Data Management in Tally

GST Appeals and Revisions

Posted on by Tally Academy

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In our previous blogs, we have taken you through the various provisions which cover the various provisions pertaining to demand, recovery and liability, when it comes to paying the unpaid tax, interest or penalty. However, any taxable person who is incorrectly facing any kind of a penalty, has an opportunity to appeal to a higher court in order to reversal the order given by a lower court, as per the GST law. If the appeal is successful, the relevant revisions are done.

In this series of blogs, we will study in detail about the various provisions related to GST appeals and revisions.

Appeals under GST – when are they invoked?

The GST law pertaining to GST appeals and revisions, primarily imposes two types of obligations – tax-related and procedure related. The taxpayers’ compliance with these obligations is verified by the proper tax officer, via audits, examinations etc. In certain cases, there are situations of actual or perceived non-compliance, which obviously leads to difference in opinion. If the difference persists, it results in a dispute, which then needs to be resolved.

To begin with, the dispute is initially resolved by a departmental officer resulting in the issue of an initial order. The order or decision is first passed by the Adjudicating Authority under GST, an entity which is considered competent to pass any order or decision under the GST Act, but does not include the Board, First Appellate Authority and the Appellate Tribunal.

However, if a taxable person is not satisfied by the decision or order passed by the Adjudicating Authority, then he can appeal to a higher court. The appeal, as discussed above will be an application to a higher court to reverse the decision of a lower court.

The following are the 4 levels of the appeal procedure in GST, as per the provisions for appeal and revision in GST:

Appeal Level Orders Passed By Can Appeal To
1st Adjudicating Authority First Appellate Authority
2nd First Appellate Authority Appellate Tribunal
3rd Appellate Tribunal High Court
4th High Court Supreme Court

Now, since India follows a dual GST structure, a natural question which arises is – should an appeal need to be made to both CGST as well as SGST / UTGST authorities. As per the provisions of GST appeals and revisions, both CGST as well as SGST / UTGST officers are empowered to pass orders, and an order passed under CGST will also be deemed to be applied to SGST / UTGST. However if an officer under CGST has passed any order, any GST appeal and revisions against that order, will lie only with the officers of CGST. The same will apply in the case or orders passed under SGST / UTGST.

Fees for filing GST appeals process

All appeals must be made by filling the prescribed GST appeal formats and by paying the required fees. The fee will be the full amount of tax, interest, fine, fee and penalty arising from the challenged order and a sum equal to 10% of the remaining amount of tax in dispute arising from the order, for which an appeal has been filed.

In cases, where an officer or the Commissioner is appealing, fees will not be applicable.

GST appeals and revisions – authorized representative

In case a person is not able to appear personally before the requisite GST appeal authority, he may assign an authorized authority to appear on his behalf. An authorized representative may be any one of the following:

  • A relative
  • A regular employee
  • A lawyer practising in any court in India
  • Any Chartered Accountant / Cost Accountant / Company Secretary, with a valid certificate of practice
  • A Retired Officer of the Tax Department of any State Government or of the Excise Department whose rank was at least that of a Group B gazetted officer*
  • Any tax return preparer

*Note: Retired officers cannot appear in place of the concerned person within 1 year from the date of their retirement, as per the provisions of GST appeals and revisions.

Scenarios when GST appeal cannot be filed

As per the provisions for appeals and revisions under GST, appeals cannot be made for the following decisions taken by a GST officer –

  • An order to transfer the proceedings from one officer to another officer
  • An order to seize or retain books of accounts and / or other documents
  • An order sanctioning prosecution under the GST Act
  • An order allowing payment of taxes and other amounts in instalments

Also, it may be noted that the Board or the State Government may, on the recommendation of the Council, fix minimum monetary limits for which a GST officer can approve and regulate the filing of appeals. This will avoid unnecessary litigation expenses, where the expense does not justify the amount of tax which is under dispute. In such cases also, an appeal will not be feasible.

When to Pay GST – Liability for Death, Dissolution & Other Cases

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In our previous blog, we had studied about various provisions which defined the liability to pay unpaid GST for certain business specific scenarios, such as transfers, mergers and liquidations. In this blog, we will go through some more company specific scenarios – such as when to pay GST and the associated liability in case of death, dissolution, partition, termination and reconstitution.

Liability in case of death

In case a taxable person who is liable to pay unpaid tax, interest or penalty dies, then the following provisions are to be followed to understand when to pay GST and by whom:

  • If business if continued – If the business is carried on after the death of a person, by his legal heir or legal representative or any other person, then the legal heir or legal representative will be held liable for the unpaid dues
  • If business is discontinued – If the business carried on by the person is discontinued, whether before or after his death, his legal heir or legal representative will be liable to pay the unpaid amount. However, the payment will be made out of the estate of the deceased, only to the extent up to which the estate is capable of meeting the unpaid tax, interest or penalty. At any point in time, the legal heir or legal representative will not be personally liable and needs to be aware about when to pay GST i.e. the pending dues.

