Hon. Finance Minister announced the budget on 23rd July 2024 and considering the changes made in the budget w.r.t. GST as well as income tax, the intension of the govt has been well-noted and exhibited. However, whether the real benefit of those intensions to reduce the litigation or provide amnesty scheme will be really benefitted to the taxpayer is the real question. Let us examine, whether such changes recommended in the budget will really benefit to the taxpayer.
I) Demand under GST – Time limit
Section 74A has been inserted to have common limitation period irrespective of demand raised on account of errors and omissions or understanding of the law or otherwise without any intension to evade the tax or with intension to evade the tax on account of suppression of facts of willful misdeclaration, willful misstatement, fraud etc. and now demand can be raised in the period of 42 months from the date of filing annual return for the financial year.
| Nature of Demand | Time Period | Remarks |
| In case of demands other than erroneous refunds | 42 months from the due date of furnishing annual return of the period to which the demand pertains. | Any demand pertaining to P1 2024-25 can be made till 30th June 2029. (42 months from 31st December 2025 i.e. due date of annual return for the period 2024-25) |
| In case of demand on account of erroneous refund | 42 months from the date of granting erroneous refunds. | – |
Order to be issued within a period of 12 months from the date of issuance of notice under Section 74A. This can be further extended by period of 6 months by the Commissioner in writing.
It means, the limitation period will be considered as per the following table.
| Section 73 | Section 74 | Section 74A (Fraud / Non-Fraud Merged) | |||||
| FY | Extended Due Date or Original Date of GSTR-9 | SCN can be issued max by (at least 3M before order) | Order can be issued max by (3 years from due date of G9) | SCN can be issued max by (at lease 6M before order) | Order can be issued max by (5 years from due date of G9) | SCN can be issued within 42 months from due date of G9 | Order can be issued within 12 months from due date of SCN |
| 2017-18 | 05-Feb-20 | 30-Sep-23 | 31-Dec-23 | 05-Aug-24 | 05-Feb-25 | – | – |
| 2018-19 | 31-Dec-20 | 31-Jan-24 | 30-Apr-24 | 30-Jun-25 | 31-Dec-25 | – | – |
| 2019-20 | 31-Mar-21 | 31-May-24 | 31-Aug-24 | 30-Sep-25 | 31-Mar-26 | – | – |
| 2020-21 | 28-Feb-22 | 30-Nov-24 | 28-Feb-25 | 28-Aug-26 | 28-Feb-27 | – | – |
| 2021-22 | 31-Dec-22 | 30-Sep-25 | 31-Dec-25 | 30-Jun-27 | 31-Dec-27 | – | – |
| 2022-23 | 31-Dec-23 | 30-Sep-26 | 31-Dec-26 | 30-Jun-28 | 31-Dec-28 | – | – |
| 2023-24 | 31-Dec-24 | 30-Sep-27 | 31-Dec-27 | 30-Jun-29 | 31-Dec-29 | – | – |
| 2024-25 | 31-Dec-25 | – | – | – | – | 30-Jun-29 | 30-Jun-30 |
- In case tax has been collected but not paid, no limit u/s 76
- When any notice or order stayed by court or tribunal, such period will be excluded
- 12 months of passing order can be extended by another 6 months by Commissioner / Additional / Joint Commissioner
This is a positive amendment and will avoid the litigations w.r.t. whether there is a intension to evade the duty through suppression of facts, willful misdeclaration, willful misstatement or fraud.
Further, Section 17(5)(i) of CGST Act 2017 also has been amended where input tax credit to the recipient is not restricted when demand is issued under Section 74A.
The care needs to be taken by all taxpayers to be 100% accurate at the first time itself or there should be a mechanism to have internal check, audit, etc. so that errors and omissions can be immediately detected and payment of tax is made much before noticing by the department, which will avoid penalty, otherwise period of issuance of SCN is 42 months and order will be delivered within 12 months, which also can be extended. So, almost there will be interest till the time payment as per the order or issue of SCN which will be substantial higher cost.
II) Demand under GST – Penalty :
Due to this amendment, honest taxpayers will be benefitted and will not be required to pay the penalty.
| Demand on Account of | Penalty |
| Demand for any reason, other than the reason of fraud or any willful- misstatement or suppression of facts to evade tax | > Tax dues with interest paid before issuance of notice – No penalty.
> Tax dues with interest paid within 60 days of issuance of notice – No penalty. > Tax dues paid after 60 days of issuance of notice – 10% tax dues or Rs 10,000 whichever is higher. |
| Demand for the reason of fraud or any willful- misstatement or suppression of facts to evade tax | > Tax dues with interest paid before issuance of notice – 15% of tax dues.
