Business prepares for GST Show Cause Notices as FY19 Deadline nears 31st Jan 2024

With the deadline approaching, businesses across the country are getting ready for a barrage of show cause notices from Goods and Services Tax (GST) officials for the Financial Year 2018-19. The prolonged deadline, set for April 30, 2024, has raised concerns among industry experts about the fairness and efficiency of tax assessment.

Section 73 of the GST Act regulates the issuing of show cause notices, which address the determination of tax that was not paid, short-paid, erroneously reimbursed, or improperly claimed input tax credit. An officer is required to issue the notice at least three months before the stated time limit for issuance of the order.

Previously, the deadline for issuing orders pertaining to the recovery of tax inconsistencies for FY 2018-19 was March 31, 2024. However, the Finance Ministry’s latest notification on December 28 extended this date to April 30, 2024, putting the show cause notice due back to January 31, 2024. Notably, the extension only applies to time-barring periods under Section 73, whereas the GST department retains an additional two years for notices and orders issued in suppression/ misrepresentation cases under Section 74.

Given the past tendency, industry insiders predict an increase in show cause notices, similar to the scenario before the FY 2017-18 deadline. In December, GST officials issued demand notices totalling Rs.1.45 lakh crore to around 1,500 enterprises for anomalies in annual returns and input tax credit claims for 2018.

Experts warn against potential arbitrary notice issuance, particularly given the hurried deadline. They emphasise the necessity of giving businesses enough time to respond and be heard, citing a potential 15-30 day window for taxpayers following a court decision.

Notably, specialists in the sector are concerned about the rapid issuance of notices and their impact on tax assessments. Rapid issues to meet deadlines could compromise the quality and fairness of assessments, perhaps resulting in errors, disagreements, and compromising taxpayer rights.

One expert emphasises the importance of more efficient systems, better tax administration, and regulatory improvements to ensure accurate and equitable tax collection. As tax authorities strengthen attempts to complete cases quickly, experts recommend firms to thoroughly analyse notices and seek professional assistance as needed.

The eagerness of field officers to accelerate tax cases has caused concerns in the business. Some officials are accused of disregarding natural justice principles, forcing taxpayers to settle payments on doubtful grounds or face referral to the intelligence section for apparent noncompliance.

Industry stakeholders emphasise the necessity of maintaining procedural fairness, minimising undue pressure on taxpayers, and pursuing a balanced approach in tax assessments.

As the business sector prepares for an influx of show cause notices, the changing scenario necessitates a delicate balance between administrative efficiency and the ideals of accuracy and justice in tax assessments.