The Institute of Chartered Accountants of India (ICAI), established by an Act of Parliament in 1949, plays a pivotal role in regulating and advancing the field of Chartered Accountancy in the country. However, recent developments in the realm of Goods and Services Tax (GST) have prompted ICAI to raise serious concerns about the mass issuance of show cause notices by the government. In this article, we delve into the challenges faced by ICAI in addressing these issues.

Detailed Analysis:

At the inception of the GST regime, it was anticipated that teething problems would arise during its implementation. The new law, coupled with an initially unprepared GST portal, caused various technical glitches for stakeholders. This resulted in difficulties in filing taxes, returning information accurately, and rectifying errors. In response to the concerns of stakeholders, the government assured that bona fide mistakes during the initial implementation would be treated leniently.

However, the Department’s recent actions have left ICAI deeply concerned. The issuance of show cause notices under Section 73 for the Financial Year 2017-18 has been widespread, targeting alleged shortfalls in GST payments, input tax credit reversals, and various issues. These notices have been issued with seemingly little regard for individual case specifics and often appear rushed, issued within the final days of September 2023, which marks the extended deadline for notice issuance.

Several flaws in the issuance of these notices have been identified:

1. Notices have been based on GSTR-9 filings for the FY 2017-18, ignoring corrections made in GSTR-9/9C and DRC-03 filings.

2. Replies filed in response to ASMT-10 notices have been disregarded, despite orders issued in response to ASMT-12.

3. Incomplete proceedings under section 61 have been overlooked when ASMT-10 notices are issued.

4. New DRC-01 notices have been issued without reference to previous DRC-01 notices, lacking explanations for their necessity.

5. Audit proceedings and show cause notices have been initiated independently, despite parallel enforcement activities.

6. Appeals for FY 2017-18 have been met with additional DRC-01 notices for the same issues.

7. The treatment of ITC as “Common Credit” has been deemed incorrect, resulting in substantial reversals.

8. Section 17(5) notices have been issued based solely on HSN codes, ignoring the nature of business and credit-taking history.

9. Discrepancies between GSTR-1 and GSTR-3B have been disregarded, even when rectified in subsequent returns.

10. Notices have been based on differences between GSTR-3B and Table 8A GSTR-9, despite the unavailability of GSTR-2A data for the period.

ICAI representation On Mass GST Notices Unfair Treatment Of Taxpayers


In light of the numerous deficiencies in the issued show cause notices, the ICAI makes several recommendations to rectify the situation:

(a) Priority handling and withdrawal of notices with identified defects to prevent undue litigation. (b) The formulation of a standard operating procedure and the creation of a special cell for scrutiny of such notices. (c) Special procedures for business closure and deceased individuals with registration surrender and final return filing. (d) Ensure due process by granting sufficient time, personal hearings, and adherence to natural justice principles. (e) Suggest to the GST Council to waive interest and penalties on demands arising from these notices as an amnesty.

The ICAI also calls for these issues to be addressed before issuing notices for FY 2018-19 to reduce litigation and improve ease of doing business in Assam. This article highlights the challenges faced by ICAI in dealing with the mass issuance of GST notices and their efforts to ensure fairness and transparency in the process.


(Set up by an Act of Parliament)

ICAVIDTC/2023-24/Rep/28 Dated: 16th October 2023

Shri Rakesh Agarwala
Principal Commissioner of State Tax
Government of Assam
Kar Bhawan, G S Road

Dear Sir,

Sub : Mass show cause notices on GST issued under section 73 for the Financial Year 2017-18 in the month of September 2023

The Institute of Chartered Accountants of India (ICAI) is a statutory body established on 1st July 1949 by an Act of Parliament, viz., The Chartered Accountants Act, 1949, for regulating and developing the profession of Chartered Accountancy in the country. The Institute functions under the administrative control of the Ministry of Corporate Affairs, Government of India has 5 Regional Councils, 171 Branches covering the length and breadth of the country and 47 Chapters and 34 representative offices spread in 81 global cities across 47 countries.

