Notices and Appeals under GST in India

The Goods and Services Tax (GST) system in India aims to provide transparency and accountability to the indirect tax system. Although GST makes compliance easier, it also has robust monitoring tools that enable tax authorities to issue GST notices whenever discrepancies, non-compliance, or incorrect information is detected. Taxpayers may react, seek clarification, and, where necessary, make GST appeals against orders made by authorities.

The concept of various kinds of notices and the process of appealing them is essential in ensuring that all GST-registered companies avoid penalties and continue working with the notices without any interference. This blog outlines the categories of GST notices, the reasons for issuing notices, the timeframes, and the full appeals process in India.

What Are GST Notices?

GST notice is a formal message by the GST department requesting information, clarification, or any action by a registered taxpayer. Such notices are motivated by discrepancies in the returns, delays in the filing period, incorrect claims, suspicions of tax evasion, or other compliance issues.

The nature of the discrepancy may involve informational GST notices, warning-based GST notices and demand-based GST notices.

Common Reasons for Issuing GST Notices

The GST department oversees compliance through the use of returns, e-way bills, analytics, and audits. The usual causes of notices are:

1. Non-filing of GSTR-3B or GSTR-1
2. Claims of excess input tax credit (ITC)
3. There is an ITC failure between GSTR-2A/2B and GSTR-3B.
4. Variations in turnover are reported in the GST returns and income tax returns.
5. Late payment of GST
6. Suspected tax evasion
7. Cancellation irregularities
8. Improper classification of services or goods.

In the event of such discrepancies, a notice is sent to the taxpayer to correct or explain.

Types of Notices Under GST

Various GSTs are applied depending on the problem. The key notices include:

1. GSTR-3A: Notice to Non-Filing of Returns: Assessed in her case, where a taxpayer does not make GSTR-3B, GSTR-1, or GSTR-4 within the due date. The notice serves to direct the taxpayer to submit pending returns and pay late penalties.
2. CMP-05: Show-Cause Notice Under Composition Scheme: Given to taxpayers who are registered under the composition scheme when the department has reason to believe that they are not eligible to be included in the scheme, such as exceeding the turnover limit or trading in disallowable goods or services.
3. REG-03: Extra Clause to Registration: The notice is given in the GST registration process, where there is a requirement by the department of the new project or enterprise to provide further documents or clarification before the registration is granted.
4. REG-17: Notice of Cancellation of GST Registration by Show-Cause: Published when the department has suggested the cancellation of the registration of a taxpayer because of non-compliance, fraud or failure to file returns for a long time.
5. DRC-01: Notice of Tax Demand for a Show-cause: DRC-01 is among the gravest notices as it is issued when the department feels that the taxpayer is not paying the amount of GST that is due to either underpayment, incorrect claim of ITC, or fraud. It describes the tax demand, penalties, as well as interests.
6. DRC-03: Voluntary Payment Notice: It is not really a notice, but a form to be used in cases where the taxpayer wants to pay tax liabilities that were determined by himself or in cases where the taxpayer was found to have a slight discrepancy that was highlighted by the department.
7. ASMT-10: Mismatch in Returns Notice: They are issued when discrepancies have been detected in the input tax credit, outward supplies or turnover. The taxpayer should respond by giving explanations or corrections.
8. AUDIT-01: Notice for GST Audit: Auditing is done within the department to ensure accuracy. The record will notify the taxpayer that his or her records will be audited. They have to furnish audits such as purchase registers, sales registers, stock and invoices.
9. DRC-07: Final Demand Order: When adjudicated, the taxpayer who does not adequately respond to previous notices receives a demand order in DRC-07. This involves the amount to be paid.

How to Respond to GST Notices?

It is essential to respond to the GST notice correctly and in a timely manner to avoid punishment. The steps include:

1. Read the notice: Know what the problem is, the legal section and what must be done.
2. Assemble supporting records, including invoices, ledgers, purchase/sales registers, e-way bills, and returns.
3. Write a concise answer: Present actual explanations backed up with documents.
4. Submit the reply online: The majority of the replies are made on the GST portal in the Services, User Services, View Notices and Orders section.
5. Correct where necessary: Amend returns, pay extra tax, reverse bad ITC.
6. Track next communication: The department can either accept your response or request additional clarification.

The suitable reply should be written in a timely and professional manner to avoid escalation of the issue.

GST under Appeals: The right of a Taxpayer

If a taxpayer disagrees with the tax officer’s decision, they are legally entitled to appeal under the GST law. The mechanism of appeal will promote fairness and guard against the abuse of power.

Under the GST law, there is a 4-tier system of appeal, which includes:

Level 1: Plea to Appellate Authority (Form GST APL-01)

Such an appeal should be made within 3 months of the date of the order.

Documents required include:

1. Grounds of appeal
2. Challenged order
3. Receipt of pre-deposit of the amount (10% of the disputed tax)

Level 2: Appeal to Appeal Tribunal (Form GST APL-05)

In case the taxpayer is dissatisfied with the order of the Appellate Authority, he may appeal to the GST Appellate Tribunal.

This appeal has to be made within 3 months of the last order.

Level 3: High Court

Appeals before the High Court may be made over questions that contain a matter of interpretation of law or may concern a significant injustice.

Level 4: Supreme Court

High Court judgments may be appealed to the Supreme Court on issues of law of substantial importance.

Prerequisite to the filing of Appeals

The law of GST requires pre-deposits to prevent meaningless requests:

1. 10% of the amount of tax in dispute in order to appeal to the Appellate Authority.
2. 20 per cent extra to appeal to the Tribunal.

This makes sure that only viable appeals are carried out.

Conclusion

Learning about GST notices and appeals in India is essential for compliance and avoiding penalties. Mismatches, delays, or suspicious transactions are reported, and a prompt response will help resolve issues in a timely manner. In the event of any disagreement, taxpayers may appeal to the system and contest the decisions at various levels.

Compliance with the correct form, filing of GST returns, and keeping of financial records will significantly reduce the likelihood of GST notices and litigation.