Navigating GST Notices: Understanding Types and Response Procedures
Taxpayers often receive various types of notices under the GST framework, including show cause, demand, and scrutiny notices, typically for non-compliance or to seek further information. It is crucial to understand the specific form and purpose of each notice, as well as the correct procedure and strict deadlines for response. Failure to address these official communications promptly can lead to significant penalties and legal repercussions under GST law.
Latest Legislative Changes July 23, 2024 The Union Budget 2024 introduced a proposal to add Section 74A to the CGST Act. This new section aims to establish a uniform timeframe for issuing demand notices and associated orders for demands relating to fiscal year 2024-25 and subsequent periods. This applies to cases involving allegations of fraud, misrepresentation, or deliberate misstatement, as well as cases without such charges. Furthermore, the period during which taxpayers can benefit from a reduced penalty, by settling the demanded tax along with interest, is proposed to increase from 30 days to 60 days. This change will become effective upon notification by the Central Board of Indirect Taxes and Customs (CBIC).
Understanding GST Notices
GST authorities issue notices as official communications to taxpayers. These documents serve to alert taxpayers to observed non-compliance with GST laws or to request additional information. Situations prompting a notice can include suspicious activities, undeclared movement of goods or services, or discrepancies identified during the verification of GST returns, information from other government departments, or third-party sources.
Notices are categorized by their purpose and the seriousness of the issue, appearing as show cause notices (SCN), scrutiny notices, or demand notices. Common reasons for receiving a GST notice include failing to register for GST when legally required, late or non-filing of GST returns, underpayment or non-payment of GST, and incorrect input tax credit claims.
Taxpayers must respond to these notices promptly within the specified deadline. Failure to do so can result in legal consequences, including prosecution or penalties for willful default.
Frequent Causes for Receiving GST Notices
Taxpayers often receive GST notices for various discrepancies and non-compliance issues, including:
- Discrepancies in data reported between GSTR-1 and GSTR-3B leading to scrutiny.
- Differences between input tax credit claims made in GSTR-3B and the amounts reflected in GSTR-2B/2A.
- Consistent delays in filing GSTR-1 and GSTR-3B for over six consecutive months.
- Inconsistencies between declarations in GSTR-1 and data on the e-way bill portal.
- Failure to reduce prices in line with decreased GST Rates as notified by the CBIC, thereby not passing on the benefit to consumers (anti-profiteering).
- Non-payment or underpayment of GST liability, whether intentional or unintentional, often resulting in a show cause notice (SCN).
- Erroneous GST refunds, with or without fraudulent intent, also leading to an SCN.
- Improper availing or utilization of Input Tax Credit.
- Businesses operating without mandatory GST registration and not fulfilling their tax obligations.
- Discrepancies between export reporting in GSTR-1 and information available on ICEGATE, such as un-reported Shipping Bills or Bills of Export.
- Requests for information related to records that taxpayers are required to maintain.
- Initiation of an audit by tax authorities.
- Failure to submit required information returns within the stipulated timeframe.
Classifications of Notices Under GST Legislation
The table below outlines various types of GST notices, the required taxpayer actions, response deadlines, and consequences of non-compliance:
| Serial No. | Notice Form Name | Description | Required Reply or Action | Response Time Limit | Non-Response Outcome |
|---|---|---|---|---|---|
| 1 | GSTR-3A | Default notice for non-filing of GST returns (e.g., GSTR-1, GSTR-3B, GSTR-4, or GSTR-8). | File the outstanding GST returns along with applicable late fees and interest on any tax liability. | 15 days from notice receipt | Tax assessment based on department's best judgment; penalty of Rs. 10,000 or 10% of tax due, whichever is higher. |
| 2 | CMP-05 | Show cause notice questioning eligibility for the composition scheme. | Provide justification for continued eligibility under the composition scheme. | 15 days from notice receipt | Penalty as per Section 122 and an order (CMP-07) denying composition scheme benefits. |
| 3 | REG-03 | Notice issued during GST registration application verification, requesting clarification or additional documents. Also used for GST registration amendment. | Submit a reply letter in REG-04 with the requested clarifications or information. | Within 7 working days from notice receipt | Application rejection, communicated electronically in REG-05. |
| 4 | REG-17 | Show cause notice proposing GST registration cancellation for specified reasons. | Submit a reply letter in REG-18 stating reasons against cancellation. | Within 7 working days from notice receipt | GST registration cancellation via REG-19. |
| 5 | REG-23 | Show cause notice for revocation of GST registration cancellation. | Submit a reply letter in REG-24. | Within 7 working days from notice receipt | Revocation of GST registration cancellation. |
| 6 | REG-27 | Notice issued to taxpayers migrating from the VAT regime who did not apply after provisional registration or provided incomplete details. | Apply in REG-26 and appear before tax authority for a hearing. | None prescribed | Provisional registration cancellation via REG-28. |
| 7 | PCT-03 | Show cause notice regarding misconduct by a GST practitioner. | Respond within the timeframe specified in the notice. | Within the time prescribed in the show cause notice | Order canceling the GST practitioner's license. |
