As you are already aware, Goods and Service Tax, commonly known as GST, is payable on a self-assessment basis. If the assessee determines the tax payable on self-assessment correctly, then there will be no issue at all. However, demand and recovery provisions can be invoked if there is any short payment, or wrong utilization of input credit. We will discuss the provisions with respect to demands in detail in this video. The provisions of demand under the GST Law are primarily similar to the provisions of service tax, and Central Excise laws. However, it also has certain distinguishing elements. First, let us analyze the circumstances under which the GST authority raise a demand. The officer can issue a demand notice in cases where: tax is not paid or short paid, Input Tax Credit, also known as ITC, is wrongly availed or utilized, refund is sanctioned erroneously, or amount collected as tax is not paid to the government. Similar to the pre-GST regime, the demand provisions in the GST era are also broadly classified into two types, depending upon the intent or motive behind the contravention of the tax provisions, that is, whether or not an intention of fraud, suppression, or wilful misstatement to evade taxes is present. Where there is no invocation of fraud, or wilful misstatement, or suppression of facts, the demand is said to be raised within the normal period of limitation, as per section 73 of the CGST Act, and the GST officers are bound to issue a show-cause notice, or SCN, within 2.75 years, that is, two years and nine months from the due date for furnishing annual returns. The adjudicating order is to be issued within three years from the due date for furnishing annual returns. In the presence of men rea to evade taxes, the extended period of limitation can be invoked as per section 74 of the CGST Act, and the GST officers are bound to issue the SCN within 4.5 years, that is, four years and six months from the due date for furnishing annual returns. The adjudicating order is to be issued within five years from the due date for furnishing annual returns. To help you understand this better, we will discuss an illustration for indicating the time limit for issuance of SCN, and adjudicating order. Before this, you should know that for financial year 2017 to 18, since the due date for filing annual returns was extensively extended by the government, the limitation period shall start from the date of the extended due date, that is, 3,5 or 7th February, 2020, and not the original due date of 31st December, 2018. For example, let us consider the case of a person registered in Tamil Nadu, where the extended due date for filing the annual return for financial year 2017 to 18, was 3rd February, 2020. In case the normal period of limitation is invoked, SCN should be issued before 3rd November, 2022, and order should be issued by 3rd February, 2023. However, as per recent notification no. 13/2022, the time limit for issuance of order under section 73 of the CGST Act for recovery of tax not paid, or short paid, or of input tax credit wrongly availed or utilized for financial year 2017 to 18, has been extended up to 30th September, 2023. If the extended period of limitation is invoked, the SCN shall be issued before 3rd August, 2024, and the order should be passed before 3rd February, 2025. Interestingly, unlike the erstwhile laws, the GST Law specifically defines the term suppression, which means: non-declaration of facts or information, which a taxable person is required to declare in the return, statement, report, or any other document furnished under this Act, or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer. The term suppression was subject to various interpretations earlier. However, now it seems to cover only those cases where there is a positive action committed by the assessee in not disclosing the facts, or information, which they were otherwise required to disclose. Let us move on to some of the important provisions of the demand section in GST. One of the important objectives of implementing GST was to increase efficiency in terms of the processing the returns, assessment, demand, and appeal. Considering this, a lot of provisions in GST are structured such that the majority of the work is technology enabled, be it filing of returns, filing of appeal, or any other related areas. Similarly, the adjudicating order in demand cases shall be uploaded by the GST officer electronically, specifying the amount of tax, interests, and penalty, payable by the person chargeable with tax. The assessee is given time period of three months to pay the demand confirmed in the order, and if the assessee fails to discharge such demand, then the officer can initiate recovery proceedings against the assessee. Under the GST Law, similar to the erstwhile regime, monetary limits are prescribed vide CBIC instructions, enabling the officer to issue an SCN. An SCN cannot be issued if the assessee has already paid the alleged tax, interests and penalty, before the issuance of such show-cause notice. Some states like Tamil Nadu have issued specific circulars, where the investigating officer cannot issue an SCN, and can only issue a report to the adjudicating officer who is empowered to issue the show-cause notice. Therefore, assessee should also consider such state-specific circulars. You should also know that the Director General of GST Intelligence has an all-India power to issue show-cause notice, and assign to the regional officer. As discussed earlier, certain relaxations are provided if the assessee discharges the demand raised by the officer, depending upon: the time of discharging such amount, and the intention behind contravening the provisions of law. Where there is no fraud or suppression, and if the assessee discharges tax and interests liability before the issuance of the SCN, then the officer cannot issue the SCN. Similarly, if the liability is discharged within 30 days from the issuance of the SCN, then no penalty can be imposed, and all the proceedings shall be deemed concluded. Where there is the element of fraud or suppression, and if the assessee discharges tax, interests, and prescribed penalty at the rate of 15 percent, before the issuance of the SCN, then the officer cannot issue the SCN. Similarly, if the liability is discharged along with penalty amounting to 25 percent of tax within 30 days from the issuance of SCN, and at 50 percent of tax within 30 days of issuance of the order, then no penalty can be imposed, and all the proceedings shall be deemed concluded. At this point, it is important to note that the phrase: "all the proceedings shall be deemed concluded," shall not include punishment proceedings as per section 132 of the CGST Act, which are applicable for contravention such as: supply without issuance of invoice with the intention to evade tax, issuance of invoice without any supply, availment of ITC using such invoice, where there is no actual supply involved, non-remittance of the tax collected, falsification of financial records or production of fake accounts, documents, or false information, or tampering with any material evidence. Persons committing such offences shall be punishable with fine, and imprisonment, which may extend from six months to five years, depending on the amount of tax evaded, or the amount of Input Tax Credit wrongly availed or utilized, or the amount of refund wrongly taken. You have now obtained a broad perspective of the demand provision under GST Law. In the next video, we will look at some of the key issues pertaining to these provisions.
