Understanding Goods and Services Tax Notices: Varieties and Response Procedures
This guide explains the different types of Goods and Services Tax (GST) notices issued by Indian tax authorities, including show cause, demand, and scrutiny notices. It details common reasons for receiving these notices, outlines the specific forms and response procedures required, and highlights the consequences of non-compliance. Taxpayers will find a comprehensive table categorizing notices, along with information on valid communication methods and how to formally respond to ensure adherence to GST regulations.
Understanding Goods and Services Tax Notices: Varieties and Response Procedures
Notices under Goods and Services Tax (GST) encompass various forms, such as show cause, demand, and scrutiny notices. This guide provides a comprehensive overview of different GST notice types and outlines the available response options for taxpayers.
Recent Regulatory Updates
The Union Budget 2024 included a proposal to introduce Section 74A into the CGST Act. This section aims to establish a unified time limit for issuing demand notices and orders for financial year 2024-25 onwards. This applies to cases involving allegations of fraud, suppression of facts, or willful misstatement, as well as cases without such charges. Additionally, the timeframe for taxpayers to benefit from reduced penalties, by remitting the demanded tax along with interest, is proposed to increase from 30 to 60 days. These changes will take effect upon notification by the Central Board of Indirect Taxes and Customs (CBIC).
What is a GST Notice?
GST authorities issue notices as official communications to taxpayers. These communications often serve to remind or caution taxpayers about observed defaults, particularly concerning non-compliance with GST laws. In some instances, notices may simply request additional information. Common situations prompting tax authorities to issue notices include unidentified movement of goods or services, suspicious taxpayer operations, or discrepancies found during GST return verification. Information from other government departments or third parties can also trigger these notices.
A notice might be termed a show cause notice (SCN), scrutiny notice, or demand notice, depending on the specific case, the purpose, the severity of the default, or the required action. Frequently, notices are issued due to taxpayer oversights such as failing to register under GST when legally required, late or non-filing of GST returns, underpayment or non-payment of GST, or claiming excessive Input Tax Credit.
It is crucial for taxpayers to respond or act promptly to notices within the specified timeframe. Failure to do so can lead to legal complications, potentially resulting in prosecution by authorities or penalties for willful default.
Common Reasons for Receiving GST Notices
Taxpayers frequently receive GST notices for various reasons, including:
- Return Data Mismatches: Discrepancies between details reported in GSTR-1 and GSTR-3B, often leading to a scrutiny notice.
- Input Tax Credit (ITC) Variances: Differences in ITC claims made in GSTR-3B compared to GSTR-2B/2A.
- Consistent Late Filings: Delays in filing GSTR-1 and GSTR-3B for over six consecutive months.
- E-way Bill Inconsistencies: Discrepancies between declarations in GSTR-1 and the e-way bill portal.
- Anti-Profiteering Violations: Failure to reduce prices in response to decreased GST Rates, as notified by the CBIC. This constitutes profiteering, leading to actions by GST authorities.
- Tax Payment Defaults: Non-payment or underpayment of GST liability, whether intentional or unintentional, typically results in a show cause notice (SCN).
- Incorrect GST Refunds: Erroneous GST refunds issued, with or without intent to defraud, also trigger an SCN.
- Improper ITC Availment/Utilization: Cases where Input Tax Credit is wrongly claimed or used.
- Failure to Register: Businesses liable for GST registration but failing to obtain it and discharge their tax obligations under the GST Act.
- Export Reporting Discrepancies: Inconsistencies between export data reported in GSTR-1 and information available on ICEGATE, such as a Shipping Bill or Bill of Export lodged but not declared in GSTR-1.
- Information Request: Authorities may seek details related to records maintained by a taxpayer.
- Tax Audits: Notices issued for the conduct of an audit by tax authorities.
- Unfurnished Information Returns: Failure to submit a required information return within the stipulated deadline.
