How to Deal with GST notice?

Introduction:

The Goods and Services Tax (GST) is a taxation system that was introduced in India with the goal of simplifying the country’s complex tax structure and enhancing the ease of doing business. This tax reform, implemented to replace multiple indirect taxes, aimed to streamline the taxation process and create a unified tax system. GST was envisioned as a significant step towards creating a business-friendly environment in India. By consolidating various taxes, it sought to reduce the tax burden on businesses and make compliance more straightforward.

The idea behind GST was to bring about a uniform tax structure, eliminate cascading taxes, and facilitate a smoother flow of goods and services across the country. The system aimed to create a transparent and efficient taxation mechanism, making it easier for businesses to navigate the complexities of taxation. However, recent developments have raised concerns about the impact of GST on businesses, particularly with the surge in tax notices and challenges faced by various sectors.

The Current Scenario:

In recent times, there has been a notable upswing in the issuance of tax notices, creating a wave of concern among businesses and individuals in India. These notices, often accompanied by substantial financial demands, have sparked widespread discussions about the challenges posed by the Goods and Services Tax (GST) system.

The magnitude of the issue becomes apparent when we delve into the staggering amounts involved in these tax demands. Businesses, especially those operating in sectors like online gaming platforms and casinos, are finding themselves at the center of this storm. The demands raised by tax authorities have reached unprecedented levels, leading to financial strain on companies already grappling with the economic aftermath of the pandemic.

Online gaming platforms, which have gained significant popularity in recent years, are particularly feeling the heat of these tax notices. The demands raised against them are not only substantial but also raise questions about the interpretation and application of GST rules in the context of digital services. The impact is not limited to a specific sector; it has broader implications for the business environment in the country.

As the surge in tax notices continues, it prompts a closer examination of the GST framework and its effectiveness in achieving its intended goals. The challenges faced by businesses highlight the need for a reevaluation of the system to ensure that it strikes the right balance between revenue generation for the government and the ease of doing business for enterprises.

Root Causes of the Issue:

Delayed Assessment Audits: The recent upsurge in tax notices can be traced back to delayed assessment audits. Tax authorities are currently grappling with a backlog spanning five years, leading to a situation where numerous businesses and individuals are facing the consequences of assessments that were postponed or not completed in a timely manner. This backlog has created a domino effect, with a cascade of notices being issued to address the pending assessments.

Backlog Impact: The backlog in assessment audits has far-reaching consequences. Businesses, which may have operated under a certain tax framework for years, are suddenly confronted with demands and notices related to assessments that were pending for an extended period. This retrospective enforcement is causing significant challenges, as businesses are forced to navigate through complex tax implications for transactions that occurred years ago.

September 2023 Due Date Pressure: Adding to the complexity is the impending due date in September 2023 for issuing notices. Tax authorities are under immense pressure to meet their targets, and as a result, there has been a rush to issue notices within a specific timeframe. This urgency, driven by the upcoming due date, has led to a surge in the number of notices being dispatched without thorough scrutiny. The focus on meeting targets has sometimes overshadowed the need for a meticulous and fair examination of each case.

Impact Across Sectors: Various sectors, including online gaming platforms and casinos, are particularly affected by this sudden surge in tax notices. The expansive scope of the notices has created uncertainty and financial strain for businesses, especially those operating in industries where transactions are intricate and may require careful examination. The impact is not limited to a specific sector, showcasing the widespread repercussions of the current tax notice scenario.

Addressing these root causes necessitates a comprehensive review of the GST framework, with a focus on streamlining assessment processes, ensuring timely audits, and reevaluating the practicality of imposing demands for transactions dating back several years. The urgency to meet targets should be balanced with the imperative of fostering a fair and transparent taxation environment.

Types of GST Notices Issued:

1. GSTR-3A Default Notice:

  • Description: Default notice to non-filers of GST returns in GSTR-1, GSTR-3B, GSTR-4, or GSTR-8.
  • Reply or Action: File the pending GST Returns along with late fees and interest, if any.
  • Time limit to respond: 15 days from the date of receiving notice.
  • Consequence of non-response: Tax is assessed to the best judgment using available information. A penalty is applicable, either Rs. 10,000 or 10% of the tax due, whichever is higher.

2. CMP-05 Show Cause Notice:

  • Description: Show cause notice questioning the eligibility to be a composition dealer.
  • Reply or Action: Justify reasons for continued eligibility for the composition scheme.
  • Time limit to respond: 15 days of receipt of the notice.
  • Consequence of non-response: Penalty stipulated under section 122 and order in CMP-07 denying the benefit of the composition scheme.

