GST Notices and its Possible Solutions for Taxpayers

September 2, 2022
GST

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GST Notices and their solutions. There has been a sharp increase in the number of GST notifications in the last 2 years. This is due to the completion of the audit on time; data analysis done by the department, a recent number of cases of false invoicing/false claims of Input Tax Credit (ITC), and many more. Likely to increase due to the low quality of AAR, tribunals are still being established. Going to court is not always possible or cost-effective. Clients would benefit from understanding the why and what and some best practices to avoid/mitigate. This article will discuss the GST Notices and their solutions.

Table of Contents

What are GST Notices?
Types of GST Notices
Why GST notices are issued?
Modes of serving GST Notices
Responding to GST Notices and Consequences of Failure to Respond
GST Notices and Possible Solutions
Best Practices
Final words

What are GST Notices?

GST notices under the Central Goods and Services Tax Act, 2017 are the medium used by tax authorities to communicate with taxpayers. GST notices are usually sent to notify authorities of any failure to comply specifically with GST or to obtain additional information from taxpayers.

GST authorities send notices mainly when taxpayers act suspiciously and when there is a supply of goods or services that do not come within the scope of the tax lens. After verifying a taxpayer’s GST Returns, the authorities act on the advice they have gathered and received from another government body or a third party.

Common reasons for receiving a GST notice are non-compliance by the taxpayer, including failure to register for GST when required by law, late or no filing of GST returns, over-claiming of input tax credit (ITC), unpaid GST, short payment of GST, etc.

GST notices are called by different names, such as Show Cause Notices (SCNs), demand notices, or scrutiny notices. The purpose of the notification, the intensity of the default committed, or the action required from the taxpayer will determine what the GST notice will be called.

The taxpayer should respond promptly to the notification issued on his behalf within the specified period. If the taxpayer does not do so, legal action will be taken against him. The GST authorities may eventually prosecute such a taxpayer or treat it as willful non-compliance and impose a penalty on the taxpayer.

Types of GST Notices

A short reference to the various types of notices that taxpayers can get, the actions that taxpayers must do, and the time limit for responding to notices are shown below:

