DGGI sent Over 300 GST SCNs to Companies for ITC discrepancies

The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued over 300 show-cause notices to company officials for improperly claiming input tax credits (ITC), imposing penalties of up to 100%.

The notices target top executives whose involvement in tax evasion has been clearly demonstrated. Industry stakeholders say that such penalties should only be imposed in extreme circumstances, and several receivers have already filed legal challenges to these notices.

The DGGI has given notices to company promoters, directors, and senior management, seeking penalties of up to 100% for erroneous ITC claims.

According to tax officials, the notices were given in cases where investigations revealed management’s involvement in incorrect ITC claims.

An official said, “Notices have been sent only in cases where the investigation indicated to the role of promoters or senior management.”

The notices were issued under Section 122(1A) of the Central GST Act, which imposes penalties on individuals who facilitate tax evasion through direct involvement or support in fraudulent invoicing.

However, industry representatives disagree with the tax authorities’ stance. They argue that personal penalties should only be levied in extreme circumstances, such as where the intent to commit tax fraud is clearly demonstrated.

In one case, a company’s managing director was penalized Rs.102 crore for evading taxes. This has caused worries among industry experts about imposing penalties on individuals when the situation may involve interpretation issues rather than intentional fraud.

Experts feel that while applying penalties equal to the evaded tax or improperly obtained ITC provides a significant discouragement, it should be used with discretion.

The dispute over whether these penalties should be imposed or go beyond the intended scope of GST law continues, with many waiting for court review of the notices.