3. REG-03 Verification Notice:

  • Description: Notice issued during GST registration verification, requiring clarification for the information provided or additional documents.
  • Reply or Action: Respond in REG-04 with necessary clarification or information.
  • Time limit to respond: Within 7 working days from the date of receiving the notice.
  • Consequence of non-response: Application rejection, informing the applicant electronically in REG-05.

4. REG-17 Show Cause Notice for Cancellation:

  • Description: Show cause notice questioning why GST registration should not be canceled.
  • Reply or Action: Respond in REG-18 with reasons for non-cancellation.
  • Time limit to respond: Within 7 working days from the date of receiving the notice.
  • Consequence of non-response: Cancellation of GST registration in REG-19.

5. REG-23 Show Cause Notice for Cancellation Revocation:

  • Description: Show cause notice why the cancellation of GST registration must be revoked.
  • Reply or Action: Respond in REG-24.
  • Time limit to respond: Within 7 working days from the date of receiving the notice.
  • Consequence of non-response: Revocation of GST Registration.

6. REG-27 Migration Notice:

  • Description: Notice issued for failure to make an application after obtaining provisional registration or providing incorrect details.
  • Reply or Action: Reply by applying in REG-26 and appear before the tax authority.
  • Time limit to respond: None prescribed.
  • Consequence of non-response: Cancellation of provisional registration in REG-28.

7. PCT-03 Misconduct Notice for GST Practitioner:

  • Description: Show cause notice for misconduct by the GST practitioner.
  • Reply or Action: Reply within the time prescribed in the show cause notice.
  • Time limit to respond: Within the time prescribed in the show cause notice.
  • Consequence of non-response: Cancellation of the license as a GST practitioner.

8. RFD-08 Show Cause Notice for Refund:

  • Description: Show cause notice as to why the GST refund must not be made to the applicant.
  • Reply or Action: Reply in RFD-09.
  • Time limit to respond: Within 15 days of receipt of notice.
  • Consequence of non-response: Order in RFD-06 for rejecting the GST Refund application.

9. ASMT-02 Notice for Provisional Assessment:

  • Description: Notice seeking additional information for provisional assessment under GST.
  • Reply or Action: Reply in ASMT-03 along with documents.
  • Time limit to respond: Within 15 days from the date of service of this notice.
  • Consequence of non-response: Rejection of the application for provisional assessment.

10. ASMT-06 Notice for Final Assessment:

  • Description: Notice seeking additional information for Final assessment under GST (for those who applied for provisional assessment).
  • Reply or Action: Reply within 15 days of receipt of the notice.
  • Time limit to respond: Within 15 days from the date of receipt of this notice.
  • Consequence of non-response: ASMT-07 can be passed without considering the views of the taxpayer being assessed.

11. ASMT-10 Scrutiny Notice:

  • Description: Scrutiny notice intimating discrepancies in the GST return after scrutiny along with tax, interest, and any other amount payable in relation to such discrepancy.
  • Reply or Action: Reply in ASMT-11 giving reasons for discrepancies in the GST returns.
  • Time limit to respond: Within the time prescribed in the show cause notice or a maximum time of thirty days from the date of service of notice or such deadline notified.
  • Consequence of non-response: Proceed to assess the taxpayer based on information at hand – may lead to prosecution and penalty.

12. ASMT-14 Show Cause Notice for Assessment under Section 63:

  • Description: Show Cause Notice stating reasons for conducting the assessment on the best judgment basis.
  • Reply or Action: Reply in written form and appear before the GST authority issuing the notice.
  • Time limit to respond: Within 15 days of notice.
  • Consequence of non-response: Assessment order in ASMT-15, may not favor the assessee.

13. ADT-01 Audit Notice:

  • Description: Notice for conducting audit by Tax authority under Section 65.
  • Reply or Action: Attend in person as directed in the notice or produce records.
  • Time limit to respond: Within the time prescribed in the notice.
  • Consequence of non-response: If not attended, it is presumed that the taxpayer does not possess books of accounts and proceedings will be initiated.

14. RVN-01 Revisional Authority Notice:

  • Description: Notice under section 108 issued to the taxpayer by the revisional authority before passing the revision order of appeals, giving the opportunity of being heard.
  • Reply or Action: Reply within the prescribed time and/or appear before the GST authority passing the order of revision on a given date and time.
  • Time limit to respond: Within 7 working days from the date of service of the notice.
  • Consequence of non-response: The case will be decided ex parte on the basis of available records and on merits.

