GST Notices

• Introduction
• What is a show cause GST notice?
• When does a GST notice served on a tax payer?
  • Case I: No Fraud – And the motivation was not to evade taxes
  • Case II: Fraud - With the intention to evade taxes
• Handling a show cause GST notice and GST notice reply letter format

Introduction

As we all know, the Goods & Service Tax (GST) is payable on self-assessment basis i.e. assessee himself has to determine its tax liability.

If the determination of assessee goes wrong i.e. assessee has short paid any taxes or not paid any taxes or has wrong availed and utilized any input tax credit or has erroneously been refunded, then, under such circumstances, demand would be raised by the GST officials by way of issuing GST notices - to be called as Show cause notices under taxation parlance.

The provisions of demand, manner of serving of GST notice and the consequent recovery provisions are similar to the provisions of Service Tax and Central Excise Act.

What is a show cause GST notice?

Show cause notice is the first stage in any investigation in tax laws. In Goods and Services Tax Act, show cause notice is to be issued before any penalty is levied or demand is raised. SCN is also required to be issued while taking action for payment of Goods and Services tax collected from any person which has not been deposited with the Central Government.

When does a GST notice served on a tax payer?

GST notice shall be served on a tax payer depending upon the motivation of the tax payer in evading taxes.

• Case I: No Fraud – And the motivation was not to evade taxes: This section applies to non-fraud cases wherein:
  • Tax is unpaid/short paid by the tax payer or,
  • Refund is wrongly made by him or where,
  • Input tax credit has been wrongly availed/utilized

The proper officer (i.e., GST authorities) will serve a show cause GST notice on the taxpayer. The tax payer will then be required to pay the amount due, along with interest and penalty.

• Case II: Fraud - With the intention to evade taxes: This section applies to cases when there is reason for occurrence of fraud/ or involves any willful misstatement or suppression of facts and the intention was clearly to evade taxes whereas a result of which:
  • Tax is unpaid/short paid by the tax payer or,
  • Refund is wrongly made by him or where,
  • Input tax credit has been wrongly availed/utilized

Handling a show cause GST notice and GST notice reply letter format

Handling a GST notice: The points stated below are important to note while handling show cause GST notices:

• Date of notice and date of receipt of GST notice could be different. While acknowledging the Show cause GST notice, always remember to put date and time over the acknowledgement copy.
• Don't avoid the receipt of SCN. If such notice is being served, there is no point in avoiding receiving it. First, it has to be received and then contested/replied. Non-receipt is considered as a service.
• If the service of notice is time barred, it could be suitably replied with substantiating evidence.
• If the SCN is beyond one year, it will have to be proved that there was no suppression etc. on assessees part so that department cannot invoke the provision of five years. SCN has to prove suppression.
• In case you are contemplating any SCN, and you feel that service tax has to be paid, it would be advisable to pay service tax before SCN is issued. SCN cannot be issued for the amounts already paid.
• Whenever SCN is intended to enhance the liability of assessee or reduce the amount of refund, an opportunity of being heard is necessary and it cannot be denied by the revenue.
• You can challenge the validity and legality of SCN served on you on the basis of facts, time or even jurisdiction.
• SCN is always issued in writing. There is nothing like GST notice.
• SCN must mention amount demanded any SCN without amount is not valid. Also, the amount of the proposed penalty should be mentioned.
• SCN is to be issued for a particular period. Where demand is raised, admitted and paid, SCN will still be required in those scenarios to be served for the subsequent period.
• Department cannot go beyond what is mentioned in SCN and adjudicate an issue which is not a subject matter of SCN.
• SCN is required to be replied within the stipulated time mentioned in the notice and must be replied accordingly.
• While efforts must be made to comply with the same, it would be advisable to seek an extension of time or adjournment which is normally granted.
• Try to provide reply or explanation to all points covered in SCN and wherever necessary, substantiate the reply with documentary evidence.
• Detailed reply may be submitted along with earlier decided case laws.
• A list of evidence on which you are relying must also be submitted.
• Even where you have submitted a detailed and convincing reply to SCN, you should seek the option of personal hearing and carve to alter or amend or modify your reply to show cause at any stage during adjudication proceedings.
• Where the penalty is levied or demand is confirmed or refund is revoked, you can always seek alternative measures for relief that there was a reasonable cause which prevented you from compliance of provisions.
• Orders issued against show cause notice are appealable.
• If you are not in a position to represent your case personally, better hire a professional to guide you in drafting a reply to SCN and represent your case at adjudication stage.
• SCNs have to be properly defended and argued for this stage builds the foundation for further actions.

It is felt that the above points if borne in mind by the assessees and service providers shall help them in appropriately replying to the show cause notice issued by the Department.

GST notice Reply letter format: Form – GST CMP 06

Note 1: The reply should not be more than 500 characters. If it is more than 500 characters, then it should be uploaded separately.

Note 2: Supporting documents, if any, may be uploaded in PDF format.

Conclusion: How Tally.ERP 9 provides you assistance with relation to show causes notices. No, it doesn’t have provisions for replying to a show cause notice but with Tally, you can file GST returns before due date effectively and efficiently.

Tally.ERP 9 validates maximum information to be filed in the returns like GSTIN, HSN code, tax rates and its calculation, the applicability of a type of supply i.e intra-state and inter-state etc. It helps taxpayers in preparing GSTR 1 i.e. outward supplies return and reconcile it with GSTR 3B so that tax liability shown in GSTR 3B matches with the final return for outward supplies. (GSTR 1)