ADJUDICATION UNDER GST (PART-2)

[Dr. Sanjiv Agarwal]

Demand Proceedings

Initiation of Demand Proceedings

In the following circumstances, demand proceedings could be initiated by the proper officer under GST as per provisions of section 73 or section 74 of the CGST Act, 2017

(a)   Any tax has not been paid.

(b)  Any tax has been short paid.

(c)   Any refund has been erroneously made.

(d)  Input tax credit has been wrongly availed.

(e)   Input tax credit has been wrongly utilized.

It covers determination of tax under following two circumstances viz,

(a)   Cases not involving fraud, wilful misstatement or suppression of facts (Section 73)

(b)  Cases involving fraud, wilful misstatement or suppression of facts to evade tax. (Section 74)

Demand and recovery provisions

Following provisions have been made under the CGST Act, 2017 for the proper officer to demand and recovery the tax:

1. Section 73 - Demand of tax not paid, short paid, erroneously refunded, wrong availment of input tax credit or wrong utilization of input tax credit by reasons other than fraud, willful misstatement or suppression of facts.
2. Section 74 - Demand of tax not paid, short paid, erroneously refunded, wrong availment of input tax credit or wrong utilization of input tax credit by reasons of fraud, willful misstatement or suppression of facts.
3. Section 75 - General provisions applicable to determination of tax such as service of notice, issuance of order, opportunity of being heard, adjournment, determination of demand and penalties.
4. Section 76 - Demand of tax collected and not deposited.
5. Section 77 – Provisions for tax wrongfully collected and paid to Central Government or State Government by wrongly considering inter-State and intra-Sate supplies.

Determination of Demand

Following diagram depicts as to how demand of GST shall be determined :

Determination of Demand
Section 73	Section 74
Tax not paid / short paid / erroneously refund / wrong ITC availed or utilized
Reason other than fraud Willful misstatement Suppression of facts Voluntary payment No SCN to be issued if amount paid suo-moto Penalty 10% Order within 3 years of due date of furnishing annual return of relevant financial year	By reason of  fraud Willful misstatement Suppression of facts Non-voluntary payment SCN to be issued Penalty 15% Order within 5 years of due date of furnishing annual return of relevant financial year

Penalty provisions (over and above interest amount) under section 73 and 74 at a glance

Situation	Penalty under section 73	Penalty under section 74
Before issuance of show cause notice	No penalty	15%
Within 30 days after the issuance of show cause notice	No penalty	25%
Within 30 days of issuance of order	10% of the tax or INR 10,000, whichever is higher.	50%
After 30 days of issuance of order.	10% of the tax or INR 10,000, whichever is higher.	Equivalent  to tax amount

(To be continued….)