Sl no	Name of the Form- Notice	Description	Reply or Action to be taken	Time limit to respond	Consequence of non-response
1	GSTR-3A	Default notice to non-filers of GST returns in GSTR-1 or GSTR-3B or GSTR-4 or GSTR-8	File the particular GST Returns, that is yet to be filed along with late fees for the delay and interest on the GST liability if any	15 days from the date of receiving notice	Tax is assessed to the best judgment using the information available to the department. The penalty will be applicable of Rs. 10,000 or 10% of the tax due, whichever is higher.
2	CMP-05	Show cause notice – Questioning the eligibility to be a composition dealer	Must justify reasons as to why the taxpayer should continue to be eligible for the composition scheme	15 days of receipt of the notice	The penalty stipulated under section 122 and the order in CMP-07 denying the benefit of the composition scheme
3	REG-03	At the time of verifying the application for GST registration, a notice can be sent requiring clarification for the information provided in the application or documents needed for verification. Also, the same form for the notice is applicable for the amendment of GST registration	Reply letter in REG-04 with clarification or the information	Within 7 working days from the date of receiving the notice	Reject such an application and inform the applicant electronically in REG-05.
4	REG-17	Show cause notice why should the GST registration not be canceled for the reasons laid down in the notice	Reply letter in REG-18 with the reasons for non-cancellation of GST registration	Within 7 working days from the date of receiving the notice	Cancellation of GST registration in REG-19
5	REG-23	Show cause notice why the cancellation of GST registration must be revoked, for the reasons laid down in the notice	Reply letter in REG-24	Within 7 working days from the date of receiving the notice	Cancellation of GST Registration will be revoked
6	REG-27	In case of migration into GST by taxpayers of the VAT regime, a notice can be issued in REG-26 within the time limit prescribed, for not making an application after obtaining provisional registration or not giving correct or complete details therein	Reply by applying in REG-26 and appear before the tax authority giving a reasonable opportunity to be heard	None prescribed	Issue the cancellation of provisional registration in REG-28
7	PCT-03	Show cause notice for misconduct by the GST practitioner	Reply within the time prescribed in the show cause notice	Within the time prescribed in the show cause notice	Order the cancellation of the license as a GST practitioner
8	RFD-08	Show cause notice as to why the GST refund must not be made to the applicant (taxpayer)	Reply letter in RFD-09	Within 15 days of receipt of notice	Make an order in RFD-06 for rejecting the GST Refund application
9	ASMT-02	Notice for Seeking Additional Information for provisional assessment under GST	Reply in ASMT-03 along with documents	Within 15 days from the date of service of this notice	Application for provisional assessment may be rejected
10	ASMT-06	Notice for seeking additional information for Final assessment under GST (for those who applied for provisional assessment)	Reply in 15 days of receipt of the notice	Within 15 days from the date of receipt of this notice	ASMT-07 can be passed without considering the views of taxpayers being assessed
11	ASMT-10	Scrutiny notice -Notice for intimating discrepancies in the GST return after scrutiny along with tax, interest, and any other amount payable in relation to the such discrepancy, if any	Reply in ASMT-11 giving reasons for discrepancies in the GST returns	Within the time prescribed in the show cause notice or a maximum time of thirty days from the date of service of notice or such deadline notified	Proceed to assess the taxpayer based on information at hand – may lead to prosecution and penalty
12	ASMT-14	Show Cause Notice for assessment under section 63- reasons for conducting the assessment on the best judgment basis	Reply in written form and appear before the GST authority issuing the notice	Within 15 days of notice	The assessment order in ASMT-15, may not be favoring the assessee
13	ADT-01	Notice for conducting an audit by Tax authority under Section 65	Attend in person as directed in the notice or produce records	Within the time prescribed in the notice	If not, it is presumed that the taxpayer does not possess books of accounts and proceedings will be initiated
14	RVN-01	Notice under section 108 issued to the taxpayer by the revisional authority before passing the revision order of appeals, giving the opportunity of being heard. Order of revision is usually passed to fix errors in order for appeals passed under section 108	Reply within the prescribed time and/or appear before the GST authority passing the order of revision on a given date and time	Within 7 working days from the date of service of the notice	The case will be decided ex parte on the basis of available records and on the merits
15	Notice of Enquiry by Directorate of Anti-profiteering	Where the supplier has not passed on the benefit of ITC or reduced GST rates to the recipient/consumer, proceedings may be initiated by the Directorate of anti-profiteering. All interested parties will get a notice asking for more details.	Cooperate in the proceedings and provide evidence, if any	As may be specified in the notice	Proceedings will be initiated ex parte on the basis of available evidence.
16	DRC-01	Show cause Notice for Demand of Tax- Is issued for demanding tax paid shortly or not paid with or without an intent to defraud. It is served along with a statement of details in DRC-02	Reply in DRC-03 for paying the amount of tax demanded in the notice along with Interest and penalty, if any applicable. Use DRC-06 to reply to the show cause notice Note: Where no fraud is committed, the penalty is chargeable only if payment is made beyond the thirty days time limit	Within 30 days of receipt of the notice	Order can be passed with a higher penalty or prosecution- within three years from the due date of annual returns for the particular financial year for which tax is demanded
17	DRC-10 And DRC-17	Notice of Auction of Goods under section 79(1)(b) of the Act- Reference to the order of demand will be given, being the order for recovery through specified officer under section 79 OR Recovery through execution of the decree	Must be able to pay the outstanding demand as per DRC-09	As may be specified in the notice before the sale. Note that the last day of the bid or the last day of the auction cannot be before 15 days from the date of issue of the notice	Proceed to e-auction and sale
18	DRC-11	Notice to the successful bidder	Pay the full bid amount	Within the 15 days from the date of the auction	The proper officer can conduct a re-auction
19	DRC-13	Notice of Recovery of outstanding tax from a third person	Deposit the amount specified in the notice and reply in DRC-14	Not applicable	Deemed to be a defaulter in respect of the amount specified in the notice and can be subject to prosecution and penalties
20	DRC-16	Notice for attachment and sale of immovable/movable goods/shares under section 79	A taxpayer receiving this notice is prohibited from transferring or creating a charge on the said goods in any way and any transfer or charge created by you shall be invalid	Not applicable	Any contravention of the notice can invite prosecution and/or penalties

Why GST notices are issued?

The most common reasons for issuing a GST notice are:

Issuance of Scrutiny Notice due to mismatch of data furnished between GSTR 1 and GSTR 3B
The difference in ITC amounts claimed in GSTR 3B as compared to GSTR 2A
Late filing of GSTR 1 and then subsequent delayed filing of GSTR 3B for more than 6 months
Inconsistent declarations made in GSTR 1 and e-way bill portal
The prices will not be reduced after the reduction in GST rates on the date notified by the Central Board of Indirect Taxes and Customs (CBIC). The taxpayer does not reduce the prices and commits a delay in not passing on the benefit of the reduced tax to the customers. Such a practice is known as profiteering and the GST authorities have adopted several anti-profiteering measures to address such non-compliance.
Issuance of SCN when GST is not paid by the taxpayer or is paid as a short payment whether with or without any fraudulent intent
Issuance of SCN when GST is wrongfully refunded, whether with or without fraudulent intent
Misused ITC
When a business that is required to register under GST has not been registered and tax and other obligations have not been fulfilled under the GST Act
Exports are reported inconsistently in Form GSTR 1 with the required information provided accurately on ICEGATE
If the authorities request additional information regarding the records maintained by the taxpayer
When the tax authorities have to carry out an inspection
If the information return required to be filed before the GST authorities has not been submitted within the stipulated time.

