The investigation arm of the Goods and Services Tax (GST) authority has issued over 20,000 notices across India for the financial year (AY) 2017-18 to AY2021-22, involving a tax demand of over Rs 80,000 crore, as per an initial estimate.
The Directorate General of GST Intelligence has issued notices on a wide range of issues including alleged shortfall in tax payments, revocation of input tax credit (ITC) and interpretation of certain statutory provisions affecting a large number of taxpayers and businesses. The last date for filing show-cause notices has been set for August 5 of the financial year 2017-18.
The investigating agency was mandated to issue notices at least six months before the end of the five-year period. Accordingly, the notices were sent by August 5 and the final orders are expected to be issued on February 5, 2025.
“These are pre-GST notices which may or may not be converted into GST notices depending on the response of businesses,” said an official in the know of the matter. It is noteworthy that the deadline for the 2018-19 financial year is June 30, 2025.
The notices were served under Section 74 of the Central GST Act, seeking a response on the alleged mismatch between sales data reported in GST returns and that in the annual financial statements.
“GST show-cause notices have been issued to all businesses, pursuant to audits and investigations, so it is essential for businesses to respond within a time-bound manner. Such responses will require collection of data from prior periods, reconciliations with accounting records and other tax data and appropriate interpretations – all of which require significant time and effort on the part of businesses,” said MS Mani, Partner, Deloitte. Section 74 of the CGST Act provides that the relevant authorities can issue a notice to recover potentially underpaid or unpaid tax, or refunded in error, on the grounds of fraud, wilful misrepresentation or suppression of facts to evade tax, within the extended limitation period.
Over the years, stricter disclosure requirements such as e-invoicing for business-to-business transactions, enhanced data collection and digitalized payment system helped tax detectives improve compliance.
Some of the sectors that have received notifications include foreign airlines, shipping companies, insurance companies, online gaming companies, information technology entities and many more.
However, time and again, the Central Board of Indirect Taxes and Customs (CBIC) has stepped in and issued guidelines to promote uniformity in GST notifications as well as for the audit exercise. The instruction mandates zonal chief commissioners to consult GST policy experts when faced with interpretive challenges. “This move is aimed at creating a more predictable business environment by reducing inconsistencies in audit findings, minimising litigation and streamlining the overall audit process. CBIC’s emphasis on standardised interpretation underlines its commitment to fair business practices while ensuring robust GST compliance,” said Saurabh Agarwal, Tax Partner, EY.
However, most of the notifications have been for ITC fraud. To tackle this menace, the department has undertaken a special drive to weed out fake registrations. So far, around 1.2 billion cases of tax evasion have been detected and as many as 59,000 entities have been identified for verification to determine whether they are fake.
The tax department has already processed around 49.8 million income tax returns and sent notifications to taxpayers. Of this number, 39.2 million returns were processed in less than 15 days.
Review of IT Act in 6 months: CBDT chief
CBDT Chairman Ravi Agrawal on Wednesday said that the revision of the Income Tax Act, 1961, will be completed within the given time frame of six months. “We have an important task ahead and that is the comprehensive revision of the Income Tax Act, 1961. This exercise is aimed at reducing litigation and providing tax certainty to taxpayers,” Agrawal said during an event held here to mark the 165th anniversary of Income Tax in India.
PTI
First published: August 22, 2024 | 00:20 IS
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