Note: The liability in case of death will hold true if the unpaid tax, interest or penalty was determined before the death of the taxable person but is unpaid or undetermined after death.

Liability in case of partition of HUF / AOP

In case a taxable person who is liable to pay unpaid tax, interest or penalty is part of Hindu Undivided Family (HUF) or an Association of Persons (AOP), and the property of the HUF or AOP is partitioned amongst the various members or group of members, then each member or group of members, shall be jointly and severally, liable to pay the unpaid tax, interest or penalty, up to the time of the partition, and thus needs to be well informed about when to pay GST.

Note: The liability in case of partition of HUF / AOP holds true if the unpaid tax, interest or penalty was determined before the partition but is unpaid or undetermined after partition.

Liability in case of dissolution of firm

In case a taxable person who is liable to pay unpaid tax, interest or penalty is a partnership firm, and the firm is dissolved, then every person who was a partner shall be jointly and severally, liable to pay the unpaid tax, interest or penalty due from the firm, up to the time of dissolution. Such a person needs to understand the liability provisions in order to determine when to pay GST.

Note: The liability in case of dissolution of firm will hold true if the unpaid tax, interest or penalty was determined before the dissolution but is unpaid or undetermined after dissolution.

Liability in case of termination of guardianship or trust

In case a taxable person who is liable to pay unpaid tax, interest or penalty is either a guardian of a ward on whose behalf the business is carried out by him, or, is a trustee who carries on the business under a trust for a beneficiary, and the guardianship or trust is terminated, then the ward or the beneficiary shall be liable to pay the unpaid tax, interest or penalty due from the taxable person, up to the time of termination, post which the due date i.e. when to pay GST can be determined.

Note: The liability in case of termination of guardianship or trust holds true if the unpaid tax, interest or penalty was determined before the termination but is unpaid or undetermined after termination.

Liability in case of discontinuance of business by firm, HUF or AOP

In case a taxable person who is liable to pay unpaid tax, interest or penalty is either a firm or a HUF or an AOP, and the firm, HUF or AOP has decided to discontinue the business for some reason, then the following provisions are to be followed to estimate liability and understand when to pay GST:

  • Tax, interest or penalty payable by such a firm, HUF or AOP, up to the date of discontinuance may be determined, as if no discontinuance had taken place
  • Every person, who at the time of the discontinuance, was a partner of the firm or HUF or AOP, shall be jointly and severally, liable for the payment of unpaid tax, interest and penalty, as if he were himself a taxable person.

Note: The liability in case of discontinuance of business will hold true if the unpaid tax, interest or penalty was determined or imposed before or after the discontinuance.

Liability in case of reconstitution of firm or AOP

In certain cases, there are changes made to the constitution of a firm or an association of persons (AOP), which is known as a reconstitution. In such cases, all the partners of the firm or members of the association, who were there at the time of the reconstitution, shall be jointly and severally, liable to pay the unpaid tax, interest and penalty, as they exist either before or after the reconstitution. The liability in case of reconstitution of firm or AOP will hold true under all circumstances, and will need to be understood by all stakeholders who need to then become aware of when to pay GST.

10 Year end Tax Planning Tips – A Guide for GSTPs

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Year-end is always a crucial period for most businesses. Most businesses will undergo a time-crunch, primarily because they need to close the books of the current financial year, and prepare themselves to start afresh from the new financial year. However, March 31st, 2018 will be more hectic compared to previous year-ends which a business would have faced, because this is the first year end in the GST era. Needless to say, the role of a tax consultant, or a tax return preparer, will become all the more important – since apart from the usual year end practices, they will also need to guide their clients for a few additional things, as they help them to file the last returns and close the books of accounts. In this blog, we will attempt to list out 10 year end tax planning tips, you can tell your client, if you are a tax consultant.