Modes of serving GST Notices

Section 169 of the CGST Act, 2017 lays down the various modes of communication of notices under GST. Any other method of sending a notice will not be legally valid. Taxpayers should note that the following are the different ways to obtain notices:

Personal delivery of the notice either directly or through a messenger by courier to the taxpayer or his representative.
By registered mail or express mail or courier with confirmation – addressed to the last known place of business of the taxpayer.
Communication to an email address
Access on GST Portal after login.
By publication in regional newspapers distributed in the given locality – in the taxpayer’s locality based on the last known address of residence.
If none of the above means is used, then by affixing it in some conspicuous place at his last known place of business or residence. If the tax authorities do not find this to be adequate, they may, as a last resort, post a copy on the bulletin board of the office of the relevant officer or authority.

A taxpayer need not act on notice or communication if it is received by means other than as notified from time to time under the GST Act.

Responding to GST Notices and Consequences of Failure to Respond

Any GST notification reply can be submitted online at the GST portal. A taxpayer may use a digital signature or an electronic signature of authorized personnel of such taxpayer or himself. If payment of tax and interest is required, pay this obligation in the required form and manner. After such payment, the response must be submitted in the required form to the tax authority that sent the notice.

In case a taxpayer who receives a GST notice fails to respond within the stipulated time, he will be liable for penalties and further proceedings as required in each case under the GST Act. The taxpayer may authorize another representative or chartered accountant to investigate matters related to GST notifications. It can do so by issuing a Letter of Authorization under GST. A GST authorization letter gives authority to respond to GST notices and act on behalf of another representative.

GST Notices and Possible Solutions

The following are the possible solutions that taxpayer’s must keep in mind while receiving GST Notices:

GST NOTICES	POSSIBLE SOLUTIONS
GSTR 1 vs GSTR 3B – Output Mismatch	The possibility that taxes were paid in a different month or through DRC-03 or when filing GSTR 9/9C. Make sure time limits are met (sections 37 & 39).
GSTR 2A vs GSTR 3B – ITC mismatch	Genuine credit – available on the tax invoice, full payment to the vendor, receipt of goods/services should be eligible. (section 16) The period until October 2019 – not applicable, no provision of the Act October 2019 to December 2021 – Rule did not have authorization power through the Act From January 2022 – implemented Section 16(2) (a) aa), adjustment of GSTR 2B is required.
GSTR 9 vs GSTR 9C – Mismatch	The difference in tax payable and paid may have logical reasons and may not be mandatory. Not all unreconciled values need to be taxable. Some tables in GSTR 9 and 9C were optional and not filled. (Notice 56/2019-CT)
Notice Regarding E-way Bill	The movement must not be restricted to genuine transactions. Various case laws are available to support EWB-related issues.
Payment of Interest	Recently the law has made it clear that interest is applicable only in the case of ITC, the balance is claimed and utilized. If interest is claimed, otherwise no payment is made.

Best Practices

The following best practices (along with those mentioned in the GST Audit Notice) would help reduce departmental interference and prove that you are a bonafide assessee. Being proactive is the best step forward. Procedures that may yield positive results (which involve no further action or just phone calls) are:

Voluntarily submit an “initial information letter” (explain the entity’s tax position and GST applicability. Submit via RPAD). This is recommended to demonstrate to any large taxpayer in good faith. State that you are willing to come and explain if necessary. Maintenance of Required Information (Section 35 r/w Rule 56)
Ensure that transactions are conducted through registered dealers as far as possible. Categorize suppliers based on their compliance and return records.
Own GSTR 1 & 3B to be matched regularly (in turn requires books to be closed on time without back-dated entries). Any missing information can be published in the next month or voluntarily paid through DRC-03.
Automate the internal process to help generate GST return information on time and with reduced error/NIL errors.
A pre-audit audit by a competent professional would go a long way in identifying and taking action before department audits begin.

Final words

A GST notification is a form of face-to-face communication between the GST authorities and taxpayers. Taxpayers should take the GST notification seriously and take corrective action as directed in the notification. Taxpayers may have to pay monetary penalties if GST notices are ignored for a long time.

Through its qualified team, Legal Window offers you a high level of satisfaction and prompt delivery of GST Registration Certificate, GST Return, and other GST-related services, as well as better handling of governmental rules. For GST-related and GST-compliance services, please get in touch with our team at 072407-51000 or admin@legalwindow.in.

CA Pulkit Goyal (B.COM, FCA)

CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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