Determination of Tax and adjudication of demand under GST

[Rajeev Jain]

Chapter XV “Demands & Recovery” of the Central Goods & Service Tax Act, 2017 (CGST Act, 2017) contains the provisions related to determination of Tax and adjudication of demand. The provisions in the said chapter have been prescribed under Sections 73 to Section 84.

The Proper Officer has to determine whether the actions of the registered tax payers involving non-payment or short payment of tax, or excess claim of input tax credit is for reason whether:

• Involving fraud, wilful misstatement, or suppression of facts on the part of the tax payers or
• Not involving fraud, wilful misstatement, or suppression of facts on the part of the tax payers.

If non-payment or short payment etc of tax is for reasons other than fraud, wilful misstatement or suppression of fact, the necessary adjudication involves application of Section 73 of the CGST, Act, 2017.

If the non/short-payment of tax, excess claim of input tax credit etc. is by way of fraud, misstatement suppression of facts etc. necessary adjudication and other follow is provided under Section 74 of the CGST Act, 2017.

The provisions for demand under section 73 are summarised as under:

1. First, it is to be determined by the Proper Office in his opinion whether the tax not/short paid etc. is for reason other than on account of fraud, wilful misstatement, suppression of fact.

2. If answer to question number 1 is affirmative, the Proper Officer shall proceed under Section 73 of the CGST Act, 2017, else under Sec 74 of this Act.

3. The Proper Officer shall ascertain and compute the details of tax, interest and penalty payable and also communicate the same to the defaulting tax payer.

4. A taxpayer, on receipt of intimation, communicate to proper officer, whether he has made whole or part payment of the ascertained liability, or the liability is not acceptable by him.

5. In case the taxable person pays the full amount mentioned as mentioned above and informs the Proper Officer, the proceedings under Section 73(1) shall stand concluded and there would be no need for issue of SCN.

6. When the amount paid as per the ascertainment of the assessee falls short, the proper officer shall issue a SCN for the amount of shortfall under Section 73(1) of the CGST Act, 2017. However, the provision of pre-notice is optional with effect from 15-10-2020 and not mandatory.

7. Thereafter, the Proper officer shall issue a notice (Form GST DRC-01) under section 73(1) in the following situation involving payment of tax has arisen in cases other than fraud, wilful misstatement or suppression of facts-

1. Tax not paid; or
2. Tax short paid; or
3. Tax erroneously refunded; or
4. Input tax credit wrongly availed or utilised.

8. The proper office may issue a statement under section 73(3) of the CGST Act, 2017 in lieu of SCN, if SCN on same grounds was issued for earlier period, in Form GST DRC-02.

9. Where the tax payer makes the payment of tax along with interest within 30 days of issuance of SCN and intimates the proper officer of such payment in FORM GST DRC-03, the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice and subsequently no penalty shall be payable.

10. Where the person files a reply or representation, the proper officer after considering the representation, shall issue an order in FORM GST DRC-06, consisting of the amount of tax, interest and penalty.

11. The amount of penalty shall be higher of 10% of tax or Rs.10,000 (Sub-section 9 of Section 73).

12. A summary of such order shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax. Such summary of order in Form GST DRC-07 shall be treated as a notice for recovery.

13. As per Section 73(10), the Proper Officer is required to pass the order within three years from:

1. the due date of filing of Annual Return under Section 44 for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates or
2. date of erroneous refund.

xiv. The Proper Officer is required to issue notice at least three months prior to the time limit specified under Section 73(10) for issuance of an order.

xv. Notwithstanding anything contained in Section 73(6) and Section 73(8), penalty under Section 75(9) shall be payable where any amount of:

1. Any amount of Self-assessed tax or
2. Any amount collected Tax collected as tax

has not been paid within a period of thirty days from the due date of payment of such tax.

CBI&C Notification No. 09/2023 Central Tax dated 31^st March 2023 extend time limit specified in sub-section (10) of Section 73 for issuance of order under sub section (9) of Section 73 by modification earlier notification No. 35/2020-Central Tax, dated 03 April 2020, hence the revised limit for issuing order under sub section (9) is given as under:

(i) for the financial year 2017-18, up to the 31^st December, 2023;

(ii) for the financial year 2018-19, up to the 31^st March, 2024;

(iii) for the financial year 2019-20, up to the 30^th June, 2024.  

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Disclaimer: The above article is author view point only, please refer respective sections, rules framed under the GST law.

The author can be reached at "rajiv@rajivudai.com"