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Tax Demand Notice under GST

Under GST, there are different provisions related to the tax demand notice. In this article, we will cover all the sections and provisions where tax demand notice under GST can be issued.

Types of Tax Demand Notice

There are two types of tax demand notice under GST:

(i) There is no such reason for fraud or intentional misrepresentation or to hide the facts

(ii) There is reason of fraud or intentional misrepresentation or to hide the facts

 

(i) There is no such reason for fraud or intentional misrepresentation or to hide the facts

In case there is no such reason for fraud or intentional misrepresentation or to hide the facts, tax demand notice is issued u/s 73 of the GST Act.

Here are the 3 cases where section 73 of the GST Act is applicable:

  1. Tax is not paid or short paid
  2. Any erroneous refund
  3. ITC is wrongly availed or utilized

Time Limit for Issue of Tax Demand Notice

The maximum time limit for issuing tax demand notice u/s 73 of the GST Act is 3 years from the date of filing annual GST return to which the amount relates. However, in this case, the tax office needs to issue the show-cause notice 3 months before the time limit.

Penalty on Tax Demand Notice u/s 73

In case of a tax demand notice is issued u/s 73, the taxpayer do not pay all the dues on time then he/she needs to pay the following penalty:

S.No Paid Dues on Penalty Amount
1 Before notice No penalty
2 Within 30 days from notice No penalty
3 30 days post issue of show cause notice or order 10% penalty of the due amount

(ii) There is reason of fraud or intentional misrepresentation or to hide the facts

In case there is a reason for fraud or intentional misrepresentation or to hide the facts, tax demand notice is issued u/s 74 of the GST Act.

Section 74 of the CGST Act applies in the case of intentional fraud to evade the tax. Here are the 3 cases where section 74 of the GST Act is applicable:

  1. Tax is not paid or short paid
  2. Any erroneous refund
  3. ITC is wrongly availed or utilized

Time Limit for Issue of Tax Demand Notice

The maximum time limit for issuing tax demand notice u/s 74 of the GST Act is 5 years from the date of filing annual GST return to which the amount relates. However, in this case, the tax office needs to issue the show-cause notice 6 months before the time limit.

Penalty on Tax Demand Notice u/s 73

In case of a tax demand notice is issued u/s 73, the taxpayer do not pay all the dues on time then he/she needs to pay the following penalty:

S.No Paid Dues on Penalty Amount
1 Before notice 15% of tax amount evaded
2 Within 30 days from notice 25% of tax amount evaded
3 30 days post issue of show cause notice or order 50% of tax amount evaded
4 In any other case (Section 122) 100% of tax amount evaded

Section 75 – General Provisions for Determination of Tax

  1. In case if there is a stay on the show cause notice or order by a Tribunal/Court order then in such case the stay period shall not be included from the time limits mentioned in Section 74 and Section 75 respectively.
  2. In case if the Appellate Authority or Tribunal passes an order that the charges of fraud are not true, then the notice issued shall be deemed to be passed under section 73 of the GST Act. The quantum of tax remaining will be computed accordingly.
  3. In case if the court or tribunal decides that order shall be passed, then such order must be passed within 2 years from the date of such decision.
  4. Every taxpayer will get an opportunity for a personal hearing. But personal hearing will be allowed for a maximum of 3 times.
  5. The amount of tax, interest or penalty shall not exceed the amount specified in the notice or order. However, this amount can be amended by the appellate authority or tribunal or court.
  6. In case if the order is not passed within the specified time limit it is assumed that the adjudication proceedings are completed. No order will be issued afterward.
  7. Recovery provisions will be applicable irrespective of demand notice or order provisions.