| 8 | RFD-08 | Show cause notice explaining why a GST refund should not be granted. | Submit a reply letter in RFD-09. | Within 15 days of notice receipt | Order (RFD-06) rejecting the GST refund application. |
| 9 | ASMT-02 | Request for additional information for provisional GST assessment. | Reply in ASMT-03 with supporting documents. | Within 15 days from notice service date | Provisional assessment application may be rejected. |
| 10 | ASMT-06 | Request for additional information for final GST assessment (for those with provisional assessment). | Reply within 15 days of notice receipt. | Within 15 days from notice receipt | ASMT-07 may be issued without considering taxpayer's input. |
| 11 | ASMT-10 | Scrutiny notice indicating discrepancies in GST returns and demanding tax, interest, or other amounts. | Respond in ASMT-11, explaining the discrepancies in GST returns. | Within the time specified in the notice (max. 30 days) | Taxpayer assessment based on available information, potentially leading to prosecution and penalties. |
| 12 | ASMT-14 | Show Cause Notice for best judgment assessment under Section 63. | Submit a written reply and appear before the issuing GST authority. | Within 15 days of notice | An assessment order (ASMT-15) may be issued, which might not be favorable. |
| 13 | ADT-01 | Notice for a tax authority-conducted audit under Section 65. | Attend in person or produce requested records. | Within the time prescribed in the notice | Presumption of no proper books of accounts, initiating further proceedings. |
| 14 | RVN-01 | Notice under Section 108 by the revisional authority before issuing a revision order for appeals, offering a hearing opportunity. | Reply within the prescribed time and/or appear before the GST authority on the specified date. | Within 7 working days from notice service date | Case decision ex parte based on available records and merits. |
| 15 | Notice of Enquiry by Directorate of Anti-profiteering | Initiated when a supplier fails to pass on ITC benefits or reduced GST rates to consumers. All involved parties receive a request for details. | Cooperate with proceedings and provide evidence as required. | As specified in the notice | Ex parte proceedings based on available evidence. |
| 16 | DRC-01 | Show cause notice for tax demand, issued for short-paid or unpaid tax, with or without intent to defraud. Accompanied by details in DRC-02. | Reply in DRC-03 for tax, interest, and penalty payment. Use DRC-06 to respond to the SCN. (Note: Without fraud, penalty applies if payment is beyond 30 days.) | Within 60 days of notice receipt | Order with higher penalty or prosecution; issued within three years from the annual return due date for the relevant financial year. |
| 17 | DRC-10 and DRC-17 | Notice for auction of goods under Section 79(1)(b) of the Act, referring to a demand recovery order. | Settle the outstanding demand as per DRC-09. | As specified in the notice before sale (last bid/auction day cannot be less than 15 days from notice issue). | Proceeds with e-auction and sale. |
| 18 | DRC-11 | Notice to the successful bidder. | Pay the full bid amount. | Within 15 days from the auction date | The proper officer may conduct a re-auction. |
| 19 | DRC-13 | Notice for recovery of outstanding tax from a third party. | Deposit the amount specified and reply in DRC-14. | Not applicable | Deemed a defaulter for the specified amount, subject to prosecution and penalties. |
| 20 | DRC-16 | Notice for attachment and sale of immovable/movable goods/shares under Section 79. | The taxpayer is prohibited from transferring or creating a charge on the goods; any such action will be invalid. | Not applicable | Contravention may lead to prosecution and/or penalties. |
These provisions become effective once formally notified by the CBIC.
Official Methods for Issuing GST Notices
Section 169 of the CGST Act specifies the authorized channels for delivering GST notices. Notices received through any other method are not legally valid. Taxpayers should be aware that notices can be communicated via:
- Direct Hand-Delivery: Either personally or through a messenger or courier, delivered to the taxpayer or their authorized representative.
- Postal Services: By registered post, speed post, or courier with an acknowledgment, addressed to the taxpayer's last known business address.
- Electronic Communication: Sent to the registered email address.
- GST Portal: Made accessible after the taxpayer logs into the official GST portal.
- Public Advertisement: Published in a local newspaper circulating in the area of the taxpayer’s last known residential address.
- Physical Affixation: If other methods are impractical, by posting the notice in a visible location at the taxpayer's last known place of business or residence. As a final alternative, if this is also deemed insufficient by tax authorities, a copy may be affixed to the notice board of the relevant officer's or authority's office.
Taxpayers are not obligated to act on communications or notices that are not delivered through these officially notified channels.
Responding to GST Notices and Consequences of Inaction
Responses to GST notices can be submitted digitally through the GST portal, using either a digital signature or an e-signature from the taxpayer or their authorized representative. If tax and interest payments are required, these must be made using the correct form and procedure. Following payment, the appropriate reply letter must be submitted to the tax authority that issued the notice.
Failure to respond to a GST notice within the specified deadline can result in penalties and additional legal actions, depending on the specifics of the case under GST law.
Taxpayers also have the option to designate an authorized representative, such as a practicing chartered accountant, to manage their GST notice-related matters. This is done by issuing a Letter of Authorisation under GST, empowering the representative to respond to notices and take necessary actions on the taxpayer's behalf.