At the time of implementation of the goods and service tax. (GST) regime, it was known to all that being a new law there would be possibility of making mistakes in the practical implementation of the new law. Further, in the initial period, the GST portal was not fully ready, due to which the stakeholders faced several technical glitches, making it difficult for them to log in, pay taxes, file returns on time, declare self-assessed information in proper manner and rectify or revise errors and mistakes when detected since the technical issues also led to incorrect GST returns filing. Considering the various representations and grievances expressed by stakeholders due to such issues, the Government had given assurance on various platforms and in various forums that the bona fide mistakes/ errors committed during the initial implementation of the law would be considered liberally.

However, the Department has already initiated inquiry under various modes prescribed under GST. Based on some auto-populated data received from the information technology infrastructure set-up/ software tools, notices have been issued in large numbers for the financial year 2017-18. These notices are for recovery of the alleged shortfall in payment of GST, for reversal of input tax credit (ITC) on grounds of mismatch under Tables 8A and 8B of GSIR 9, ineligible ITC in terms of section 17(5) and rules 42/43 as well as on issues such as mismatch of output GST liability under GSTR 3B and GSTR9/ GSTR 1 under the Central/ Assam Goods and Services Tax Act, 2017. In most of the cases, the notices have been issued within last few days of September 2023 i.e., the last few days of the extended time limit for issuance of notice.

It appears that the notices are issued in haste and at the last moment in a generic manner without considering the individual facts of each case. These notices have been issued to all taxpayers regardless of their nature of business, information declared in self-assessment returns. Unfortunately, the preliminary requirements of law have not been followed and notices have been seemed to be issued mechanically in the last moment.

We have been informed by the stakeholders at large that such notices are vague and lack the ingredients of a proper show cause notice under section 73 / 74 of the CGST/ Assam GST Act. These notices are issued without proper relied upon documents or findings being communicated to the taxpayers and appear to be based on mere auto populated numbers which may not be reliable in majority of notices. We have observed the following with regard to such notices:

(1) Notices are issued based on GSTR-9 filed for the FY 2017-18. However, the required correction/rectification has already been made in GSTR-9/ 9C, and DRC-03 has also been filed, but the same is not considered while issuing these notices.

(2) Where ASMT 10 notice is issued to a taxpayer, the reply has been already filed in ASMT 11 and an Order is issued in ASMT 12 but the same is not considered while issuing notices.

(3) In some cases, where ASMT 10 notice has been issued and a reply has been filed in ASMT 11, but proceedings have not been completed i.e., order in ASMT 12 is not issued till date, still notice has been issued without any reference to proceedings in progress under section 61.

(4) Where DRC 01 has already been issued (either by SGST or CGST) under section 73 or section 74 in past, yet now new DRC 01 is issued based on auto populated figures without reference to old proceedings or notices and without stating reasons why another notice is required.

(5) Where GST audit u/s 65 has been completed (either by CGST or SGST) and DRC 01 has been issued, ADT-02 has been issued as part of completion of audit without any audit para remaining unsettled, still notice has been issued without any reference to proceedings under section 65.

(6) Where enforcement activity has been conducted either by SGST or CGST and show cause notice has been issued, still notice has been issued without any reference to proceedings in progress/ completed by enforcement and without stating reasons why another notice is required.

(7) Where the registered person is already at appeal stage for FY 2017-18 but for the same point DRC-01 is issued.

(8) Notice for reversal of ITC on a total claim of ITC treating it as “Common Credit” in ad hoc manner has been made. It appears that the working mechanism adopted in this regard is not correct since total ITC has been taken as common ITC, whereas, in most cases, it is the ITC after considering rule 42 or it is the ITC exclusively related to taxable supplies. This has resulted in exorbitant / unrealistic amount of reversal worked out by the Department in the notices. Further, certain exempt supplies which have to be excluded for the purpose of calculation of reversal under rules 42 & 43, have been included in some cases. Certain items, on which GST is not levied, have also been considered for the purpose of calculation of reversal under rule 42 & 43.

