“Get clarity on Section 73 of CGST Act, 2017 with frequently asked questions. Understand the determination of tax issues and penalties for non-compliance. Stay informed with our comprehensive guide.”

Section 73 of CGST Act, 2017: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful-misstatement or suppression of facts.

What does Section 73 say: Section 73 talks about the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful-misstatement or suppression of facts.

Now let us understand Section 73 in Question and Answer Format.

Question and Answer on Section 73 of CGST Act, 2017

Q1. What is the meaning of Proper Officer for Section 73?

Ans. Proper Officer in relation to any function to be performed under this act means the Commissioner or the officer of the central tax who is assigned that function by the commissioner in the Board.

Q2. When does Section 73 can be invoked?

Ans. Section 73 invokes in several circumstances as described below:

a. Tax not paid

b. Tax short paid

c. Erroneously Refunded

d. Input Tax Credit wrongly availed

e. Input Tax Credit wrongly utilized

Q3. Does Section 73 invoke in matter related to Fraud or willful-misstatement?

Ans. The answer is No.

Q4. Time period for issuance of SCN for Section 73?

Ans. Within 3 months prior to the time limit for issuance of adjudication order.

Q5. Whether penalty can be levied where tax and interest paid within 30 days from date of issue of notice?

Ans. Yes , all penalty proceedings shall be concluded.

Q6. Does the notice under section 73 will cover reason for issuance?

Ans. Yes, the SCN Shall cover the reason and statement shall be served to provide details relating to tax not paid, short paid, erroneously refunded, Input tax credit wrongly availed or utilized.

Q7. What is time limit to issue determination order under section 73?

Ans. a. Within three years from due date of annual return for tax unpaid, short paid, input wrongly utilized or availed.

b. Within three years from due date of erroneous refund.

Q8. How much penalty shall be levied under section 73?

Ans. 10% of Tax or Rs 10,000 whichever is higher.

Q9. How much interest shall be paid in case demand is raised under section 73?

Ans. The interest shall be calculated as per 50 of the Act which shall be 18% P.A.

Q10. When penalty shall be levied under section 73?

Ans. If tax unpaid within 30 days from due date of payment of tax then penalty shall be levied.

Judicial Decision:

1. Extension of Limitation to Issue order u/s 73 of CGST ACT would also extend time limit to issue SCN. (Kerla HC).

2. No Coercive steps shall be taken for recovery without following adjudication process u/s 73/74 of CGST ACT.(Delhi HC).

EXTRACT OF SECTION 73 OF CGST ACT, 2017 FOR READY REFERENCE OF READERS

Section 73: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful-misstatement or suppression of facts.

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

 (3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.

(4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of notice under subsection (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.

(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

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Disclaimer: The above said article is author viewpoint only, please refer respective sections , rules framed under the GST.

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4 Comments

  1. Jayantilal says:

    order u/s 73 of GST ACT imposed penalty as we have no payment has been made within 30 days. DRC-01 notice issued on 3.3.2023, As its the huge tax liability we have paid through several challan in between 9.3.23 to 18.5.23 and uploaded the GSTR-3B on 18.5.23. In the above circumstances kingly guide us whether we are liable to pay penalty of 10% on tax liability. If not plz send how we can save the penalty or if any related case laws can be made available.

  2. Moli says:

    Hi Sir
    Recently my company got state govt. notice to pay GST in 2017 together with extract interest due to our HO in Taiwan was a corporate gurantee for our loan. May I learn more about relevat tax regulations, thanks!

  3. ASOKKUMAR says:

    Liability Mismatch – GSTR-1 to GSTR-3B, can we pay under DRC -03 without department notice, if paid within the 20 th of the respective month

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