> Tax dues with interest paid within 60 days of issuance of notice – 25% of tax dues. > Tax dues paid after 60 days of issuance of notice – Equal to tax dues. |
III) Waiver of Interest and Penalty:
Section 128A has been inserted so as to waive interest and penalty on the demand pertaining to period 2017-18, 2018-19, 2019-20, taxpayer pays the full amount of tax demanded in the notice upto 31.03.2025.
While we appreciate the intension of the Govt considering the initial period of introduction of GST and frequent changes in the portal, but almost each taxpayer has received the SCN demanding the tax on the following grounds:
(a) Mismatch between GSTR-1 and GSTR-3B without referring tax paid in the subsequent year or while filing the annual return in the Form GSTR-9 or GSTR-9C.
(b) Mismatch between GSTR-3B and GSTR-2A
(c) Disallowing the ITC on account of ineligible ITC in the opinion of GST Officers.
(d) Disallowing the ITC on account of receipt of the goods and services from the person whose registration has been subsequently cancelled sumoto or otherwise.
(e) Difference between GSTR-1 and E-Way Bill
(f) In-eligible ITC claimed from non-genuine taxpayers (NGTPs) whose RC is cancelled ab-initio.
(g) In-eligible ITC claimed from GSTR 3B Non-filers
(h) Less RCM Liability disclosed in GSTR 9/3B/4 than shown by suppliers in GSTR-1 Outward supplies on which RCM is applicable are shown by the supplier.
(i) ITC claims after the last date of availment of ITC as per section 16(4)
(j) Excess IGST on Imports shown in GSTR9_6E Vs. ICEGATE data
As a matter of fact, the manner in which SCN are issued by State GST Officers and Central GST Officers are completely different. Even most of the times there is no specific allegation in the SCN or any evidence but it is the summary statement taken from the GSTN portal and just issued the demand without referring the provisions at relevant period of time as well as subsequent returns filed by the taxpayers.
Even though, it is mandatory to issue Consultative Show Cause Notice in the Form GSTR-1A till 15th October 2020 and thereafter it was replaced with “Shall to May”. Still department hardly issues GSTR-1A which defeats the object and spirit of the law.
The grounds on which SCN are issued which has been rejected by number of Hon. High Court decisions and Supreme Court decisions.
- Mismatch of ITC as per GSTR-2A and GSTR-3B
- Assistant Commissioner of State Tax v. Suncraft Energy (P.) [2023] 157 taxmann.com 352 (SC)
- Revathi Readymades vs the Deputy State Tax Officer [2024] 162 taxmann.com 341 (Madras)
- Heena Medicals- Kerala High Court
- Sri Shamuga Hardwares Electricals
- Mina Bazar vs. State Tax Officer Kerala High Court [2023] 156 taxmann.com 579 (Kerala)
- Kochi Medicals vs. State Tax Officer Kerala High Court [2024] 159 taxmann.com 225 (Kerala)
- Praveen Bhaskaran vs. Union of India- Kerala High Court [2023] 155 taxmann.com 466 (Kerala)
- Raju Joseph vs. State Tax Officer- Kerala High Court [2023] 157 taxmann.com 400 (Kerala)
- Goparaj Gopalkrishnan Pillai vs. State Tax Officer – Kerala High Court [2023] 155 taxmann.com 325 (Kerala)
- Anvita Associates vs. Union of India – Bombay High Court [2024] 158 taxmann.com 660 (Bombay)
- NRB Bearings Ltd. vs. Commissioner of State Tax – Bombay High Court [2024] 159 taxmann.com 656 (Bombay)
- Philips Auto Agencies (India) Pvt. Ltd – Kerala High Court
- GMA Pinnacle Automotives (P)Ltd. vs. State Tax Officer – Kerala High Court [2024] 161 taxmann.com 145 (Kerala)[06-03-2024]
- No ITC to be disallowed, when registration of the supplier cancelled retrospectively.
- Cleon Optobiz (P.) Ltd. High Court of Madras [2024] 158 taxmann.com 691 (Madras)
- Goyal Sanitary Store High Court of Madhya Pradesh [2023] 157 taxmann.com 289 (Madhya Pradesh)
- Biswajit Kundu High Court of Calcutta [2024] 163 taxmann.com 716 (Calcutta)
- Engineering Tools Corporation High Court of Madras [2024] 159 taxmann.com 576 (Madras)
- M/S. Gargo Traders Calcutta High Court V. THE JOINT COMMISSIONER, COMMERCIAL TAXES [WPA No. 1009 of 2022 dated June 12, 2023]
- Rama Brick Field v. Additional Commissioner, Grade-2 court of Allahabad 2023 (79) G.S.T.L. 163 (All.)
