ICAI Representation on Mass SCN issued by GST Department in Sept

SCN issued by GST

SCN issued by GST: Regarding the mass SCN that the GST Department released in September 2023, the Institute of Chartered Accountants of India (ICAI) has filed a representation before Shri Rakesh Agrawala, Principal Commissioner of State Tax (Government of Assam).

The relevant text of the representation is given below:

The Chartered Accountants Act, 1949, established the Institute of Chartered Accountants of India (ICAI) as a statutory entity on July 1st, 1949, with the goal of fostering and regulating the chartered accountancy profession in the nation. The Government of India has 5 Regional Councils, 171 Branches across the entire nation, 47 Chapters, 34 representative offices, and 81 global cities in 47 nations. The Institute operates under the administrative supervision of the Ministry of Corporate Affairs.

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When the goods and services tax (GST) regime was put into place, everyone knew that since it was a new law, faults could happen when it came to actually putting it into practice. Furthermore, the GST portal was not fully operational during the initial period, which caused a number of technical issues for the stakeholders. These issues made it difficult for them to log in, pay taxes, file returns on time, declare self-assessed information correctly, and correct or revise errors and mistakes when they were discovered because the technical issues also resulted in incorrect GST returns being filed. In light of the diverse representations and complaints made by affected parties as a result of these problems, the government has provided assurances across a range of channels and forums. That the bona file mistakes/ errors committed during the initial implementation of the law would be considered liberally.

But the Department has already started looking into things using the many channels that GST specifies. Notices have been sent out in huge quantities for the 2017–18 fiscal year, according to some auto-populated data obtained from the software tools and IT infrastructure setup. These notifications are intended to recover the purportedly underpaid GST, reverse input tax credit (ITC) due to mismatches under Tables A and 8B of GSTR 9, identify ineligible ITC under section 17(5) and rules 42/43, and address mismatched output GST liability under GSTR 3B and CSTR9/GSTR 1 under the Central/Assam Goods and Services Tax Act, 2017. Notices have been issued in the majority of cases in the recent few of the extended time limit for issuance of notice

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It appears that the notices are issued in haste and at the last moment in a generic manner without considering the individual facts of each case. These notices have been issued to all taxpayers regardless of their nature of business, and information declared in self-assessment returns. Unfortunately, the preliminary requirements of the law have not been followed and notices have seemed to be issued mechanically at the last moment.

We have been informed by the stakeholders at large that such notices are vague and lack the ingredients of a proper show cause notice under section 73/74 of the CCST/Assam CST Act. These notices are issued without properly relying upon documents or findings being communicated to the taxpayers and appear to be based on mere auto-populated numbers which may not be reliable in the majority of notices. We have observed the following with regard to such notices:

(1) Notices are issued based on GSTR-9 filed for FY 2017-18. However, the required correction/rectification has already been made in GSTR-9/ 9C, and DRC-03 has also been filed, but the same is not considered while issuing these notices.

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(2) Where ASMT 10 notice is issued to a taxpayer, the reply has been already filed in ASMT 11 and an Order is issued in ASMT 12 but the same is not considered while issuing notices

(3) In some cases, where ASMT 10 notice has been issued and a reply has been filed in ASMT 11, but proceedings have not been completed Le, an order in ASMT 12 has not been issued to date, still, notice has been issued without any reference to proceedings in progress under section 61.

(4) Where DRC 01 has already been issued (either by SCST or CGST) under section 73 or section 74 in the past, yet now new DRC 01 is issued based on auto-populated figures without reference to old proceedings or notices and without stating reasons why another notice is required.

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(5) Where GST audit u/s 65 has been completed (either by COST or SCST) and DRC 01 has been issued, ADT-02 has been issued as part of the completion of the audit without any audit para remaining unsettled, still notice has been issued without any reference to proceedings under section 65.

(6) Where enforcement activity has been conducted either by SCST or CCST and show cause notice has been issued, still notice has been issued without any reference to proceedings in progress/ completed by enforcement and without stating reasons why another notice is required.

(7) Where the registered person is already at the appeal stage for FY 2017-18 but for the same point DRC-01 is issued.

