In recent times, businesses across the country have found themselves inundated with Show Cause Notices (SCN) from GST authorities. This sudden surge in notifications can be attributed to the enforcement of Section 73(10) of the Central Goods & Services Tax Act, 2017 (CGST Act).
Understanding the Significance of CGST Act Section 73(10)
Section 73(10) of the Central Goods & Services Tax Act, 2017 (CGST Act) imposes a critical obligation on proper officers. It requires them to issue an order within three years from the due date for furnishing annual returns of the financial year. This applies when taxes were not paid, were short-paid, or when there were discrepancies in Input Tax Credit (ITC) utilization, or an erroneous refund was granted.
Moreover, the GST law mandates proper officers to issue a Show Cause Notice (SCN) at least three months before the three-year time limit stipulated for the order's issuance. This regulatory provision ensures due process, offering taxpayers an opportunity to respond before a final order is issued. In essence, Section 73(10) plays a crucial role in establishing compliance frameworks and timelines within the GST landscape.
Extended Timelines and Emerging Pressures
The recent notification by the Central Board of Indirect Taxes and Customs (CBIC) has extended the time limit for issuing orders under Section 73(10) for the financial years 2017-18, 2018-19, and 2019-20. While the deadline for FY 2017-18 is now December 31, 2023, this extension has initiated a looming challenge for both tax authorities and businesses.
The heightened urgency to adhere to these timelines is indicative of an impending and potentially prolonged battle. The compressed turnaround time for responding to Show Cause Notices (SCNs) and the rush to pass orders before the deadline are ominous signs pointing towards possible future litigation. Furthermore, the time limit for issuing SCNs for subsequent financial years (2018-19 and 2019-20) ending on December 31, 2023, and March 31, 2024, respectively, forewarns of an imminent surge in notices.
Measures for Businesses in Response to Regulatory Developments
In response to these developments, businesses are strongly encouraged to reassess their strategies and proactively address potential issues. Learnings from past notices serve as valuable indicators, suggesting that recurring issues may resurface in subsequent periods.
An imperative step for businesses is to conduct a thorough review of statutory filings against financial statements, identifying gaps, and reassessing tax positions adopted since the inception of GST.
Common Challenges Leading to Notices
Common problems leading to notices encompass ITC mismatches, disparities in outward liability reporting and GST payments, blocked credit availment, non-payment under the 'Reverse Charge Mechanism,' and failure to reverse common ITC used in exempt supply.
Challenges: Post-GST Implementation
The post-GST implementation period witnessed myriad challenges arising from legal interpretation, compliance issues, and technical glitches. Despite government interventions to address these concerns, stakeholders often neglected to revisit their initial tax positions.
Consequently, businesses now face the prospect of unexpected financial burdens in the form of additional taxes, interest, and penalties.
Conclusion
To proactively mitigate potential risks, businesses are advised to take a step back, examining historical GST positions, reviewing contracts and agreements, initiating vendor compliance verification, maintaining comprehensive records, and providing training to tax teams.
As the GST landscape evolves into an era of heightened litigation, businesses are urged to adopt a meticulously crafted approach to navigate these challenges. The present moment presents an opportune time for strategic planning and proactive measures to be implemented before the next wave of notices hits.
Source: CFO.com