction: The Goods and Services Tax (GST) legislation, encapsulated within Sections 73 and 74 of the GST Act, delineates clear procedures for addressing discrepancies such as unpaid or short-paid tax, improper refunds, or incorrect availment of input tax credit. These sections draw a significant distinction between unintentional errors, which are not aimed at defrauding the tax authorities, and deliberate actions intended to evade tax liabilities. This article delves into the nuances of these provisions, highlighting the procedural aspects, penalties involved, and the implications for taxpayers.
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When there is No Fraud (Section 73)
Condition
If
- Tax is unpaid/short paid or,
- Refund is wrongly availed or,
- The input tax credit has been wrongly availed/utilised
And the cause of above is merely a Mistake or Error and not the Intention to defraud the competent authorities then the proper officer (i.e. GST authorities) will issue a show-cause notice on the taxpayer. They will be required to pay the amount due, along with interest and penalty.
Upto When the Authorities can issue a SCN
The proper officer is required to issue the show-cause notice 3 months before the expiry of 3 years from the due date for filing of annual return for the year to which the amount relates.
For Example: For Period July 2022 i.e. FY 2022-23, the Proper Office could issue a SCN upto 30th September 2026 i.e. 3 Months before the expiry of 3 Years from the due date of filing Annual Return for FY 2022-23(31st December 2023)
Voluntary Tax Payment
A person can pay tax along with interest, based on his own calculations (or the officer’s calculations), before the notice/statement is issued and inform the officer in writing of the same. The officer will not issue any notice in this case. However, if the officer finds that there is a short payment, they can issue a notice for the balance amount.
Penal Provisions
If the taxpayer pays all their dues within 30 days from the date of the notice, then the penalty will not be applicable.
However if the taxpayer delays in payment of dues and pays after expiry of 30 days from the date of notice then the he would be liable to pay an amount higher of Rs. 10000 or 10% of demanded tax.
When there is a Fraud (Section 74)
Condition
If
- Tax is unpaid/short paid or,
- Refund is wrongly availed or,
- The input tax credit has been wrongly availed/utilised
And the cause of above is not a Mistake or Error but the Intention to defraud the competent authorities either through Willful misstatement, Fraud or Suppression of Facts.
Then in such cases, the proper officer will serve a show-cause notice to the taxpayer. The taxpayers will be required to pay the amount due along with interest and penalty.
Upto when the Proper Officer can Issue the SCN
For cases of fraud, the proper officer is required to issue the notice 6 months before the expiry of 5 years from the due date for filing of annual return for the year to which the amount relates.
For Example: For the period July 2022 i.e FY 2022-23, the Proper Officer can issue a SCN up to 30th June 2028 i.e. 6 months before the expiry of 5 years from the due date of Filing annual return for the FY 2022-23 (31st December 2023)
Voluntary Tax Payment
In instances where an individual proactively pays the tax, including interest and a 15% penalty, based on either their own assessment or that of the officer, prior to the issuance of any notice or statement, and communicates this payment in writing to the officer, the officer is then precluded from issuing a notice.
Nevertheless, should it be discovered by the officer that the payment made falls short of the actual amount due, they retain the authority to issue a notice for the outstanding balance.
Penal Provisions
If the taxpayer pays the tax along with interest before the notice/statement is issued then a 15% penalty on demanded tax will be levied
If the taxpayer pays all their dues within 30 days from the date of notice then a penalty of 25% on the demanded tax will be levied.
If the taxpayer pays all their dues after 30 days from the date of order then a penalty of 50% on the demanded tax will be levied.
For any other cases Penalty of 100% will be levied.
Important Points to be noted
When a Tribunal or Court has issued a stay against the service of notice or the issuance of an order, the duration of the stay will be omitted from the computation of the stipulated time frames of three and five years.
Should the Appellate Authority, Tribunal, or Court determine that allegations of fraud are unfounded (meaning the case does not involve fraud), the previously issued notice will be treated as if it were issued under Section 73 (pertaining to cases without fraud). Consequently, the tax official will adjust the tax calculation based on this reclassification.
In conclusion, navigating the intricacies of GST demand provisions requires a meticulous understanding of the statutory guidelines outlined in Sections 73 and 74. Whether addressing inadvertent errors or deliberate fraud, the framework provides a structured approach to rectify discrepancies and enforce compliance. By adhering to timelines for issuing notices, facilitating voluntary tax payments, and accounting for legal interventions, the system aims to foster transparency and accountability within the GST regime. Ultimately, a robust comprehension of these provisions empowers taxpayers and authorities to navigate challenges, uphold integrity, and ensure the equitable resolution of disputes.
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