GST notice, order, and demand U/s 73

To understand the proceeding under Section 73 let us break the topic into, when GST notice U/s73 be issued, rules relating to the show cause notice U/s 73, how to respond to the GST notice, the time limit for issuing the notice, the time limit for passing a final order, remedies available to the dealer.

When does GST notice U/s 73 will be issued?

The proceedings U/s 73 will be initiated in the following circumstances

• Any tax has not been paid to the department
• Any tax has been short paid
• Any tax has been refunded erroneously
• Input tax has been wrongly utilized or availed 

due to reasons other than fraud, any wilful-misstatement, suppression of facts.

In most cases, Notice U/s.73 will be issued based on the data available in the GST filing data, GST input tax credit statement, data from E-way bill etc.

GST Show cause notice- SCN for initiating proceeding U/s 73

Contents of GST show cause notice U/s 73

Show cause notice is the communication by the department asking why he should not pay the amounts mentioned in the notice.

Issue of show cause notice mandatory before issuing order U/s 73, GST show cause notice should mention the amount of tax, interest at 18 % p.a, and penalty.

The GST notice should clearly mention the reasons regarding why the notice is issued, and on what facts the department had relied to recalculate the tax, interest and penalty payable. Generally, show cause notice will be issued with the information regarding the relevant period and reconciliation of the actual amount paid in comparison with the amount payable as per the GST Act 2017.

Time limit for issuing GST notice U/s 73

The show cause notice U/s 73 should be issued at least 3 months prior to the time limit for issue of order U/s.73, issue of notice within the time limit is mandatory for passing order.

For financial year 2022-2023 the time limit for issue of order U/s 73 is 31st December 2026, therefore the notice should be issued 3 months prior to 31st December 2026, so the time limit for issue of notice is 30th day of September 2026.

Time limit for responding to GST showcase notice U/s 73

• The tax and interest mentioned in the notice should be paid completely on or before 30 days from the date of issue of notice.
• Where tax along with the interest is paid within 30 days of issue of GST notice, then the penalty mentioned in the notice is not required to be paid. The proceedings are deemed to be concluded at this point, and no further action will not be taken for recovery of penalty.
• In case tax along with the interest is not paid with in 30 days of issue of GST notice, the officer can issue final demand order U/s 73 in form GST DRC-07.
• The dealer should take assistance of GST auditor for providing proper response and determination of the amount payable.

Assessment of other tax period using the show cause notice already issued

Where the show cause notice for a period is issued mentioning the reasons, if there is the same issue in any subsequent tax periods, then separate show cause notice is not required to be issued for subsequent period, the statement with computation is deemed as service of show cause notice for subsequent period.

The statement issue for a subsequent tax period is valid only if the statement is issued within the time limit available for issue of show cause notice for the subsequent financial year.

Example

M/s.THE GOOD BOY PRIVATE LIMITED received show cause notice under section 73 for financial year 2022-2023 mentioning reason as difference in tax payable between GSTR-3B and GSTR-1, then for financial year 2023-2024 if there is mismatch between tax payable between the GSTR-3B and GSTR-1 a separate SCN is not required to be issued.

It is sufficient that the statement containing the reason and calculation for the financial year 2023-2024 is issued.

Show cause notice Under 73 should not be issued where the amount mentioned in the ASMT-10 is paid.

Where GST ASMT-10 notice is issued by the officer, and the amount is paid to the department, then the notice U/s 73 cannot be issued for the same reason and same amount.

In most of the cases, action U/s 73 will not be initiated immediately after the expiry of time limit to reply to GST ASMT-10 notice. Even after the expiry of the time limit and before the issue of show notice, if the amount due is paid voluntarily, then the proceeding under section 73 will not be initiated.

Where the tax is paid voluntarily without any active notices, then the dealer should provide a written intimation to the proper officer.

SCN can be issued after voluntary payment, or GST ASMT-11 payment if there is any shortfall in the tax or interest payable.

Order U/s 73

Order U/s 73 is the final step taken by the department in respect of assessment proceeding under section 73, once the order U/s 73 is issued, the demand amount mentioned in the notice should be paid.

When Order U/s 73 will be issued ?

• Where tax amount along with the interest is not paid, and reply is not submitted by the dealer within the time allowed.
• Where a reply is filed, and the reply is not satisfactory.
• In case the amounts mentioned in the notice is paid, the closure order will be issued.
• Where reply is satisfactory, a closure order will be issued, U/s.73.

Time limit for Order U/s 73

Order U/s 73 is required to be issued within 3 years from the due date for filing the annual return for the relevant financial year. In case of financial year 2022-2023, the due date for filing annual return is 31st December 2023, therefore order U/s.73 should be issued on or before 31st December 2026.

Maximum penalty that can be determined in order U/s.73

The proper officer shall impose maximum penalty of 10 % of tax amount or Rs.10,000 which ever is higher, once the order is passed there is no relaxation on any penalty mentioned in the order.

What is the remedy after issue of order U/s.73

Once the order U/s.73 is passed, the dealer should pay the amount mentioned in the order, reply window to proceedings will be closed.

Where the demand amount mentioned in the notice is not correct, the dealer can file an GST appeal U/s.107 to the respective appellate authority by paying the minimum amount required to be paid for filling the appeal with in the time limit.