(9) DRC-01 has been issued in many cases in terms of section 17(5) of CGST/ SGST without appreciating the specific exclusions provided under section 17(5). Notices issued through DRC-01 now are only based on HSN code as filed by the supplier for invoices appearing in GSTR-2A of the taxpayer irrespective of the fact as to whether or not credit has been taken by the taxpayer, and irrespective of the nature of business of the taxpayer.

(10) In many cases, notices have been issued based on differences in tax declared and tax paid in cash and by adjustment of ITC as per Form GSTR 9 without considering the fact that the higher amount in GSTR 1 as compared to GSTR-3B has been rectified in the GSTR 1 filed in subsequent periods or the mistake that has occurred in filing GSTR 1 and GS1 It 3B has been rectified either in the returns filed in subsequent periods or GSTR 9.

(11) In all the cases, notices have been issued based on differences of ITC between G51 R 3B and Table 8A GSTR 9. However, GSTR 2A was not available and thus, was not applicable in FY 2017-18 and the figures auto-populated in Table 8A were upto a certain date only, which is not a cut off date under any provision of the GST law. In fact, for the period July 2017 to March 2018, for claiming ITC, only the conditions of section 16(2) (as applicable at that time) are to be considered. However, this fact has been ignored, and notices have been issued, holding that ITC reflected in Table 8A of GSTR 9/ GSTR 2A are a condition for eligible ITC under section 16(2).

In view of the above, we humbly request as under:

(a) That suitable arrangements be made to prioritize the disposal of the above few categories of cases as explained above by dropping the demand under the notices without requiring the reply of the taxpayer and appearance of the stakeholders, if the above stated defects/ weaknesses in notices are found as highlighted above. The notices should be withdrawn without requiring the presence of the taxpayer or their representative, with intimation to the taxpayer to avoid undue litigation and loss of productive time of all stakeholders.

However, if the Department believes that the notices issued are for a valid and legal reason, the proper officer may be directed to follow the legal procedure and issue/ pursue the proceedings but under a proper show cause notice to the taxpayer.

(b) That a standard operating procedure be prescribed for dealing with such notices and intimated to all subordinate offices. Additionally, a special cell of high-ranking officials may also be constituted to scrutinize such notices and instructions be issued to the officers not to take any action based on mass notices issued until the suggested mechanism is evolved.

(c) That to avoid litigation a special procedure be adopted in case of closure:of business or in the case of a deceased person where registration has been surrendered and a final return has been filed.

(d) That instructions be issued to proper officer to give sufficient time and allow personal hearing in all cases, and to ensure that the principle of nature justice is followed. Relied upon documents, where sought, may be provided to taxpayers to enable compliance.

That a recommendation be sent to the GST Council for waiving interest and penalty on all demands arising out of these notices for the period FY 2017-18 as an amnesty in view of the promises made by the Government in initial years to help GST stabilize in the country.

(e) The time limit for issuance of show cause notice for FY 2018-19 under section 73 of CGST/Assam GST Act also falls on or before 31.12.2023. Accordingly, we request that the above issues be taken care of before issuance of notices for FY 2018-19 to reduce litigation and for ease of doing business in the state of Assam.

We are sharing herewith the Instruction No. CCT/0707/10/2023 dated 11-10-2023 issued by the Additional Commissioner (Administration), State Taxes, Gujarat in case of similar notices issued based on HT Big Data Software, for your kind reference.

We humbly request you to consider the above representation in good spirit and for benefit of taxpayers as well as revenue in overall perspective.

Looking forward to a positive response.

Yours sincerely,
Sushil Kumar Goyal
GST & Indirect Taxes Committee, ICAI

Copy to:

CA. (Dr.) Ayush Saraf, Chairman, Guwahati Branch (EIRC) of ICAI

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  1. Rama Krishna says:

    Good initiative of ICAI, Assam to represent on behalf of tax payers. Notices are issued on last date without seeking any reply on some points earlier; not considering the reversals already made and communicated to the department. 2Section 17 (5) notices are issued based on the main HSN / SAC code of the supplier even not based on the HSN / SAC as per GSTR1 filed by supplier. For example an insurance company provides medical insurance and general insurance. Notices are issued based on Medical insurance SAC code. Atleast they should issue based on GSTR1 filing data where SAC code is available against each invoice.

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