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Determination of tax not paid/short paid/erroneously refunded/ITC wrongly availed/utilized for any reason other than fraud or any willful misstatement or suppression of facts

Section 73 is applicable under the cases other than fraud, or wilful misstatement or suppression of facts with an intention to evade payment of tax.

Sec-73 CGST Act 2017 read with CGST Rules -142

  • Proper officer shall serve notice along with summary in FORM GST DRC-01 on the person chargeable with tax  -
  1. Which has not been so paid or
  2. Short paid or
  3. Refund has erroneously been made, or
  4. ITC wrongly availed or utilized

Requiring him to show cause as to why he should not pay the amount specified in notice along with interest payable u/s 50 and a penalty leviable under the provisions of this Act/rules.

  • Proper officer shall issue the notice at least 3 months prior to the time limit of 3 years for issuance of order.
  • Where a notice has been issued for any period, proper officer may serve a statement in Form GST DRC-02, containing the details of  –
  1. Tax not paid or 
  2. Short paid or
  3. Erroneously refunded or
  4. Input tax credit wrongly availed or utilized for such periods.
  • Service of such statement shall be deemed to be service of notice on such person.
  • Before service of notice or statement, if the person pay the tax amount along with interest payable thereon u/s 50, on the basis of his own ascertainment of such tax or the tax as ascertained by proper officer and will inform the proper officer in writing of such payment in Form GST DRC-03.
  • On receipt of such information, proper officer shall not serve any notice or statement, in respect of the tax so paid or any penalty payable and issue an acknowledgement, accepting the payment made, in FORM GST DRC–04.
  • Where proper officer is of the opinion that the amount paid u/s-73(5) falls short of amount actually payable, he shall proceed to issue the notice as provided for in Section-73(1) in respect of such amount which falls short of the amount actually payable.
  • Where the person pay the said tax along with interest payable within 30 days of issue of show cause notice and intimate the proper officer of such payment in FORM GST DRC-03, no penalty shall be payable and all proceedings regarding the said notice shall be deemed to be concluded.
  • Proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice and subsequently no penalty shall be payable.
  • Proper officer shall, after considering the representation in FORM GST DRC-06 , if any, made by person, determine the amount of tax, interest and a penalty equivalent to 10% of tax or Rs.10,000/-, whichever is higher, due from such person and issue an order.
  • A summary of such order shall be uploaded electronically in FORM GST DRC- 07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.
  • Order shall be treated as the notice for recovery.
  • Any rectification of the order, in accordance with the provisions of section 161, shall be made by the proper officer in FORM GST DRC-08.
  • Proper officer shall issue the order within 3 years from the due date for furnishing of annual return for the financial year to which the tax not paid/short paid or ITC wrongly availed/utilized relates to or within 3 years from the date of erroneous refund.
  • Penalty u/s-73(9) shall be payable, where any amount of self-assessed tax or any amount collected as tax has not been paid within 30 days from the due date of payment of such tax.

Determination of tax not paid/short paid or erroneously refunded or ITC wrongly availed/utilized by reason of fraud or any willful misstatement or suppression of facts.

Sec-74 CGST Act 2017 read with CGST Rules -142

Section -74 covers determination of tax in cases of fraud, or any kind of wilful mis-statement or suppression of facts to evade payment of tax.

  • Proper officer shall serve notice along with summary in FORM GST DRC-01 on the person chargeable with tax –
  1. which has not been so paid or
  2. short paid or
  3. refund has erroneously been made,
  4. or ITC wrongly availed/utilized

By reason of fraud, or any wilful-misstatement or suppression of facts to evade tax,

Requiring him to show cause as to why he should not pay the amount specified in notice along with interest payable thereon u/s 50 and a penalty leviable under the provisions of this Act/rules.

  • Proper officer shall issue the notice at least 6 months prior to the time limit of 5 years for issuance of order.
  • Where a notice has been issued for any period, proper officer may serve a statement in FORM GST DRC-02, containing the details of –
  1. Tax not paid
  2. Short paid or
  3. Erroneously refunded or
  4. ITC wrongly availed/utilized
  • Service of statement shall be deemed to be service of notice, except the ground of fraud, or any wilful-misstatement or suppression of facts to evade tax, for periods other than those covered under section 74(1) are the same as are mentioned in the earlier notice.
  • Before service of notice, person chargeable with tax may pay the tax amount along with interest payable u/s-50 and a penalty equivalent to 15% of such tax on the basis of his own ascertainment of such tax or tax as ascertained by proper officer and inform the proper officer in writing of such payment in FORM GST DRC-03.
  • Proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC–04.
  • Proper officer, on receipt of such information, shall not serve any notice in respect of the tax so paid or any penalty payable.
  • If Proper officer is of the opinion that the amount paid u/s-74(5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in section 74(1) in respect of such amount which falls short of the amount actually payable.
  • If any person chargeable with tax, pays the said tax along with interest payable u/s-50 and a penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.
  • Proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.
  • Proper officer shall, after considering the representation in FORM GST DRC-06, if any, made by person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order in FORM GST DRC-07.
  • Proper officer shall issue the order u/s-74(9) within 5 years from the due date for furnishing of annual return for the financial year to which the tax not paid/short paid or ITC wrongly availed/utilised relates to or within 5 years from the date of erroneous refund.
  • Order issued u/s-74(9) shall be treated as the notice for recovery.
  • Any rectification of the order, in accordance with the provisions of section 161, shall be made by the proper officer in FORM GST DRC-08.
  • Where any person served with an order issued u/s-74(9) pays the tax along with interest payable thereon u/s-50 and a penalty equivalent to 50% of such tax within 30 days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.