10 year end tax planning tips for your clients

  • Books of Accounts – Books of Accounts should be finalized for two different periods – one pre-GST and one post-GST. Thus one finalization will be from the period 1st April, 2017 to 30th June, 2017, and another finalization will be from the period 1st July, 2017 to 31st March, 2018. Books of Accounts will thus need to be carefully closed.
  • Transitional Credit – The department is going to scrutinize all the cases of Transitional credits of old taxes paid in the previous tax regime, while migrating to the GST regime. The taxpayer who has claimed transitional credit, should ensure that the following activities are completed, as part of year end tax planning:
    • Maintain copy of 6 months returns – From Jan 2017 to June 2017
    • Maintain copy of GST TRAN 1 – while ensuring that the stock as per GST TRAN 1 is matching with the finalized books of accounts i.e. stock as on 30th June, 2017
    • Maintain certified copy of invoices with tax paid bills
    • Maintain certified copy of Stock Summary
    • Check and file GST TRAN 2 before 31st March, 2018, for claiming transitional credit against the sale of stock for which tax paid documents are not available
  • Verification of Purchases – Although Form GSTR 2 has been deferred for the time being, a business can still see the Form GSTR 2A in the GST portal. From the same form, one can take a stock of monthly purchases from made from registered dealers, and verify the same with records of purchases in the books. Doing this will allow businesses to take the necessary steps to reconcile the books properly, as part of year end tax planning.
  • Reconciliation – This would be the right time to reconcile sales and purchases as well as the GST tax liability along with the Form GSTR 3B returns. If there are any differences, the same should be brought into the Form GSTR 3B of March 2018. One should thus reconcile the cash ledger, credit ledger and liability ledger, with the books of accounts, and ensure that all entries are completed before the year ends. At the same time, debit notes, credit notes, rate differences, discounts etc. also have to be accounted for, and the effect of these have to reflect in the returns being filed.
  • Reversal of ITC – As per the Input Tax Credit rules, if the recipient does not make full payment within 180 days of the issuance of the tax invoice, then the ITC taken on that invoice is to be reversed. The ITC will be made available again, only when the payment is made. Thus ageing analysis of the debtors and creditors should be done, and all old invoices which have been issued before 1st October, 2017 should be paid before 31st of March, 2018.
  • GST Turnover Check – Before the new-year starts, taxpayers will need to check their annual GST turnover in FY 2017-18. The turnover under GST, will be an integral part of year end tax planning for the business in FY 2018-19, which are as follows:
    • How many digits should HSN Code have in Invoice? – Taxpayers whose turnover is above INR 1.5 Crores but below INR 5 Crores shall use 2 digit codes and the taxpayers whose turnover is above INR 5 Crores will need to use 4 digit codes. Also, taxpayers whose turnover is below INR 1.5 Crores are not required to mention HSN codes in their invoice at all.
    • Whether to file Monthly or Quarterly GSTR 1 Returns? – Taxpayers whose turnover is above INR 1.5 Crores will have to file monthly GSTR 1 returns, while those taxpayers whose aggregate turnover is less than INR 1.5 Crores will have an option to file quarterly GSTR 1 returns.
    • Whether to go for Composition Scheme? –In Special Category States the turnover limit for Composition Scheme is 75 lakhs, whereas in Rest of India the limit is INR 1.5 Crores. Depending on the turnover, a business may decide to go for Composition Scheme in the new financial year, in which case he will need to apply for the same in Form GST CMP 02 before 31st March, 2018. Similarly, all those who wants to cancel the registration under composition scheme will have to apply for the same in Form GST CMP 04 before 7th April.
    • Cancellation of Registration – In the unlikely scenario, that a business who had taken voluntary registration under GST, does not want to continue, either because of lower turnover or closure of business, they can apply to cancel their registration
  • New Series for Tax Invoice – If anyone wants to change the series for invoicing or billing in the new year, then he can do that from 1st April, 2018.
  • Depreciation on Capital Assets – If ITC has been claimed on the purchase of fixed assets, or capital assets, then a business should not include the same in the cost of the asset, while calculating the value of depreciating assets.
  • Anti-profiteering – As per the directives of the government and the GST Council, businesses are to compare the Gross Profits for the FY 2016-17, FY 17-18 and for the periods April 2017 to June 2017 and July 2017 to March 2018. If the gross profit ratio for March 2018 is higher, then a business will need to check whether the credit for the profit has been passed on to the customer or not.
  • Important Return Filing Dates – There are various important return filing dates in April and May which businesses need to be aware of:
    • 10th April – Monthly GSTR 1 to be filled by Regular Dealer for February 2018
    • 18th April – GSTR 4 to be filled by Composition Dealer for Jan to March 2018
    • 20th April – GSTR 3B to be filled by for March 2018
    • 30th April – Quarterly GSTR 1 to be filed by Regular Dealer for Jan to March 2018
    • 10th May – Monthly GSTR 1 to be filled by Regular Dealer for March 2018

Last but not the least, the e-way bill is going to be rolled out from the 1st of April, 2018. Besides all the important activities listed above for year end tax planning, tax consultants will also need to guide their clients to successfully use the right technology to generate e-way bills, and navigate the e-way bill portal without hassle, to ensure a smooth movement of goods both within and between States.

Special GST Recovery Provisions

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Void transfer of property

As we have discussed in our previous blog, the department can seize properties belonging to the defaulter to recover the due tax amount. Sometimes, in order to avoid such seizures, the taxpayer transfers the property via sale, mortgage, exchange etc. after the amount has become due – the intention being to evade paying the tax amount which is due.

