Show Cause Notice (SCN) Under GST : An Overview

 

 

Show Cause Notice (SCN) Under GST : An Overview

 

In the legal landscape, a notice serves as a formal communication or warning, often delivered in writing. When it comes to taxation, the concept of a Show Cause Notice (SCN) becomes important. As a legal notification, SCN is a document issued by GST authorities, prompting individuals or organizations to explain why certain actions should not be taken against them.

A show cause notice is a formal written request issued by a government regulatory body to an individual or business, asking them to provide a satisfactory explanation or justification for a certain action or behavior. In the context of Indirect Taxation in India, a show cause notice under GST may be issued by the GST authorities to a business or individual for various reasons, such as non-compliance with GST laws and regulations, evasion of tax, or other suspected offenses.

The purpose of a show cause notice under GST is to give the recipient an opportunity to explain their actions or provide any relevant information or documents that may support their case.The recipient is required to respond to the notice within the specified time frame, which is usually 30 days. If the recipient fails to respond or provide a satisfactory explanation, the GST authorities may proceed to take further action, such as imposing a penalty or initiating legal proceedings.

What does a Show Cause Notice Contain?

Under GST a Show Cause Notice includes the following:

1. Show Cause Notice Number and Date of Issuance
2. The name and address of the recipient
3. The GST registration number of the recipient
4. The nature of the alleged offense or violation
5. The provisions of the GST laws that recipient is alleged to have violated
6. The deadline for the recipient to respond to the notice
7. Consequences for Not Replying to SCN

 

Validity of Show Cause Notice-

To ascertain the validity of the show-cause notice, we will have a look at the various parameters:

1.Time Frame for Issuance of Order and Show Cause Notice (SCN):

1. Normal Situation:

• Time limit for issuance of Order: 3 years from the due date of the annual return.
• Time limit for issuance of SCN: At least 3 months prior to the time limit for the issue of the order..

b. Fraud Situation:

• Time limit for issuance of Order: 5 years from the due date of the annual return.
• Time limit for issuance of SCN: At least 6 months prior to the time limit for the issue of the order

Common Reasons for the issuance of a Show Cause Notice

1. Delay in filing GSTR-1 and GSTR-3B consecutively for more than 6 months
2. Mismatch in details reported between GSTR-1 and GSTR-3B
3. Mismatch declaration in GSTR-1 and E-way bill portal
4. GST Refund is wrongly made with or without the intent to defraud
5. Having failed to obtain GST registration even when applicable
6. Mismatch – ITC claim found between GSTR-3B & GSTR-2A/2B
7. Non-payment/ Short-payment of GST
8. Wrongly availed ITC/ Refund wrongly claimed
9. Anti-profiteering cases

 

Verification Parameters-

SCN issued without Document Identification Number (DIN) is invalid.

Pre-Show Cause Notice is mandatory if demand claim is more than Rs.50 lakhs.

Show Cause Notice must be Issued along with a summary: In accordance with Rule 142(1) (a), the proper officer must electronically deliver the notice together with a summary using Form GST DRC-01. Following Rule 142(5), it is required to electronically upload the order summary in FORM GST DRC-07, which includes the prescribed amounts of tax, interest, and penalty.

Steps to handle a Show Cause Notice Under GST–

Here are some steps you can take if you receive a show-cause notice under GST:

• Carefully read the notice and understand the reasons stated for the issuance of the notice.
• Determine whether allegations made in the notice are correct or not. If you believe that the allegations are incorrect, you should prepare a detailed response explaining why.
• Gather all relevant documents and records that support your response to the show cause notice. This may include invoices, receipts, bank statements, and any other supporting evidence.
• Write a thorough response to the show cause notice, addressing every allegations made in the notice. Make sure to explain each point, and provide supporting evidence wherever necessary.
• Respond to the GST authorities by the deadline listed in the notice. You may also want to consider seeking the assistance of a professional tax advisor or lawyer to help you prepare and submit your response.
• If you are not satisfied with the outcome of the show cause notice, you may have grounds to appeal against the decision to a higher authority or to the courts. It is advisable to seek legal advice before pursuing this option.

Consequences if you fail to reply correctly to a Show Cause Notice-

It is important for businesses and individuals to take show cause notices under GST seriously and respond to them promptly and appropriately. Ignoring or failing to respond to a show cause notice can result in serious consequences, including financial penalties, legal action, and damage to the business’s reputation.
The GST authorities have powers to issue SCNs and to take further action if the taxpayer is not able to provide a satisfactory reason. Some common actions that may be taken include:

• Imposing a penalty: The GST authorities may impose a penalty on the taxpayer if they are found to be non-compliant with the GST laws or if they are found to have evaded taxes.
• Initiating legal proceedings: The GST authorities may initiate legal proceedings against the taxpayer if they are found to be involved in fraudulent activities or if they fail to provide a satisfactory explanation in response to the SCN.
• Disqualifying the taxpayer from availing ITCs: The GST authorities may disqualify the taxpayer from availing ITCs if they are found to be misusing ITCs or if they fail to provide a satisfactory explanation in response to the SCN.

In conclusion, understanding the intricacies of Show Cause Notices is essential for individuals and organizations dealing with GST. From exploring the legal framework under Sections 73-74 to verifying the validity of the notice and crafting a strong response, each step is pivotal in navigating the GST legal landscape effectively. Stay informed, respond strategically, and ensure compliance with GST regulations to navigate the complexities seamlessly.

From,

Krishnakant Jakhotia 

Mobile No :-9422507911

Email Id :- taxtalknew@gmail.com