Introduction: In a bid to maintain uniformity and efficiency in the process of issuing notices under the Kerala State Goods and Services Tax Act, 2017, the Commissioner’s office in Thiruvananthapuram has released Circular No. 16/2023. This circular provides clear instructions on the subject-wise issuance of separate notices to taxpayers under Sections 73 and 74 of the KSGST Act, aiming to streamline the process.
Understanding Sections 73 and 74: Sections 73 and 74 of the Kerala State Goods and Services Tax Act, 2017, address different aspects of tax determination. Section 73 focuses on instances where tax has not been paid, is short-paid, or erroneously refunded, without fraud or willful misstatement. Section 74, on the other hand, deals with similar issues but in cases involving fraud, willful misstatement, or suppression of facts.
Key Provisions: The circular highlights Section 6(2)(b) of the Act, which states that if a proper officer initiates proceedings under one of these sections, no further proceedings can be initiated on the same subject matter under another section. This provision ensures that each subject matter of a taxpayer is treated independently, allowing central and state GST administrations to initiate proceedings on different matters without interference.
Subject Matter-Based Litigation: Under the GST law, subject matter-based litigation is emphasized. This approach allows tax authorities to treat each issue as a separate case, even when dealing with the same taxpayer. This is important because it ensures that the actions of one GST administration do not affect proceedings initiated by another.
Simultaneous Actions: The circular acknowledges that there can be situations where a single taxpayer is involved in multiple subject matters. In some cases, the issues may not meet the conditions of Section 74, especially the definition of “suppression” as per Explanation 2 to Section 74. To address this, the circular recommends that separate notices be issued under Sections 73 and 74 for the respective subject matters.
Delineating Subject Matters: To effectively implement this, the circular emphasizes the need for clear separation of subject matters between Sections 73 and 74. This responsibility lies with the JC Intelligences, the audit monitoring committee, and the proper officers involved in scrutinizing returns.
Conclusion at Notice Level: The circular points out that the closure of proceedings under Sections 73 and 74 should occur at the notice level, not the subject matter level. For instance, a notice issued under Section 73(1) concludes entirely in Section 73(8). This approach ensures that each subject matter remains distinct, making adjudication and closure more efficient.
Independence of Adjudication: Finally, the circular underscores that, in line with existing instructions and provisions, the adjudication and closure of each notice or proceeding under Sections 73 and 74 should be independent of one another.
Conclusion: The circular from the Commissioner’s office provides essential guidelines for issuing separate notices to taxpayers under Sections 73 and 74 of the KSGST Act. By maintaining a clear distinction between subject matters and ensuring independent adjudication, this directive seeks to streamline the process and enhance the efficiency of the State Goods and Services Tax administration in Kerala. This move will not only benefit taxpayers but also improve the effectiveness of tax-related proceedings.
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Office of the Commissioner of the State Goods and Services Tax
Department, Tax Towers, Karamana, Thiruvananthapuram — 695 002.
Ph: 04712785276, e-mail: [email protected]
File No. SGST/5087/2023-PLC11
Circular No: 16/2023 date : 09-10-2023
Sub: Subject-wise issuance of separate notices to the same taxpayer under sections 73 and 74 of the KSGST Act, 2017 – Instructions issued – reg
In exercise of powers conferred under section 168 of KSGST Act 2017, the following circular instructions are issued to bring out uniformity in issuing notices while proceeding under section 73 and section 74 .
1. Section 73 of the Kerala State Goods and Services Tax Act/Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the said Acts”) provides for 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. Section 74 of the said Acts provides for the detenaination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts.
2. Section 6(2)(b) of the Kerala State Goods and Services Tax Act, 2017 reads as follows “where a proper officer under the Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017) has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”. Similarly, Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 reads as “where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”
3. Therefore, GST law envisages a subject matter-based litigation system primarily based on the self-assessed returns filed by the taxpayer. Each subject matter of a taxpayer is to be treated independent of the other subject matters of the same taxpayer so that the Central GST administration is at liberty to initiate proceedings on a different subject matter of a taxpayer who is already under a proceeding of the State GST administration.
4 . This being the position, situations can arise wherein the nature of issues involved against a single taxpayer are such that simultaneous actions are to be initiated under both the sections 73 and 74. Certain subject matters identified therein may not .satisfy the conditions of Section 74, especially the definition of suppression as per Explanation 2 to Section 74, whereas some others may satisfy the conditions of Section 74. This situation may arise when action is initiated under relevant provisions of the Act in Audit/Intelligence/Tax Payer Services verticals.
5. Under these circumstances, it is clarified that in case a taxpayer is found to have multiple subject matters for which determination of tax is required under both Sections 73 and 74 of the said Acts, separate notices shall be issued to the taxpayer under each section for the respective subjects matters. All the subject matters that fall under Section 73 should be covered in a notice issued under that section, while the remaining matters pertaining to Section 74 shall be dealt in a separate notice under the said Section. Therefore, the JC Intelligences who approve the investigation report, the audit monitoring committee which considers draft audit paras, the proper officer in Taxpayer services who undertakes scrutiny of returns etc. are required to clearly delineate the subject matters between Sections 73 and 74.
6. Further, it is also seen that the process of closure of proceedings in Section 73 and 74 speaks of conclusion at the notice level and not at the subject matter level. For instance, a notice issued under section 73(1) is concluded entirely in section 73(8), rather than on a specific subject matter within that notice. Similar situation exists in Section 74. Therefore, the subject matters that fall under Section 73 and those matters which fall under Section 74 should not be combined into a single notice as it creates difficulty in operationalizing the subsequent adjudication/closure provisions under each of those Sections.
7. Needless to say, in line with existing instructions and the provisions of Section 73 and 74, the adjudication and closure of each notice/proceeding under Section 73 and 74 shall be independent of each other.
COMMISSIONER
To
All concerned