(8) Notice for reversal of ITC on a total claim of ITC treating it as “Common Credit” in an ad hoc manner has been made. It appears that the working mechanism adopted in this regard is not correct since total ITC has been taken as common ITC, whereas, in most cases, it is the ITC after considering rule 42 or it is the TTC exclusively related to taxable supplies. This has resulted in exorbitant/ unrealistic amounts that have to be excluded for the purpose of calculation of reversal under rules 42 & 43, which have been included in some cases. Certain items, on which GST is not levied, have also been considered for the purpose of calculation of reversal under rules 42 & 43.

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(9) DRC-01 has been issued in many cases in terms of section 17(5) of CGST/ SGST without appreciating the specific exclusions provided under section 17(5). Notices issued through DRC-01 now are only based on the HSN code as filed by the supplier for invoices appearing in GSTR-2A of the taxpayer irrespective of the fact as to whether or not credit has been taken by the taxpayer, and irrespective of the nature of business of the taxpayer.

10) In many cases, notices have been issued based on differences in tax declared and tax paid in cash and by adjustment of ITC as per Form GSTR 9 without considering the fact that the higher amount in GSTR 1 as compared to GSTR-38 has been rectified in the GSTR 1 filed in subsequent periods or the mistake that has occurred in filing GSTR 1 and GSTR 3B has been rectified either in the returns filed in subsequent periods or GSTR 9.

(11) In all the cases, notices have been issued based on differences in ITC between GSTR 38 and Table SA GSTR 9. However, GSTR 2A was not available and thus, was not applicable in FY 2017-18 and the figures auto-populated in Table 8A were up to a certain date only, which is not a cutoff date under any provision of the GST law. In fact, for the period July 2017 to March 2018, for claiming ITC, only the conditions of section 16(2) (as applicable at that time) are to be considered. However, this fact has been ignored, and notices have been issued, holding that ITC reflected in Table 8A of GSTR 9/ GSTR 2A is a condition for eligible ITC under section 16(2).

In view of the above, we humbly request as under:

(a) That suitable arrangement be made to prioritize the disposal of the above few categories of cases as explained above by dropping the demand under the notices without requiring the reply of the taxpayer and appearance of the stakeholders if the above-stated defects/ weaknesses in notices are found as highlighted above. The notices should be withdrawn without requiring the presence of the taxpayer or their representative, with intimation to the taxpayer to avoid undue litigation and loss of productive time of all stakeholders. However, if the Department believes that the notices issued are for a valid and legal reason, the proper officer may be directed to follow the legal procedure and issue/ pursue the proceedings but under a proper show cause notice to the taxpayer.

(b) That a standard operating procedure be prescribed for dealing with such notices and intimated to all subordinate offices. Additionally, a special cell of high-ranking officials may also be constituted to scrutinize such notices, and instructions be issued to the officers not to take any action based on mass notices issued until the suggested mechanism is evolved.

(c) That to avoid litigation a special procedure be adopted in case of closure of business or in the case of a deceased person where registration has been surrendered and a final return has been filed.

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(d) That instructions be issued to the proper officer to give sufficient time and allow personal hearing in all cases, and to ensure that the principle of nature justice is followed. Relied upon documents, where sought, may be provided to taxpayers to enable compliance.

(e) That a recommendation be sent to the GST Council for waiving interest and penalty on all demands arising out of these notices for the period FY 2017-18 as an amnesty in view of the promises made by the Government in the initial years to help GST stabilize in the country.

The time limit for issuance of show cause notice for FY 2018-19 under section 73 of CGST/Assam GST Act also falls on or before 31.12.2023. Accordingly, we request that the above issues be taken care of before the issuance of notices for FY 2018-19 to reduce litigation and for ease of doing business in the state of Assam.

We are sharing herewith Instruction No. CCT/0707/10/2023 dated 11-10-2023 issued by the Additional Commissioner (Administration), State Taxes, Gujarat in case of similar notices issued based on III Big Data Software, for your kind reference.

We humbly request you to consider the above representation in good spirit and for the benefit of taxpayers as well as revenue in the overall perspective.