- State of Punjab and others vs. Atul Fasteners Ltd 2007 4 SCC 471
- Bright Star Plastic Industries v. Additional Commissioner of Sales Tax Orisa High Court IW.P.(C) No.15265 of 2021
- Sanchita Kundu Vs Assistant Commissioner of State Tax W.P.A. 7231 of 2022 Calcutta High Court W.P.A. 7231 of 2022.
- M/s. Goparaj Gopalkrishnan Pillai v. State Tax Officer, Thripunithura & Ors. [WP(C) 29855 of 2023 dated October 5, 2023]
- M/s. Sri Ranganathar Valves Private Limited v The Assistant Commissioner (CT) (FAC) Velandipalayam Assessment Circle, Coimbatore [W.P. No38488 of 2015 dated 2.09.2020]
When Hon. High Court decision and Supreme Court decisions have clearly given the decision in favour of tax payer and no SCN will independent issues for which tax is payable, the benefit of the Section 128A can’t be availed by most of the taxpayers and they will have to go for litigation on payment of mandatory deposit and go through the litigations.
Hope the Government will issue and regularize non-levy or short levy of central tax due to any general practice prevalent in trade and above high court decisions utilizing the powers provided under Section 11A.
IV) Refund :
Section 54 (15) has been inserted so as to restrict the refund accumulated input tax credit of pertaining to export of zero rated goods, which attracts export duty.
V) Attendance of Summons :
Section 70 has been amended so as to allow authorized representative who is aware of the facts & provisions of the law as against only by employees / Director/Proprietor / Partner. This will help to withstand undue harassment by the investigating officers.
VI) Reduction in filling pre-deposit in case of appeal:
Below changes are proposed in pre-deposit
| Appeal | Earlier Pre-deposit | Proposed pre-deposit |
| First Appeal | 10% with maximum amount of Rs 50 Cr (25 Cr under CGST + 25 Cr SGST/ UTGST). | 10% with maximum amount of Rs 40 Cr (20 Cr under CGST + 20 Cr SGST/ UTGST). |
| Second Appeal | Incremental 20% with maximum amount of Rs 100 Cr (50 Cr under CGST + 50 Cr SGST/ UTGST). | Incremental 10% with maximum amount of Rs 40 Cr (20 Cr under CGST + 20 Cr SGST/ UTGST) |
| Total Pre-deposit | 30% with maximum amount of Rs 100 Cr (50 Cr under CGST + 50 Cr SGST/ UTGST). | 20% with maximum amount of Rs 40 Cr (20 Cr under CGST + 20 Cr SGST/ UTGST). |
VII) Extension of filing appeal before GST Appellate Tribunal:
Since GST Appellate Tribunal is not still functional, the time limit of filing appeals has been extended to 90 days from the date of notifying formation and start of functionality of GST Appellate Tribunal. Fortunately, Notification No. 2907 dtd 31.07.2024 has been issued by the Ministry of Finance establishing Appellate Tribunals w.e.f. 1st Sept 2024 at various locations and Principal Bench at New Delhi.
Now, any orders issued by Joint Commissioner / Commissioner Appeal / Commissioner GST which has confirmed demand or impose the penalty or levy interest can be challenged before GST Appellate Tribunal after 1st Sept 2024 within 90 days.
Similarly, provision of withdrawal of appeal and refiling has been incorporated.
VIII) Transitional Credit:
Section 140 has been amended so as to resolve the issues w.r.t. transitional credit where services provided & invoices were received before appointed day. Section 140(7) of CGST Act is amended retrospectively w.e.f. 01.07.2017 to allow transitional credit in respect of invoices pertaining to services provided before appointed date, and invoices were received by ISD before the appointed date.
IX) Anti-Profiteering:
Powers has been given to the Government to notify the date from which anti-profiteering cases will not be registered.
Further any appeal against anti-profiteering order can be represented before GSTAT.
To conclude the Government needs to be applauded to remove the complexities of the law and reduce the litigation. However, considering the implementation by the State and Central GST Officers, unfortunately justice is received only at later stage upto Appellate Tribunal, High Court & Supreme Court.
Until officials are properly trained and given freedom to give judicious orders, the benefit of the provisions of the budget will not be visible.
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