The Goods and Service Tax is payable on a self-assessment basis. If the assessee pays the tax on self-assessment correctly then there will not be any problem. If there is any short payment or wrong utilisation of input credit, then the GST authorities will initiate demand and recovery provisions against the assessee.
Provisions of demand under GST Act and the consequent recovery provisions are similar to the provisions of Service Tax and Central Excise Act.
Time Limit
The proper officer is required to issue the show cause notice 3 months before the time limit. The maximum time limit for the order of payment is 3 years from the due date for filing of annual return for the year to which the amount relates.
For Other Tax Periods
Once the above 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.
Voluntary Tax Payment
A person can pay tax along with interest, based on his own calculations (or the officer’s calculations), before the notice/statement is issued and inform the officer in writing of the same. The officer will not issue any notice in this case.
However, if the officer finds that there is short payment, they can issue a notice for the balance amount.
No Penalty
If the taxpayer pays all their dues within 30 days from date of notice, then the penalty will not be applicable. All proceedings (excluding proceedings u/s 132,i.e., prosecution) regarding the notice will be closed.
Penalty in Other Cases
The tax officer will consider the taxpayer’s representation and then calculate interest and penalty. Penalty will be 10% of tax subject to a minimum of Rs. 10,000. The tax officer will issue an order within three years from the due date for filing of relevant annual return.
Notice when there is Fraud for tax shortfall (Section 74)
This section applies to cases of tax evasion involving:
- Fraud
- Wilful misstatement
- Suppression of facts
This results in:
- Unpaid/short paid tax or,
- Wrong refunds or,
- Wrongly availed/utilized input tax credit
In such cases, the proper officer will serve a show cause notice to the taxpayer. They will be required to pay the amount due along with interest and penalty.
Time Limit
For cases of fraud, the proper officer is required to issue the notice 6 months before the time limit. The maximum time limit is 5 years from the due date for filing of annual return for the year to which the amount relates.
For Other Tax Periods
Once the above 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.
Voluntary Tax Payment
If the person pays tax along with interest and a 15% penalty based on their own calculations (or the officer’s calculations) before the notice/statement is issued and informs the officer in writing, then the officer will not issue any notice.
However, if the officer finds that there is short payment, they can issue a notice for the balance amount.
If the taxpayer pays all their dues and a penalty of 25% within 30 days from the date of the notice, then all proceedings (excluding proceedings u/s 132,i.e., prosecution)regarding the notice will be closed.
Issue of Order
The tax officer will consider the taxpayer’s representation and then calculate interest and penalty and issue an order.
The order must be issued within five years from the due date for filing of the relevant annual return. [For wrong refunds the order must be issued within five years from the date of the wrong refund].
If the taxpayer pays all their dues and a penalty of 50% within 30 days from the date of order, then all proceedings (including prosecution) regarding the notice will be closed.
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