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Article Dated 2nd September, 2021

SHOW CAUSE NOTICE UNDER GST

Show cause notice shortly called as ‘SCN’ is a document served by the department on a person asking him to explain with reasons as to why a particular course of action should not be taken against him. It is similar to an opportunity given to a person who is proposed to be charged with violation of law by giving him sufficient opportunity to submit his view point as to why he should not be proceeded against for the alleged violation.

Under the Goods and Services Tax Law, there are multiple situations where show cause notice is issued by department. These are as follows—

Sr. No.

Types of show cause notices

1.

Show cause notice under section 73

2.

Show cause notice under section 74

3.

Show cause notice under section 76

4.

Notice for denial of option to pay tax under section 10

5.

Show Cause Notice for Cancellation of Registration

6.

Show Cause Notice for rejection of application for revocation of cancellation of registration

7.

Show Cause Notice for cancellation of provisional registration

8.

Show Cause Notice for disqualification

9.

Notice for rejection of application for refund

10.

Show Cause Notice for assessment under section 63

 

1. Show cause notice under section 73

Section 73 of CGST Act provides for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts.

This section further provides that the adjudication order will be issued within three years from the due date of filing of annual return for the year to which the discrepancy is noticed.

This section also provides that the Show cause notice is required to be issued at least three months before the due date of passing of adjudication order i.e. 2 years and 9 months from the due date of annual return

Opportunity to avoid show cause notice— It has also been provided that SCN need not be issued if tax along with interest is paid before issue of such notice.

Where any person chargeable with tax pays the tax along with interest within thirty days of issue of Show cause notice, no penalty shall be payable and all proceedings in respect of the notice shall be deemed to be concluded.

In case taxpayer not availed the above opportunities then the proper officer will proceed to take up the adjudication process and then determine penalty equivalent to 10% or ten thousand rupees, whichever is higher.

2. Show cause notice under section 74

Section 74 of CGST Act provides for determination of  tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised, for reasons of fraud or wilful misstatement or suppression of facts.

The adjudication order will be issued within five years from the due date of filing of annual return for the year to which the discrepancy is noticed.

Further, the Show cause notice is required to be issued at least six months prior to the due date of passing of adjudication orders.

Opportunity to avoid show cause notice —It provides that such notice need not be issued if tax along with interest and penalty equal to fifteen per cent. of tax is paid before issue of such notice.

This section also provides that where any person chargeable with tax pays the tax along with interest and penalty equal to twenty five per cent. of tax within thirty days of issue of Show cause notice, all proceedings in respect of the notice shall be deemed to be concluded.

This section also provides that where any person chargeable with tax pays the tax along with interest and penalty equal to fifty per cent. Of tax within thirty days of communication of order, all proceedings in respect of the notice shall be deemed to be concluded.

3. Show cause notice under section 76

Section 76 of CGST Act provides that any amount collected as tax, along with interest, from customers shall be paid to account of the Government regardless of whether the supplies are taxable or not.

This section further provides for issuance of a Show cause notice for the amount collected but not deposited. This clause also provides that the order needs to be issued within one year from the date of issuance of such notice.

4. Notice for denial of option to pay tax under section 10 Rule 6(4)

Where the proper officer has reasons to believe that the registered person was not eligible to pay tax under section 10 or has contravened the provisions of the Act or provisions of this Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under section 10 shall not be denied.

5. Show Cause Notice for Cancellation of Registration (Rule 22)

Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29, he shall issue a notice to such person in FORM GST REG-17, requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled.

6. Show Cause Notice for rejection of application for revocation of cancellation of registration (Rule 23)

The proper officer shall, before passing the order referred to in clause (b) of sub-rule (2), issue a notice in FORM GST REG–23 requiring the applicant to show cause as to why the application submitted for revocation under sub-rule (1) should not be rejected and the applicant shall furnish the reply within a period of seven working days from the date of the service of the notice in FORM GST REG-24.

7. Show Cause Notice for cancellation of provisional registration (Rule 24(3))

Where the particulars or information specified in sub-rule (2) have either not been furnished or not found to be correct or complete, the proper officer shall, after serving a notice to show cause in FORM GST REG-27 and after affording the person concerned a reasonable opportunity of being heard, cancel the provisional registration granted under sub-rule (1) and issue an order in FORM GST REG-28.

8. Show Cause Notice for disqualification (Rule 83(4))

If any goods and services tax practitioner is found guilty of misconduct in connection with any proceedings under the Act, the authorised officer may, after giving him a notice to show cause in FORM GST PCT-03 for such misconduct and after giving him a reasonable opportunity of being heard, by order in FORM GST PCT-04 direct that he shall henceforth be disqualified under section 48 to function as a goods and services tax practitioner.

9. Notice for rejection of application for refund (Rule 92(3))

Where the proper officer is satisfied, for reasons to be recorded in writing, that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant, he shall issue a notice in FORM GST RFD-08 to the applicant, requiring him to furnish a reply in FORM GST RFD-09 within a period of fifteen days of the receipt of such notice and after considering the reply, make an order in FORM GST RFD-06 sanctioning the amount of refund in whole or part, or rejecting the said refund claim and the said order shall be made available to the applicant electronically and the provisions of sub-rule (1) shall, mutatis mutandis, apply to the extent refund is allowed.

10. Show Cause Notice for assessment under section 63 (Rule 100(2))

The proper officer shall issue a notice to a taxable person in accordance with the provisions of section 63 in FORM GST ASMT-14 containing the grounds on which the assessment is proposed to be made on best judgment basis and shall also serve a summary thereof electronically in FORM GST DRC-01, and after allowing a time of fifteen days to such person to furnish his reply, if any, pass an order in FORM GST ASMT-15 and summary thereof shall be uploaded electronically in FORM GST DRC-07.

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