Under the Goods and Services Tax system, demand can be raised when there is a short payment or incorrect utilization of ITC by the taxpayer.
Note:
GST which is payable are based on self-assessment by the taxpayer. If the taxpayer accurately assesses and pays the tax, there are generally no issues.
If there is a discrepancy in payment or incorrect use of ITC, tax authorities can initiate demand proceedings against the taxpayer.
![GST Demands and Penalties GST Demands and Penalties](/img/preview/custom/20231220171133_penalty.png)
Types of Demand under GST
GST demand notices may be issued by the tax authorities in two situations:
Types | Section 73 of GST Act | Section 74 of GST Act |
Nature | No Fraud or Misrepresentation | Fraud or Misrepresentation |
Applicable | It is applicable when taxes are not paid, short-paid, erroneously refunded, or when ITC is wrongly utilized or availed. | It is applicable when taxes are not paid, short-paid, wrongly utilized or involves in fraud, wilful misstatement, or suppression of facts to evade tax. |
Time Limit | It must be completed within 3 years from the date of filing the annual GST return for the relevant financial year. | It must be completed within 5 years from the date of filing the annual GST return for the relevant financial year. The officer must issue a notice for tax recovery at least 6 months before the time limit. |
Penalties under GST
Penalties under GST may arise if dues are not cleared within the specified time limit.
Types | Penalty under Section 73 of GST Act | Penalty under Section 74 of GST Act |
Dues Paid Before Show Cause Notice | No penalty if the dues are cleared before the issuance of the show cause notice. | Penalty is 15% of the tax amount due if the dues are cleared before the issuance of the show cause notice. |
Dues Paid Within 30 Days of Show Cause Notice | No penalty if the dues are cleared within 30 days of the issuance of the show cause notice. | Penalty is 25% of the tax amount due if the dues are cleared within 30 days of the issuance of the show cause notice. |
Dues Paid After 30 Days of Order Issuance | Penalty is applicable, and it is 10% of the tax dues or INR 10,000, whichever is higher. | Penalty is 50% of the tax amount due if the dues are cleared after 30 days of the issuance of the order. |
Any Other Case | 10% of the tax dues or INR 10,000, whichever is higher. | In cases other than the above, the penalty is 100% of the tax amount due. |
Recent Case: UltraTech Cement grapples with GST Demands and Penalties
UltraTech Cement faces GST demands issued by Assistant Commissioner CGST & Central Excise and Joint Commissioner - Central Tax, South Kolkata. According to the filing, UltraTech Cement is facing two separate orders.
- First Order: GST demand of Rs 17,60,661 with interest and penalty of Rs 1,76,066.
- Second Order: GST demand of Rs 54,252 with interest and penalty of Rs 20,000.
GST demand of Rs 1.14 crore related to alleged non-payment of differential GST on mined limestone royalty. Demand confirmed at Rs. 1,14,87,546 with interest and penalty of the same amount.
Company Response
- UltraTech Cement disclosed the information through a filing with the Bombay Stock Exchange (BSE).
- Considering legal recourse in response to GST demands.
- No specific details yet provided on allegedly ineligible ITC transitioned to GST.
Potential Impact
- Analysts speculate potential financial and market impact.
- Stakeholders and investors will closely monitoring the company's response.
Future Actions
- UltraTech Cement likely to evaluate options in addressing GST challenges.
- Uncertainty regarding broader implications for operations and financial performance in upcoming quarters.
Ongoing Situation
- The unfolding situation will determine how UltraTech Cement navigates legal complexities.