SEPTEMBER 26, 2023

By Jitendra Nair, Assistant Commissioner

GST (Goods and Services Tax) is soon going to reach the first milestone on 30th September 2023 when the period for issuance of Show Cause Notice under the provisions of Section 73 (1) for the financial 2017-18 comes to an end. It was on 1st July 2017 GST was introduced in the whole of India replacing a complex web of Central and State taxes. The first financial year under GST was 2017-18. The CBIC vide Notification No. 06/2020-Central Tax dated 03.02.2020 extended the time limit for furnishing of the annual return specified under Section 44 of the CGST Act, 2017 read with Rule 80 of the CGST Rules, 2017 in respect of the period from 1 st July 2017 to the 31 st March 2018 to 5th February 2020/ 7th February 2020. Further CBIC vide Notification No. 09/2023-Central Tax dated 31.03.2023 extended the time limit specified under sub-section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilised, relating to the financial year 2017-18, up to the 31st day of December, 2023.

As per the provisions of Section 73 (2) of the CGST Act, 2017 (reference to CGST Act, 2017 would also mean reference to corresponding similar provisions in the State GST Act, 2017) the proper officer shall issue the notice under sub-section (1) of Section 73 at least three months prior to the time limit specified in sub-section (10) for issuance of order. In view of the same any GST demand under Section 73(1) of the CGST Act, 2017 wheretax 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, for the financial year 2017-2018 needs to be issued on or before 30th September 2023.

This milestone is important for the Tax Payer (TP) also. As per Section 59 of CGST Act, 2017"Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39 ". If the Tax Payer fails to assess his liability correctly, then the Tax Authority can issue Show Cause Notice under Section 73(1) of CGST Act, 2017 or 74(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 by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, requiring the Tax Payer to show cause as to why he should not pay the amount specified in the notice along with interest and penalty.

The Tax Payer needs to get his returns re-examined especially for the period 2017-18. The areas mainly to look into is whether the sales accounted for in GSTR-1 return and Input Tax Credit (ITC) availed as per GSTR-2A/2B return are properly reflected in GSTR-3B return. Other areas to look for into is to check whether ITC availed is not restricted as per the provisions of Section 16(4) of CGST Act, 2017. The relevant provision is reproduced below:

"A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019."

Another important provision which needs to be looked into is Rule 96 (10) of CGST Rules 2017, which reads as follows:

"The persons claiming refund of integrated tax paid on exports of goods or services should not have- -

(a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion capital goods Scheme or notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or

(b) availed the benefit under notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion capital goods Scheme.

Explanation.- For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications."

The above are only some of the examples where the Tax Payer needs to re-visit to ensure that there is no tax which has not been paid or short paid or erroneously refunded to them, or where input tax credit has been wrongly availed or utilised by them. There are two scenarios, one where there is element of fraud, or wilful-misstatement or suppression of facts is present to evade tax and one where the same is absent. The former situation is covered under Section 74 of CGST Act, 2017 and the later under Section 73 of the CGST Act, 2017. Both section offers immunity in the form of lesser penalty under Section 74 or no penalty under Section 73 if the Tax Payer pays on his own before issuance of Show Cause Notice or within 30 days of issuance of Show Cause Notice. Once Tax Payer finds that he is required to pay differential tax then he should immediately pay up using the DRC-03 Challan and inform the tax authority about payment of the tax.

It has been noticed that though the Tax Payer many a times makes payment of differential tax using the DRC-03 challan but they fail to submit detailed reasons and relevant documents leading to the payment of differential tax payment. Tax Payer needs to understand that non-submission of details when sought by the tax authority will lead to suppression of fact and the proper officer can invoke extended period of time available for issuance of show cause notice under Section 74(10) of the CGST Act, 2017. In this regard it is relevant to refer to Explanation 2 provided under Section 74 of CGST Act, 2017 which states as under:

"For the purposes of this Act, the expression "suppression" shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer ."

The above may put the Tax Payer into a disadvantage as assessment for that particular financial year will not be closed unless payment of differential tax is made alongwith interest and penalty as provided under Section 74 of the CGST Act, 2017. For the Tax Payer, the tagline is, therefore, "Jaankar Baniye aur sahi GST Bhariye".

(The above views are strictly personal and not of the department where the author works.)