SECTION 20 REGARDING RECOVERY OF TAXES NOT PAID OR SHORT PAID

GST Update 26.01.2016

GST DAILY DOSE OF UPDATION:-

SECTION 20 REGARDING RECOVERY OF TAXES NOT PAID OR SHORT PAID:-

The proposed section 20 of the GST Act, 2016 is being bifurcated into 3 parts being A, B and C. Part A pertains to recovery of taxes not paid or short paid or erroneously refunded for reasons other than fraud or any willful misstatement or suppression of facts. Part B pertains to recovery of taxes in cases of fraud whereas Part C contains general provisions. This update seeks to discuss Part A pertaining to recovery of taxes not paid or short paid for reasons other than fraud.

The time limit for issuing show cause notice in case of normal period of limitation is being specified in sub-section (1) as three years from the relevant date. Presently, in Excise Laws, the time limit to issue show cause notice in case of normal period of limitation is one year from the relevant date and in case of Service Tax Laws, it is eighteen months from the relevant date. This time limit has been increased in the proposed GST law.

The sub section (2) states that where notice has been issued for any period under sub-section (1), the proper officer may service within one year from the date of service of the said notice, a statement containing details of tax not paid or short paid or erroneously refunded for the subsequent period and it will be deemed to be service under sub-section (1) subject to the condition that the grounds relied upon for the subsequent period are the same as mentioned in earlier notice. The provision as regards specifying another time limit for issuing show cause notice on the same issue is not understandable.

Furthermore, if the tax along with interest is voluntarily paid along with interest and is intimated to the proper officer, no show cause notice will be issued for imposing penalty. This provision is already prevalent both in Excise and Service Tax Laws. Moreover, penalty provision similar to that introduced in Budget 2015-16 have been proposed which seeks to quantify penalty as 10% of tax or Rs. 5000/- whichever is higher.

The important sub-section which needs attention is (7) which states that the proper officer SHALL issue order within one year from the date of issue of notice thereby mandatorily requiring speedy disposal of show cause notices. Presently, there are instances wherein show cause notices are being issued and personal hearings are also convened but order in originals are passed after a considerable lapse of time as there is no mandatory time limit to pass order in originals. Consequently, there are unnecessary delays and mental harassment to assessees. Not only this, there have been judicial pronouncements by High Courts that orders passed after a reasonable period of time are not valid and are not legally sustainable. It is hoped that this provision would speed up the litigation disposal mechanism.

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GST Update 26.01.2016

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