Navigating the GST Regime: Transformation and Its Challenges
December 2023 has marked a significant juncture in the GST law, as the time limit for issuance of orders for the first year of GST i.e., FY 2017-18 for tax not paid or short paid or input tax credit wrongly availed or utilized or erroneous refund under normal cases (i.e., without any fraud, collusion or wilful misstatement) has come to an end. This juncture has arrived after 69 months of end of the relevant financial year. The next six months of this year were again challenging for the assessee, tax consultants, and officials as the time limit for issuance of orders after the recent extension was 30th Apr 24 for FY 2018-19 and 31 Aug\' 24 for FY 2019-20 and SCN (Show Cause Notice) in both the cases is to be issued three months prior to the issuance of the order. Hence, the remaining part of this calendar year is going to be exciting for everyone in the IDT ecosystem, including the IT team of the taxpayers and tax collectors.
Time limit
According to Finance Act, 1994 (Service tax law), the prescribed time limit for the issuance of Show Cause Notices (SCNs) in normal cases was 30 months (extended from 18 months) from the \"relevant date.\" This date was determined as the date of filing the tax return, and in situations where the return was not filed, it was based on the due date for filing the return.
However, under the Goods and Services Tax (GST) law, there is no time limit for issuance of SCN. The time limit is prescribed only for the issuance of an order which must be done within three years from the due date for furnishing the annual return under normal cases (i.e., without any fraud, collusion, or wilful misstatement). Additionally, show cause notice is to be issued at least three months prior to passing the order.
The actual date of filing the return holds no relevance in determining the time limit for the issuance of a Show Cause Notice or order in GST law and is solely based on the due date of furnishing the annual returns. The time limit under GST law is determined from the annual return which is due after 9 months from the end of the financial year and monthly tax returns are not relevant for the determination of time limit, whereas in Finance Act, 1994, the time limit was computed from periodical return and also, there was no requirement of any separate annual return.
Finance Act 2024 has introduced common section 74A for both the cases i.e. normal cases (i.e., without any fraud, collusion, or wilful misstatement) as well as cases with fraud, collusion, etc. wherein the time limit of issuance of notice has been prescribed as 42 months from the due date of filing annual return or erroneous refund. The newly inserted section is applicable from FY 2024-25 onwards and section 73 & Section 74 would be applicable for proceeding related to FY 2017-18 to FY 2023-24.
The extended \"Due date of filing annual return\"
GST was introduced in the Second quarter of FY 2017-18, and both taxpayers and tax administrators faced challenges in adapting to the newly introduced GST law. The format for the annual return and reconciliation statement was first notified in September 2018 through notifications 39/2018-CT and 49/2018-CT, even though the GSTN portal was not yet fully prepared. This posed a significant challenge for the majority of taxpayers and tax professionals, as understanding the requirements and providing the necessary details became difficult. Repeated extensions brought much-needed relief to the clueless taxpayers and tax professionals however, the extended \"due date of filing annual return\" also extended the time limitation for issuance of orders for non-payment or short payment of taxes which was unintentional but brought large ramifications in the tax administration.
Extended due date of issuance of Show Cause Notice
The due date for the issuance of orders for the fiscal year 2017-18 in normal cases/non-fraud cases was stipulated to be three years from the extended due date of 30th Nov 2019 thereby concluding on November 30, 2022. Subsequently, extensions were granted vide Notification No. 13/2022 and Notification No. 09/2023, extending the due date further for FY 2018-19 and FY 2019-20 to 30th Apr 2024 and 31st Aug 2024 respectively. Several petitions have been filed before High Courts challenging these extensions, with courts granting interim stays in various cases.
Constitution of tribunal and stay of demand
Principal Bench of GST Appellate Tribunal have been set up and its State Benches have been notified. A swift functioning of the Tribunal is imperative considering the substantial backlog and upcoming huge matters of FY 2018-19 and FY 2019-20 post-completion of the time limit for issuance of orders in this year. In Circular 224/18/2024 GST dated 11th July 2024, it has been clarified that upon payment of an amount equivalent to 20% of the disputed tax amount and filing of an undertaking stating intention to file an appeal before the GSTAT, recovery for the balance amount will be stayed.
Pre-deposit Amount
The Finance Act, 2024 upon recommendation of the GST council has reduced the pre-deposit amount to 10% subject to the maximum of 40 Crores (CGST and SGST both) while filing an appeal before the first appellate authority and an additional 10% of the remaining amount subject to the maximum of 40 Crores while filing the appeal before the Appellate Tribunal. Such reduction will help businesses in better working capital management.
Conclusion
The certainty in tax laws helps the business to plan themselves and contribute towards the growth of the nation. Any uncertainty impacts the ease of doing business and hence, it is imperative that there should be absolute clarity with respect to tax laws, reporting, and appellate process.
(No explicit references listed in source)