GST Demand Notice – Demand Notice under GST by authorities

GST Demand Notice: The Goods & Service Tax (GST) is payable on a self-assessment system, meaning the taxpayer is responsible for figuring out how much taxes they need to pay. The GST officials will issue a demand if the taxpayer’s assessment is incorrect, meaning that they have underpaid taxes, failed to pay taxes, improperly claimed and used input tax credits, or erroneously received refunds. The GST authorities will initiate demand and recovery provisions against the taxpayer if there is any underpayment or improper utilisation of input tax credit. Let’s understand demand provisions under GST through this article. 

What is a Demand Notice under GST?

The GST Demand Notice contains information regarding the amount of tax owed, the reason for the demand, and the period within which the tax must be paid. The notice is usually issued after an audit of the individual’s or company’s records and returns has been filed, and it is determined that tax has been underpaid.

A demand notice is issued by the GST officials in case of short payment or non-payment of GST. The given notice can be raised in two different situations:

1. When there is no fraud or wilful misstatement or suppression of facts
2. When there is fraud or wilful misstatement or suppression of facts

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Section 73 of CGST Act – No Fraud or Misrepresentation

When there is no reason of fraud or wilful misstatement or suppression of facts, GST demand notice is issued under Section 73. Section 73 of the CGST Act, deals with the cases where any taxes

• has not been paid or
• short paid or
• erroneously refunded, or
• where input tax credit has been wrongly availed or utilised

for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax.

1. Time Limit for Issue of Notice and Adjudication under Section 73

The Time limit in case of Notices under section 73 is within 3 years from the date of filing of annual GST return for the relevant financial year.

If the taxpayer received an erroneous refund, the case must be adjudicated within 3 years from the date on which such refund was credited to the taxpayer’s account.

The officer should issue notice for recovery of tax at least 3 months prior to the limit of adjudication or issue of order.

The officer should issue order of adjudication within 3 years from the due date for furnishing of annual return for the financial year for the relevant period of dispute

Once the above notice has been issued within the time limit, the proper officer can serve a statement, with details of any unpaid tax/wrong refund etc. for other periods not covered in the notice. A separate notice does not have to be issued for each tax period.

Finally, taxpayer can voluntarily pay taxes along with interest before issue of notice / statement and inform the departmental officer about the same in writing. The departmental officer, if satisfied, will not issue notice in that respect.

2. Payment of Tax on Receiving GST Demand Notice

If a demand notice is issued under Section 73 and the taxpayer makes payment, the following would be the penalty:

Penalty under Section 73 of the CGST Act

Payment of Penalty	Amount of Penalty
Dues paid before issuance of show cause notice.	No penalty
Dues paid within 30 days of issuance of show cause notice.	No penalty
Dues paid after 30 days of issuance of Order.	10% of tax dues or RS 10,000 Whichever is higher.
Any other case	10% of tax dues or RS 10,000 Whichever is higher.

If the taxpayer pays all their dues within 30 days from the date of the notice, then the penalty will not be applicable. All proceedings (excluding proceedings u/s 132, i.e., prosecution) regarding the notice will be closed.

Section 74 of CGST Act  – Fraud or Misrepresentation

When there is reason of fraud or wilful misstatement or suppression of facts, GST demand notice is issued under Section 74 of the CGST Act.

Section 74 of the CGST Act, deals with the cases where any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts to evade tax.

1. Time Limit for Issue of Notice and Adjudication under Section 74

If there is any:

• non-payment,
• short payment, or
• where input credit has been wrongly availed or utilized

with the reason of:

• fraud or
• willful misstatement or
• suppression of facts,

then the officer will serve a show-cause notice within 5 years from the date of filing of annual return for the relevant financial year.

If the taxpayer received an erroneous refund, the case must be adjudicated within 5 years from the date on which such refund was credited to the taxpayer’s account.

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The officer should issue notice for recovery of Tax at least 6 months before the deadline for adjudication of case or issue of order.

The officer should issue order of adjudication within 5 years from the due date for furnishing of annual return for the financial year for the relevant period of dispute.

Please note that, once the notice has been issued, the proper officer can serve a statement, with details of any unpaid tax/wrong refund etc. for other periods not covered in the notice. A separate notice does not have to be issued for each tax period.

Finally, taxpayer can voluntarily pay taxes along with interest and 15% penalty before issue of notice/statement and inform the departmental officer about the same in writing. The departmental officer, if satisfied, will not issue notice in that respect.

2. Penalty under Section 74 of CGST Act

Payment of Penalty	Amount of Penalty
Dues paid before issuance of show cause notice.	15% of tax amount due
Dues paid within 30 days of issuance of show cause notice.	25% of tax amount due
Dues paid after 30 days of issuance of Order.	50% of tax amount due
Any other case.	100% of tax amount due

Section 75 of CGST Act – General Provisions for Determination of Tax

Section 75 of the CGST Act, deals with the general provisions relating to determination of tax and demand under GST. The following are some of the important provisions under Section 75 :

1. Stay of Notice

If the service of notice or issuance of order is stayed by an order of Court or Appellate Tribunal, the period of stay will be excluded in computing the period 3 years or 5 years  – the time limit for issue of notice or adjudication.

2. No Fraud or Wilful Misrepresentation

If any Appellate Authority or Appellate Tribunal or Court concludes that the notice issued under Section 74 is not sustainable for the reason that the charges of fraud or willful misstatement or suppression of facts to evade tax has not been established, the officer shall determine the tax payable deeming as if the notice were issued under Section 73.

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3. Time Limit for Passing Order

Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order should be issued within 2 years from the date of communication of the said direction.

4. Opportunity for Being Heard

An opportunity of hearing should be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is proposed against such person.

5. Maximum Adjournments Allowed

The officer can, if sufficient cause is shown by the person chargeable with tax, adjourn the hearing for reasons to be recorded in writing. Adjournment will be allowed for maximum of 3 times.

6. Limitations

The amount of tax, interest and penalty demanded in the order should not be in excess of the amount specified in the notice and no demand can be confirmed on the grounds other than the grounds specified in the notice.

Further, where any penalty is imposed u/s 73 or section 74, no penalty for the same act or omission can be imposed on the same person under any other provision of this Act.

Finally, if the order is not issued with 3 years or 5 years as provided u/s 73 and 74, respectively, then it shall be deemed that the adjudication proceedings are completed and no order can be issued afterwards.

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7. Applicability of Interest

The interest on the tax short paid or not paid should be payable whether or not specified in the order determining the tax liability. The interest charged for the tax shortfall is 18% per annum where the tax is short paid or liability is short-assessed. Also, where the input tax credit is only availed but not utilised, this is the interest charge. However, the interest charged for availing and utilising input tax credit in excess of what is available is 24% p.a.

How can I view or download the notices and demand orders issued by the GST tax authorities?

To view or download the notices and demand orders issued by the GST tax authorities, perform the following steps:

1. Access the www.gst.gov.in URL. The GST Home page is displayed.

2. Login to the GST Portal with valid credentials.

3. Click the Services > User Services > View Notices and Orders command.

All the notices and demands issued to the taxpayer for the last one year is displayed on the screen in chronological order (Descending).

Note: You can view or download any of the documents by clicking the Download link.