To handle such a scenario, the provisions have been laid down, which state that transfer of property will become void, whenever there is a tax amount due to be paid.

However, the transfer will not be held as void, provided:

  • Transfer has been made for an adequate consideration
  • Transfer has been made in good faith, i.e. without any intention to cause fraud
  • The taxpayer has not received any notice regarding pending tax dues or proceedings at the time of transfer
  • Prior permission of the proper officer has been obtained

Tax to be the first charge on property

As per the GST recovery provisions, any tax amount which is due, including interest and penalty, will be the first charge on the property of the defaulter, and will override all laws, except the Insolvency and Bankruptcy Code.

For example, Manjunatha Traders owes INR 20,000 as tax due amount as well as INR 1,00,000 as loan to the bank. Manjunatha Traders has a vehicle worth INR 80,000. However, the due tax amount of INR 20,000 will be the the tax first charge on property i.e. the vehicle, post which the remaining INR 60,000 may be taken by the bank against the loan.

Provisionally attaching property to protect revenue

If at any point in time, the commissioner is of the opinion, that the government revenue is at stake, then he has the authority to provisionally attach any property of the defaulting taxpayer. Such a provisional attachment will have a validity of 1 year.

Properties are generally treated as a temporary security for the purpose of provisional attachment, especially when there is a strong suspicion that the defaulter will abscond. That is the reason why the provision has been made to include bank accounts also into such property and include them as part of provisional attachment of property to protect revenue.

Appeal and Revisions

If the taxpayer files for an appeal or revision against the notice of demand received, then either of the following can occur, as far as the decision is concerned:

  • Due Amount is Increased – In this case, the commissioner will serve another notice of demand for the difference amount. The old amount will anyway be covered by the notice issued earlier.
  • Due Amount is Decreased – In this case, the commissioner will inform the taxpayer about the reduction, and also apprise the authority with whom the recovery proceeding under GST is pending. No new notice will be issued in this case.

Thus, it is important for businesses to not only be aware of the demand provisions, but also the GST recovery provisions, so that a clear clarity exists between what is deemed legal and what is deemed illegal. However, there are certain scenarios – such as transfer of business, mergers, demergers, liquidation etc., which can make recovery of GST a tricky situation for the department. In our next blog, we will go through the provisions in place to determine liability in the case of certain business cases.

Liability to Pay GST which is unpaid – For Stakeholders

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Liability to pay GST – For Agent and Principal

If an agent supplies or receives any taxable goods on behalf of his principal, then both the agent and the principal will be liable to pay unpaid GST, jointly and severally. This defines the liability to pay GST for both agents and principal.

Liability of Directors of Private Company

If a private company does not pay its dues, then the directors of the company will become jointly and severally liable for the dues, i.e. there will be some personal liability for directors. In this case, only the directors who were in office during the period when the tax was due, will have the liability to pay GST. However, if a director can prove to the tax commissioner that the non-payment was not due to any negligence or breach of duty due to his part, then he will not be held liable.

Note: Nothing has been specified as such in the GST Act with regards to conversion or transfer of a private company to a public company. However, a rule in this section states, that this provision does not apply when a private company is converted to a public company. Thus, it can be interpreted to mean that this provision does not apply to public limited companies.

Liability of Partners of a Partnership Firm

In a partnership firm, all the partners have unlimited liability. Similarly under GST, the partners of the firm are jointly and severally liable to pay unpaid GST which is due irrespective of any clause in the partnership deed or any other law.

In case of retirement of a partner, the commissioner must be informed of the same by the firm or the retiring partner. This is because, it could be possible that the retiring partner could have the liability to pay GST until the date of his retirement. If any intimation regarding the retirement is not given within 1 month, the retiring partner will continue to face liabilty for unpaid GST, till such an intimation is received by the commissioner.

Liability of Guardians, Trustees, Agents

Liability to pay GST comes into play when any business is conducted by a guardian or trustee or agent on behalf of and for the benefit of a minor or an incapacitated person. In case of any tax amount due, both the guardians or trustees or agents and the beneficiary will be liable to pay under the GST Act, and the due amount may be recovered from both parties. Thus, it is important to understand GST liability of guardians, GST liability of trustees and GST liability of agents, for such scenarios.

Liability of Court of Wards

This scenario is applicable, when the estate of a taxable person owning a business, is under the control of the Court of Wards or the Administrator General or the Official Trustee or any receiver or manager appointed by a court. In such a case, if the business owes any amount under GST, then all entities will be equally held liable, i.e. the Court of Wards, the Administrator General, the Official trustee, any receiver or manager along with the taxable person.