15. Notice of Enquiry by Directorate of Anti-profiteering:

  • Description: Where the supplier has not passed on the benefit of ITC or reduced GST rates to the recipient/consumer, proceedings may be initiated by the Directorate of anti-profiteering. All interested parties will get a notice asking for more details.
  • Reply or Action: Cooperate in the proceedings and provide evidence, if any.
  • Time limit to respond: As may be specified in the notice.
  • Consequence of non-response: Proceedings will be initiated ex parte on the basis of available evidence.

16. DRC-01 Show Cause Notice for Demand of Tax:

  • Description: Notice issued for demanding tax paid shortly or not paid with or without an intent to defraud. It is served along with a statement of details in DRC-02.
  • Reply or Action: Reply in DRC-03 for paying the amount of tax demanded in the notice along with Interest and penalty*, if any applicable. Use DRC-06 to reply to the show cause notice. *Note: Where no fraud is committed, the penalty is chargeable only if payment is made beyond the thirty days time limit.
  • Time limit to respond: Within 30 days of receipt of the notice.
  • Consequence of non-response: Order can be passed with higher penalty or prosecution, within three years from the due date of annual returns for the particular financial year for which tax is demanded.

17. DRC-10 And DRC-17 Notice of Auction of Goods:

  • Description: Notice under section 79(1)(b) of the Act- Reference to the order of demand will be given, being the order for recovery through the specified officer under section 79 OR Recovery through execution of decree.
  • Reply or Action: Must be able to pay the outstanding demand as per DRC-09.
  • Time limit to respond: As may be specified in notice before the sale. Note that the last day of the bid or the last day of the auction cannot be before 15 days from the date of issue of the notice.
  • Consequence of non-response: Proceed to e-auction and sale.

18. DRC-11 Notice to the Successful Bidder:

  • Description: Notice to the successful bidder to pay the full bid amount.
  • Reply or Action: Within 15 days from the date of the auction.
  • Time limit to respond: The proper officer can conduct a re-auction.

19. DRC-13 Notice of Recovery from a Third Person:

  • Description: Notice of Recovery of outstanding tax from a third person.
  • Reply or Action: Deposit the amount specified in the notice and reply in DRC-14.
  • Time limit to respond: Not applicable.
  • Consequence of non-response: Deemed to be a defaulter in respect of the amount specified in the notice and can be subject to prosecution and penalties.

20. DRC-16 Notice for Attachment and Sale:

  • Description: Notice for attachment and sale of immovable/movable goods/shares under section 79. A taxpayer receiving this notice is prohibited from transferring or creating a charge on the said goods in any way, and any transfer or charge created by you shall be invalid.
  • Reply or Action: Not applicable.
  • Time limit to respond: Any contravention of the notice can invite prosecution and/or penalties.

General mistakes made while registering for GST

During the GST registration process, businesses often encounter common errors that can lead to complications and delays. One prevalent mistake is the provision of incorrect jurisdiction details, where inaccuracies in location information can cause confusion and hinder the registration process. Another issue arises when businesses attempt to register using a PAN that has been canceled, leading to complications in the approval process.

Additionally, individuals may inadvertently enter their personal PAN instead of the business PAN, introducing inaccuracies in the registration data. Mismatches between the details of promoters and their PAN, Director Identification Number (DIN), or UIDAI (Aadhaar) information further contribute to registration challenges.

Errors such as providing an incorrect Company Identification Number (CIN) or using missing, insufficient, or outdated supporting documents during the registration process can also pose hurdles. Transcription errors while entering data into the registration form and attaching incorrect documents are common mistakes that can lead to discrepancies in the registration information.

Identifying and rectifying these common errors is crucial to ensure a seamless and accurate GST registration process. Businesses need to exercise diligence in providing accurate information and adhering to the specified requirements to avoid complications and streamline the registration procedure. 

How to give reply to GST notice received from tax officials for deficiencies?

Responding to a notice from tax officials for deficiencies in your GST registration involves a systematic process to address the concerns raised. Here’s a step-by-step guide on how to provide a reply:

Step 1: Access the GST Portal

  • For new registrations, click on ‘Register Now’ and choose the ‘Temporary Reference Number (TRN)’ option. Enter the TRN, and provide the required mobile/email OTP.
  • For existing registrations, log in to the GST portal using your credentials.

Step 2: Navigate to Registration Services

  • Go to ‘Services’ and select ‘Registration.’
  • Click on ‘Application for Filing Clarifications.’

Step 3: Locate the Notice

  • Look up the notice using the reference number or Application Reference No. (ARN).