Categories of Notices under GST Law
The table below provides a concise overview of various GST notices, actions required from taxpayers, response deadlines, and consequences of non-compliance:
| Sl no | Form Name | Description | Required Reply or Action | Response Timeframe | Non-Response Consequences |
|---|---|---|---|---|---|
| 1 | GSTR-3A | Default notice for taxpayers who have not filed GST returns like GSTR-1, GSTR-3B, GSTR-4, or GSTR-8. | File the outstanding GST Returns, including late fees and interest on any unpaid GST liability. | 15 days from notice receipt. | Tax assessed based on best judgment using department data. Penalty of Rs. 10,000 or 10% of tax due, whichever is higher. |
| 2 | CMP-05 | Show cause notice questioning a taxpayer's eligibility for the composition scheme. | Provide justification for continued eligibility under the composition scheme. | 15 days from notice receipt. | Penalty under 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 in REG-04 with clarifications or required information. | Within 7 working days from notice receipt. | Rejection of application and electronic notification to the applicant in REG-05. |
| 4 | REG-17 | Show cause notice proposing GST registration cancellation for reasons specified in the notice. | Submit a reply in REG-18 stating reasons against GST registration cancellation. | Within 7 working days from notice receipt. | Cancellation of GST registration in REG-19. |
| 5 | REG-23 | Show cause notice regarding the revocation of GST registration cancellation, detailing the reasons. | Submit a reply in REG-24. | Within 7 working days from notice receipt. | GST Registration cancellation will be revoked. |
| 6 | REG-27 | Notice issued to VAT regime taxpayers migrating to GST who failed to apply after provisional registration or provided incomplete/incorrect details. | Reply by applying in REG-26 and attend before the tax authority, providing a reasonable opportunity to be heard. | None prescribed. | Cancellation of provisional registration in REG-28. |
| 7 | PCT-03 | Show cause notice concerning misconduct by a GST practitioner. | Reply within the timeframe specified in the show cause notice. | Within the time prescribed in the show cause notice. | Order to cancel the GST practitioner license. |
| 8 | RFD-08 | Show cause notice explaining why a GST refund application should be rejected. | Submit a reply 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 assessment under GST. | Submit a reply in ASMT-03 along 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 assessment under GST (for those who applied for provisional assessment). | Reply within 15 days of notice receipt. | Within 15 days from notice receipt. | ASMT-07 may be issued without considering the taxpayer's views. |
| 11 | ASMT-10 | Scrutiny notice informing about discrepancies in the GST return, along with any associated tax, interest, and payable amounts. | Submit a reply in ASMT-11 explaining the discrepancies in the GST returns. | Within the time prescribed in the show cause notice or a maximum of 30 days from notice service, or as notified. | Authorities may proceed to assess the taxpayer based on available information, potentially leading to prosecution and penalties. |
| 12 | ASMT-14 | Show Cause Notice for assessment under Section 63, providing reasons for best judgment assessment. | Submit a written reply and appear before the issuing GST authority. | Within 15 days of notice. | Assessment order (ASMT-15) may be unfavorable to the assessee. |
| 13 | ADT-01 | Notice for conducting an audit by the Tax authority under Section 65. | Attend in person as directed or produce requested records. | Within the time prescribed in the notice. | Presumption that the taxpayer lacks books of accounts, leading to initiation of proceedings. |
| 14 | RVN-01 | Notice under Section 108 issued by the revisional authority before passing a revision order of appeals, offering an opportunity to be heard. This order typically corrects errors in appeal orders under Section 108. | Reply within the prescribed time and/or appear before the GST authority on the specified date. | Within 7 working days from notice service. | Case will be decided 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 notice requesting further details. | Cooperate with proceedings and provide any relevant evidence. | As specified in the notice. | Proceedings initiated ex parte based on available evidence. |
| 16 | DRC-01 | Show cause notice for tax demand, issued for short-paid or unpaid tax, with or without fraudulent intent. It is served with a statement of details in DRC-02. | Reply in DRC-03 by paying the demanded tax amount, along with applicable interest and penalty. Use DRC-06 to formally reply to the show cause notice. Note: If no fraud is involved, a penalty is only charged if payment occurs beyond the 60-day time limit. | Within 60 days of notice receipt. | Order may be passed with higher penalties or prosecution. Must be issued within three years from the annual return due date for the relevant financial year. |
| 17 | DRC-10 And DRC-17 | Notice of Auction of Goods under Section 79(1)(b) of the Act, referencing a demand order for recovery by a specified officer under Section 79 or recovery through decree execution. | Pay the outstanding demand as per DRC-09. | As specified in the notice before the sale (last day of bid/auction cannot be before 15 days from notice issue date). | Proceed with e-auction and sale. |
| 18 | DRC-11 | Notice to the successful bidder in an auction. | 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 in the notice and reply in DRC-14. | Not applicable. | The third party is deemed a defaulter for the specified amount and may face prosecution and penalties. |
| 20 | DRC-16 | Notice for attachment and sale of immovable/movable goods/shares under Section 79. | Taxpayer is prohibited from transferring or creating a charge on the specified goods. Any such transfer or charge will be invalid. | Not applicable. | Contravention of the notice may result in prosecution and/or penalties. |
Valid Methods for Sending GST Notices
Section 169 of the CGST Act specifies the acceptable methods for communicating GST notices. Notices received through any other channels are not legally valid. Taxpayers should be aware of the following official modes of delivery:
- Personal Delivery: Hand-delivery of the notice directly to the taxpayer or their authorized representative, either personally or via a messenger or courier.
- Registered Mail: Sending by registered post, speed post, or courier with an acknowledgment, addressed to the taxpayer's last known business location.
- Email Communication: Transmitting the notice to the taxpayer's registered email address.
- GST Portal: Making the notice accessible on the GST portal after the taxpayer logs in.
- Public Advertisement: Publishing the notice in a regional newspaper circulated in the locality corresponding to the taxpayer's last known residential address.
- Physical Affixation: If other methods are not feasible, affixing the notice in a prominent location at the taxpayer's last known place of business or residence. As a final recourse, if this is also deemed unreasonable, authorities may affix a copy on the notice board of the relevant officer's or authority's office.
Taxpayers are not obligated to act on notices or communications if they are received through channels not sanctioned by GST law.
Responding to GST Notices and Consequences of Non-Compliance
Responses to GST notices can be submitted online via the GST portal. Taxpayers or their authorized personnel can use a digital signature or e-signature for submission. If the notice requires payment of tax and interest, this liability must be settled using the appropriate form and method. Following payment, the necessary reply letter must be submitted to the tax authority who issued the notice.
Should a taxpayer fail to respond to GST notices within the stipulated deadline, they risk incurring penalties and facing further legal actions as mandated by GST law.
Taxpayers have the option to authorize a representative or a practicing chartered accountant to handle matters related to GST notices. This is done by issuing a Letter of Authorization under GST, granting the representative the authority to reply to notices and take actions on their behalf.