How Tally.ERP 9 Simplifies Generating E-Way Bills for you?

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You might have already generated e-Way Bills for your business since e-Way Bills are mandatory for interstate movement of goods in India from April 1st onwards.

An e-Way Bill has to be generated if the total of taxable value and tax amount in the invoice of goods being transported exceeds Rs. 50,000, and in few States for intrastate transactions as well.

By now, you must also be aware of the challenges involved in generating e-Way Bills. It is quite likely that you are evaluating a software to make it easy for you to generate and manage e-Way Bills, or you are already using Tally.ERP 9 to do so.

In this blogpost, we will take you through the various challenges that businesses go through on a typical day and how Tally.ERP 9 supports them by helping generate e-Way Bills in a faster and simplified way. Tally.ERP 9 Release 6.4 has been launched with the purpose to make e-Way Bill generation and management easy for you.

Generating e-Way Bills faster using Tally.ERP 9

For many businesses, generating e-Way Bills is now mandatory in addition to their routine activities. Businesses need to generate e-Way Bills faster and correctly for overall efficiency.

Businesses such as distributors of machinery, electrical equipment, consumer durables, wholesalers and manufacturers who dispatch goods in bulk will find it handy to generate an e-Way Bill right at the time of creating the invoice.

Keeping this in view, at the time of creating the invoice after you have provided all the invoice level details, Tally.ERP 9 opens an additional form where you can provide transportation and other details required for generating e-Way Bill.

On the other hand, a business involved in dispatching small quantities of goods such as FMCG distributors will find it a hindrance to generate e-Way Bills for every transaction. They will prefer to generate e-Way Bills in bulk since they dispatch goods for multiple orders at the same time.

In such a case, you can disable the e-Way Bill form in Tally.ERP 9 when creating sales invoices. When you are ready to dispatch goods, you can see all the transactions for which e-Way Bills are yet to be generated. You can select them all together and export them as a single JSON file which can be uploaded on the e-Way Bill portal. The portal will generate e-Way Bills for all these invoices in a single click.

How Tally.ERP 9 helps generate e-Way bills correctly?

Errors can take place when entering data. Tally.ERP 9 has inbuilt capability to check for such errors.
In the absence of any mandatory detail such as distance, vehicle number, pin codes of consignee and consignor, and so on, Tally.ERP 9 will not allow you to export the JSON file for the purpose of generating e-Way Bill. It also checks if the GSTIN numbers and Transporter IDs of the parties are correct or not.

Due to all these inbuilt checks, the chances of your JSON file getting rejected in the e-Way Bill portal is minimized. Generation of e-Way Bills will be faster and accurate.

Be sure to not to miss e-Way bills

Typically, businesses are involved in multiple things at the same time. In a hurry, you could send the goods to your transporter without an e-Way Bill. Due to this, your consignment can get delayed and you will miss out on your promise made to customer. This situation can be avoided easily. Tally.ERP 9 ensures that all the transactions for which e-Way Bills are yet to be generated are available in one place in a single report. You will never miss generating the required e-Way Bills. Even if you have created an e-Way Bill in the portal first, you can update the respective transaction with e-Way Bill details at a later stage through this report.

How Tally.ERP 9 helps in generating consolidated e-Way bill?

If the State, place of supply, vehicle no. and mode of transport are the same, then you can group such invoices, generate their individual e-Way Bills and finally consolidate the individual e-Way Bills and generate a single consolidated e-Way Bill.

Tally.ERP 9 helps you in grouping invoices based on the above criteria, with a single click. This makes it convenient for the transporter since he can now carry just the single consolidated e-Way Bill for multiple invoices.
We have taken you through various kinds of business scenarios with respect to e-Way Bills and explained how Tally.ERP 9 handles all of them, simplifying the generation of e-Way Bills. We are eager to hear about your experiences. Download Tally.ERP 9 Release 6.4 and let e-Way Bill management make your business more efficient. Do share your experience with us.

Liability for GST – Transfers, Mergers & Liquidation

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Liability for GST during transfer of business

If a taxable person transfers his business, either wholly or partly, to another person, then both the taxable person and the person to whom the business is transferred, will be having liability for GST – jointly and severally, wholly or to the extent of such a transfer, to pay the tax amount which is due, which will include tax, interest and penalties. It does not matter whether the due tax amount was determined before and after the transfer of business under GST, as long as it is unpaid.

All forms of transfer, ranging from sale, gift, lease, leave and license, hire etc. will be covered under GST liability in transfer of business.

Apart from the unpaid tax amounts, the new owner of the business will also have the liablity to pay GST from the date of transfer. If he carries on the business in a new name, which is different from the original, then he must apply for an amendment of his registration certificate, which will prevent any legal complications.

