Procedure of Issuance of Show Cause Notice Under GST

Meaning of Show Cause Notice (SCN):-

It means order issued by a Court, Competent Authorities or an Organization by asking  Individuals or Organization to explain the reason what has been stated in the Show cause Notice that why the disciplinary action should not be taken against the individual or the group of people involved in certain incidents or in particular scenario at that time for the particular period.

Reasons for SCN issuance under GST:-

SCN is issued for the cause of either for sections 73 or section 74  stated in it.

Section 73:-

Section 73 of the CGST Act stating the reasons for which the SCN is issued for the assessment when the following incidents have occurred either for a single cause or combined cause as the case may be.

1. Tax is unpaid/short paid or,
2. Refund is wrongly made or,
3. The input tax credit has been wrongly availed/ utilized.

Accordingly, Taxpayer is required to pay the Amount Due along with the Interest and penalty under section 73 under the GST act.

Time Limit for issuance of notice under section 73:-

It is obliged to issue the show-cause notice at least 3 months before the due date of passing of demand order.

Demand order can be sent for the order of payment is 3 years from the due date for filing of annual return for the year to which the amount relates.

Section 74:- 

Under this section, SCN will be issued for the Tax Evasion cases where fraud or wilful misstatement or suppression of facts occurs. That will ultimately result in:-

• unpaid/short paid tax or,
• wrong refunds or,
• wrongly availed/utilized input tax credit

Time Limit

For the section 74, notice is required to be issued at least 6 months before the due date of passing of demand order and The maximum time limit is 5 years from the due date for filing of annual return for the year to which the amount relates.

How GST Officer will proceed 

The proper officer shall, before service of notice to the person chargeable with tax, interest, and penalty, under section 73 or section 74, as the case may be, shall furnish  the details of any tax, interest, and penalty 

Important Points to be considered while Issuing notice 

• Show Cause Notice is issued after having the detailed Investigation / Inquiries and critical Examination for the facts and the circumstances for which the Notice is issued in the Particular case whichever it falls. Once when all the Investigation / Inquiries and critical Examination for the facts and the circumstances  are done then a drafted SCN either it may be Revised or Supplementary SCN is required to be issued 
• Appropriate Narration linked with the Facts and the circumstances for which the SCN is to be issued is carefully examined 
• For the purpose of invoking period for the SCN  for more than 1 year, it will be granted only when the appropriate basis will be given.
• It has been agreed that SCN is issued for the safeguard the Revenue in a relevant period of time.