Step 4: Responding to New Registration Applications

  • If ‘Yes’ is chosen under ‘Modification in the Registration Application filed,’ the original application will be displayed for editing. Make necessary changes and upload required documents.
  • If ‘No’ is selected, an application will be available with various queries. Respond to each query in the ‘Query Response’ section.

Step 5: Submit Additional Information

  • Provide any additional information along with supporting documents that address the concerns raised in the notice.

Step 6: Verification and Submission

  • Verify the information by selecting the name of the authorized signatory and the place from the drop-down list.
  • Depending on the available authentication method, choose either ‘Submit with DSC’ (Digital Signature Certificate) or ‘Submit with EVC’ (Electronic Verification Code) to submit the application.

Legal and Procedural Challenges related to GST notices issued by tax authorities:

Businesses are grappling with significant legal and procedural challenges when it comes to responding to the array of GST notices issued by tax authorities. These challenges contribute to the complexities faced by entrepreneurs and impact the overall ease of doing business.

1. Complexities in Responding: Businesses often find it challenging to navigate the complexities involved in responding to different types of notices. The legal jargon and intricate procedures can be overwhelming, especially for small and medium-sized enterprises (SMEs) with limited legal resources.

2. High Pre-deposit Requirements: One major hurdle is the unreasonably high pre-deposit requirements imposed when filing appeals against the tax notices. The pre-deposit is a mandatory amount that businesses need to pay upfront before their appeal is even heard. This requirement poses a significant financial burden, particularly for SMEs operating on tight budgets.

3. Impact on SMEs: The high pre-deposit amounts have a disproportionate impact on SMEs, affecting their cash flow and financial stability. These businesses, often already facing resource constraints, find it challenging to set aside substantial sums merely to initiate the appeal process.

4. Resource Drain: Dealing with legal challenges and responding to notices necessitates substantial time and resources. SMEs, in particular, may lack the manpower and legal expertise required to effectively address these issues, diverting their focus from core business operations.

5. Procedural Delays: The procedural intricacies in the appeals process contribute to delays in resolving tax disputes. The time-consuming nature of these procedures can lead to prolonged uncertainty for businesses, impacting their day-to-day operations and long-term planning.

6. Need for Legal Assistance: Many businesses, especially smaller ones, may require legal assistance to understand the nuances of the notices and respond appropriately. However, legal representation adds an additional cost, further straining the financial resources of these enterprises.

7. Call for Simplification: The legal and procedural challenges underscore the need for simplification of the GST framework, especially in terms of dispute resolution. A more straightforward and accessible process would enable businesses, irrespective of their size, to address tax-related issues efficiently.

8. Advocacy for Reforms: Business advocacy groups and industry associations are increasingly calling for reforms in the legal and procedural aspects of GST. These reforms aim to create a more business-friendly environment, ensuring that entrepreneurs can focus on growth rather than being bogged down by legal complexities.

Conclusion

Taking precautions during the GST registration process is crucial to avoid receiving notices and ensure a smooth registration experience. Firstly, it’s imperative to verify that details such as PAN, business name, and business constitution align with PAN records, as GST registration is PAN-based. Additionally, confirming the status of PAN to ensure it is not canceled is essential.

Verifying the accuracy of the provided email address and phone number is vital to receive OTPs and TRNs promptly. Timely submission of the registration application, within 15 days, is advised to prevent automatic removal from the system.

Furthermore, cross-checking details of promoters or authorized signatories, including DIN, PAN, and Aadhaar, against respective databases (MCA, NSDL, UIDAI, etc.), is essential. Providing a valid address is crucial, as authorities may conduct on-site visits.

Lastly, ensuring that all supporting documents are up-to-date and valid for every required detail is fundamental. Adhering to these precautions minimizes the likelihood of errors and discrepancies, reducing the chances of receiving notices from tax authorities.

In conclusion, a meticulous approach to GST registration, with attention to detail and accuracy, not only prevents potential notices but also establishes a strong foundation for compliance. By following these precautions, businesses can navigate the registration process seamlessly, fostering a positive relationship with tax authorities.

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One Comment

  1. GAURAV TYAGI says:

    Dear Sir/Madam,

    I need immediately a true professional CA & Taxation Lawyer who can handle my cases with various GST Authrotities specifically in Rajasthan/Haryana/Punjab due to which I had shutdown my business since april2023 not able to operate. Kindy provide any reasonable & genuine Taxation Lawyer for my urgent issues. Regards, Gaurav Tyagi-Director-981 864 13 07

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