Liability in case of merger or amalgamation of companies

There could be situation where companies enter into an amalgamation or merger under GST. As per the GST provisions, if two or more companies merge or amalgamate, then they are individually have liability for GST, provided:

  • Under GST, merger or amalgamation has happened due to the order of a court or tribunal
  • Order is to take effect from a date earlier to the date of the order i.e. in retrospective effect
  • Both companies have supplied goods and / or services to each other during the period in between the order date to order effect date

It is to be noted that the merging companies will be treated as separate companies under GST till the date of the order and not the order effect date. Their registrations will stand cancelled on the date of the order.

Liability in case of company liquidation

When any company is being wound up, either under the orders of a court or Tribunal or otherwise, every person who is appointed as a receiver of any assets of that company, will need to inform the Commissioner of his appointment as a liquidator, within 30 days. Post this, the Commissioner may conduct enquiries to confirm the same, and then notify the final amount to the liquidator, which in his opinion, will be sufficient to provide for any tax, interest or penalty, which is payable by the company at that point in time. This amount will need to be communicated to the liquidator by the Commissioner within 3 months of receiving the appointment intimation.

When any private company is wound up, the scenario is little different. If, any tax, interest or penalty payable by the company for any period (whether before or in the course of or after its liquidation) cannot be recovered, then every person who was a director of the company at any time during the period for which the tax was due shall, jointly and severally, have liability for GST payment, interest or penalty. However, if he manages to prove to the Commissioner that such a non – recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, then he may be excused from paying the due amount.

Recovery of Tax under GST

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When to initiate proceedings for Recovery of Tax?

As per the recovery provisions under GST, if the amount payable by a taxable person, remains unpaid, even after 3 months from the date of issuing the Order for demand of tax, then the recovery of tax under GST will be initiated. However, if the proper officer considers it urgent in the interest of revenue, he may state reasons recording in writing, and direct the concerned taxpayer to make payment in a reduced period as well. In any case, if the demand is not paid in the time specified, then the department will initiate proceedings for tax recovery under GST.

What are the modes of recovery of tax?

The proper officer may recover the tax due in the following tax recovery modes:

  • Deduction of due amount from the tax amount payable to such person by the department
  • Recovery of tax by way of detaining and selling any goods belonging to such person
  • Recovery of tax from another person, from whom money is either due or may become due to such person
  • Recovery of tax from another person, who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central or a State Government
  • Detention of any movable or immovable property belonging to such person, until the amount payable is paid. If the dues are not paid within 30 days, the said property is to be sold and with the proceeds of such sale the amount payable and cost of sale is to be recovered
  • Recovery of tax through the collector of the district, in which such person owns any property or resides or carries on his business, as if it were an arrear of land revenue. The proper officer will need to prepare a certificate specifying the amount due from such person and hand it over to the concerned collector, for this purpose
  • Recovery of tax by way of application to the appropriate magistrate, who in turn shall proceed to recover the amount as if it were a fine imposed by him
  • Recovery of tax via enforcing the bond or instrument executed under the Act or any rules or regulations made under the Act
  • Recovery of tax done by the proper officer of the State Government or Union Territory Government, wherein, any CGST arrears will be recovered as if it were an SGST / UTGST arrear. Such an amount will be recovered, and then later credited to the account of the Central Government. In case the amount recovered by this means, is less than the amount due, then the amount will be apportioned among the Central Government and State / UT Government in proportion to the amount due to each authority

Provision for paying taxes in Instalments

If the taxpayer cannot pay all the GST dues i.e. tax, interest and penalty, in a lump sum or within the stipulated date, then he can file an application to the Commissioner requesting to pay in instalments. Basis this application, the commissioner can either extend the due date of payment, or, allow the taxpayer to pay the amount in instalments. In either case, the reasons for accepting and rejecting this request, have to be provided in writing.

When paying taxes in instalments however, the taxpayer has to remember the following conditions:

  • Instalments are payable every month
  • A maximum of 24 instalments are allowed i.e., the time of payment can be extended for a maximum of 2 years
  • Interest at 18% must be paid along with the instalment
  • All instalments must be paid on time. A single default will cause the instalments to cease and the entire outstanding balance will become due on that date, and will be recoverable, without any notice

However, please note that this option of paying in instalments is not available for dues under self-assessment. Any tax under self-assessment must be paid in one go.

Determination of Tax Liability under Demand Provisions

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Determination-of-tax-liability

In this blog, we will understand the rules laid down for determination of tax liability for calculation of penalty under the demand provisions of GST.

General Provisions for Determination of Tax Liability

The general provisions for determination of tax liability are as follows:

  • If the service of the Show Cause Notice (SCN) or the issue of the Order, both of which are important notifications for a defaulting tax payer, have been stayed by a Tribunal or Court order, then the stay period will be excluded from the maximum time limits specified i.e. 3 years in the case of non-fraud cases and 5 years in the case of fraud cases
  • If the Appellate Authority or Tribunal or Court decides that charges of fraud are not sustainable i.e. the case cannot be labelled as a fraud case, then the case will be handled as a non-fraud one and the SCN issued earlier will be assumed to be a SCN for a non-fraud case. The tax officer will calculate the tax accordingly
  • If the Tribunal or Court directs that an order has to be passed, then it will be issued within two years from the date of the direction
  • An opportunity of a personal hearing will be granted to the taxpayer if they request it in writing, or, if a penalty or any adverse decision is proposed against such person
  • The proper officer can adjourn the personal hearing if the concerned person provides sufficient cause in writing, but, such an adjournment will be allowed for a maximum of 3 times
  • While issuing an order, the proper officer, shall set out the relevant facts and the basis of his decision, in the order itself
  • The amount of tax, interest and penalty demanded in the order will not exceed the amount specified in the notice. All demands will be made, only on the grounds specified in the notice
  • The Appellate Authority or Tribunal or Court can modify the amount of tax determined by the proper officer
  • Interest on tax which is unpaid or short paid, will have to be paid whether or not specified in the order
  • If the order is not issued within 3 years (in case of non-fraud cases) or 5 years (in case of fraud cases), then it is assumed that the adjudication proceedings are completed, and no further orders will be issued afterwards
  • All pending cases, where the decision was against the interest of revenue, might be appealed to a higher authority. For such cases, the period between the date of the original decision and the date of the revised decision of the higher authority, will be excluded from the period of 3 years or 5 years, as applicable
  • Recovery provisions for unpaid or short paid tax and interest levied on the same, is applicable irrespective of the demand provisions
  • Once a penalty is imposed on a taxpayer under the demand provisions specified for fraud and non-fraud cases, no other penalty under any of the GST sections will be applicable

Tax collected but not paid to Government

The following provisions have been specified to handle the scenario of a person collecting tax from another person, but not depositing the same with the Government, i.e. tax collected but not deposited to the Government:

  • The defaulter will have to mandatorily pay the said amount to the Government, irrespective of whether the supplies, for which the amount was collected, are taxable or not
  • If the amount is not paid in time, a proper officer may issue a SCN immediately, for recovery of the amount and penalty equivalent to the amount. There will be no specified time limit for issuing such a SCN
  • The proper officer, will then after considering all the facts, determine the amount finally due from the defaulter. The defaulter will be liable to pay not only the amount, but also the interest at the rate specified, from the date the said amount was collected by him to the date the said amount is paid by him to the Government
  • The proper officer shall issue an order within one year from the date of issue of the notice, post which the amount shall be collected and adjusted against the relevant tax ledgers

Tax wrongfully collected and paid to Central Government or State Government

One of the most common mistakes which can happen for any business is the payment of tax under the incorrect head i.e. CGST + SGST / UTGST being paid in place of IGST or vice versa. The following provisions have been specified to handle tax wrongfully collected:

  • A registered person who has paid CGST + SGST / UTGST on a transaction considered by him to be an intra-State supply, but which was actually an inter-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed.
  • A registered person who has paid IGST on a transaction considered by him to be an inter-State supply, but which was actually an intra-State supply, shall not be required to pay any interest on the amount of CGST and SGST / UTGST, which is payable.

Demand under GST

Posted on by Tally Academy

Demand-Provisions-under-GST

As you must be aware, the Goods and Service Tax is largely payable on a self-assessment basis. If the assessee pays the right amount of tax, there is no problem. However, if there is any short payment or wrong utilisation of input credit, then the GST authorities will initiate demand and recovery of tax under GST provisions, against that particular assessee. Under the GST Act, provisions relating to demand and recovery are quite similar to the provisions under the erstwhile Service Tax and Central Excise Act norms. In this blog, we will understand the provisions of demand under GST in detail.

When can a demand under GST be raised?

The GST Act contains elaborate demand provisions under GST as well as provisions for recovery of tax under various situations, which can be broadly classified as follows:

  • Tax is unpaid or short paid
  • Refund is wrongly made
  • Input Tax Credit is wrongly availed or utilised

Now, these situations can happen, either because of an inadvertent bona fide mistake (normal case) or because of a deliberate attempt to evade tax (fraud case). Since the nature of offences is totally different in both the cases, separate recovery and demand provisions under GST have been laid down for each type of case. These provisions attempt to encourage voluntary compliance, under certain specific timelines, which are discussed below.

Demand of tax when there is no fraud

As per the rules of demand in GST, when there is no fraud, no wilful misstatement or no suppression of facts – in other words, no motive to evade tax, the demand of tax provisions are comparatively more lenient.

Time Limit to issue Show Cause Notice & Order

As per the provisions of demand under GST, the proper officer i.e. the concerned GST authority is required to primarily issue 2 notifications, which serve as opportunities to the defaulter – Show Cause Notice (SCN) & Order.

  • Order – 3 years from the due date of filing Annual Return for Financial Year, to which the amount relates
  • Show Cause Notice (SCN) – 3 months before the date of issue of the Order, i.e. 2 years and 9 months from the due date of filing Annual Return for the Financial Year, to which the amount relates.

Once the above notice has been issued, the proper officer can then serve a statement, with details of any unpaid tax / wrong refund etc., for other periods which are not covered in the notice. This means, that a separate notice does not have to be issued for each tax period, which the concerned authority wants to highlight, as per the provisions of demand under GST.

Penalty Scenarios

  • Before SCN – If the taxpayer pays the tax along with interest, based on his own calculations, or the officer’s calculations, and informs the same to the officer in writing, before the SCN is issued, then the officer will not issue any notice, nor charge any penalty. However, if the officer finds that there is a short payment, they can issue a notice for the balance amount.
  • Within 30 days of SCN – If the taxpayer pays all his dues within 30 days from the date of issue of the SCN, then the penalty will not be applicable, and all proceedings and prosecution regarding the notice will be closed.
  • Within 30 days of Order – If the taxpayer pays all his dues within 30 days from the date of issue of the Order, then penalty will be charged at 10% of tax subject to a minimum of INR 10,000.
  • After 30 days of Order – If the taxpayer pays all his dues after 30 days from the date of issue of the Order, then penalty will be charged at 10% of tax subject to a minimum of INR 10,000.

To sum up,

Due Payment Date Penalty
Before SCN No penalty
Within 30 days of SCN No penalty
Within 30 days of Order 10% subject to a minimum of INR 10,000
After 30 days of Order 10% subject to a minimum of INR 10,000

Demand of tax when there is fraud

As per the demand rules in GST, such provisions arise, when there is unpaid or short paid tax, wrong refund or wrong utilisation of ITC, under the following situations:

  • Fraud
  • Wilful misstatement
  • Suppression of facts

Time Limit to issue Show Cause Notice & Order

As per the provisions of demand under GST, even in the case of fraud, the proper officer i.e. the concerned GST authority is required to primarily issue 2 notifications, which serve as opportunities to the defaulter – Show Cause Notice (SCN) & Order. However, the timelines are different as follows:

  • Order – 5 years from the due date of filing Annual Return for Financial Year, to which the amount relates
  • Show Cause Notice (SCN) – 6 months before the date of issue of the Order, i.e. 4 years and 6 months from the due date of filing Annual Return for the Financial Year, to which the amount relates.

Once the above notice has been issued, the proper officer can then serve a statement, with details of any unpaid tax / wrong refund etc., for other periods which are not covered in the notice. Similar to the previous scenario, a separate notice does not have to be issued for each tax period, which the concerned authority wants to highlight, as per the provisions of demand under GST.

Penalty Scenarios

  • Before SCN – If the taxpayer pays the tax along with interest, based on his own calculations, or the officer’s calculations, and informs the same to the officer in writing, before the SCN is issued, then the officer will not issue any notice, but a penalty of 15% will be charged. However, if the officer finds that there is a short payment, they can issue a notice for the balance amount.
  • Within 30 days of SCN – If the taxpayer pays all his dues within 30 days from the date of issue of the SCN, then a penalty of 25% will be applicable, and all proceedings regarding the notice will be closed.
  • Within 30 days of Order – If the taxpayer pays all his dues within 30 days from the date of issue of the Order, then a penalty of 50% will be applicable, and all proceedings regarding the notice will be closed.
  • After 30 days of Order – If the taxpayer pays all his dues after 30 days from the date of issue of the Order, then penalty will be charged at 100% of the tax amount.

To sum up,

Due Payment Date Penalty
Before SCN 15%
Within 30 days of SCN 25%
Within 30 days of Order 50%
After 30 days of Order 100%

Note: However, as per the latest demand rules in GST, with respect to self-assessed tax and / or any amount collected as tax, a penalty of 10% will still be payable where payment has not happened within 30 days from the due date of payment of the tax. In these cases, penalty will be applicable irrespective of whether or not the taxpayer pays before or after SCN i.e. the due date of payment will be considered more important than date of issue of SCN, over-riding all the rules stated above.

The GST Act also ensures timely disposal of cases by further providing that if the Order is not issued within the stipulated time limit of 3 years or 5 years, as the case may be, the adjudication proceedings shall be deemed to be concluded. This has ensured a strong mechanism for recovery and demand in GST, which will hopefully go a long way to wipe out tax evasion across the nation.