Difference between Section -73 & 74

S.No.

Particular

Section-73

Section -74

1

Notice

In case of Tax not paid/short paid/erroneously refunded/ITC wrongly availed or utilized, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax

In case of Tax not paid/short paid/erroneously refunded/ITC wrongly availed or utilized, by reason of fraud or any wilful-misstatement or suppression of facts to evade tax

2

Time limit for issuance of Notice

At least 3 months prior to the time limit of      3 years for issuance of order

At least 6 months prior to the time limit of    5 years for issuance of order

3

Statement

serve a statement in Form GST DRC-02 along with detail, for such period other than those covered under notice

serve a statement in Form GST DRC-02 along with detail, for such period other than those covered under notice

4

Payment of tax before service of Notice

Will pay the tax amount along with interest payable

Will pay the tax amount along with interest payable and penalty equivalent to 15% of such tax

5

Information of payment

Will inform the proper officer in writing of such payment in FORM GST DRC-03

Will inform the proper officer in writing of such payment in FORM GST DRC-03

6

Acknowledgement

Proper officer shall issue an acknowledgement, accepting the payment made by said person in FORM GST DRC–04

Proper officer shall issue an acknowledgement, accepting the payment made by said person in FORM GST DRC–04

7

Short payment

Proper officer shall issue the notice as provided for in section 73(1) in respect of such amount which falls short of the amount actually payable

Proper officer shall issue the notice as provided for in section 74(1) in respect of such amount which falls short of the amount actually payable

8

Penalty after issuance of notice

Where the person pay the said tax along with interest payable within 30 days of issue of show cause notice and intimate the proper officer of such payment in FORM GST DRC-03, no penalty shall be payable, all proceedings in respect of the said notice shall be deemed to be concluded.

If any person pay the tax along with interest payable u/s-50 and a penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.

9

Order for concluding the proceeding

Proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.

Proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.

10

Amount of Penalty after consideration of representation

Proper officer shall, after considering the representation in FORM GST DRC-06 , if any, made by person, determine the amount of tax, interest and a penalty equivalent to 10% of tax or Rs.10,000/-, whichever is higher, due from such person and issue an order

Proper officer shall, after considering the representation in FORM GST DRC-06, Where any person served with an order issued pays the tax along with interest payable thereon u/s-50 and a penalty equivalent to 50% of such tax within 30 days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.

11

Summary of order

A summary of such order shall be uploaded electronically in FORM GST DRC- 07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax

Proper officer shall issue an order in FORM GST DRC-07

12

Rectification of order

Any rectification of the order, in accordance with the provisions of section 161, shall be made by proper officer in FORM GST DRC-08

Any rectification of the order, in accordance with the provisions of section 161, shall be made by proper officer in FORM GST DRC-08

13

Time limit for issuance of Order

Proper officer shall issue the order within 3 years from the due date for furnishing of annual return for the financial year to which the tax not paid/short paid or ITC wrongly availed/utilized relates to or within 3 years from the date of erroneous refund

 Proper officer shall issue the order within 5 years from the due date for furnishing of annual return for F.Y. to which the tax not paid/short paid or ITC wrongly availed/utilised relates to or within 5 years from the date of erroneous refund.


Monetary limit for issuance of show cause notices and passing of orders under sections 73 and 74 of CGST Act

As per Circular No. 31CGST Dt. 9th Feb 2018- Board hereby assigns the officers mentioned in Column (2) of the Table below, the functions as the proper officers in relation to issue of show cause notices and orders under sections 73 and 74 of the CGST Act and section 20 of the IGST Act (read with sections 73 & 74 of CGST Act), up to the monetary limits as mentioned in columns (3), (4) and (5) respectively of the Table below:-

Table


Sl. No.

Officer of Central Tax

Monetary limit of amount of central tax (including cess) for issuance of show cause notices and passing of orders u/s 73 and 74 of CGST Act

Monetary limit of amount of integrated tax (including cess) for issuance of show cause notices and passing of orders u/s 73 and 74 of CGST Act made applicable to matters in relation to integrated tax vide section 20 of IGST Act

Monetary limit of  amount of central tax and integrated tax (including cess) for issuance of show cause notices and passing of orders u/s 73 and 74 of CGST Act made applicable to integrated tax vide section 20 of IGST Act

(1)

(2)

(3)

(4)

(5)

1.

Superintendent of Central Tax

Not exceeding Rupees 10 lakhs

Not exceeding Rupees 20 lakhs

Not exceeding Rupees 20 lakhs

2.

Deputy          or Assistant Commissioner of Central Tax

Above Rupees 10 lakhs and not exceeding Rupees 1 crore

Above Rupees 20 lakhs and not exceeding Rupees 2 crores

Above Rupees 20 lakhs and not exceeding Rupees 2 crores

3.

Additional    or Joint Commissioner of Central Tax

Above Rupees 1 crore without any limit

Above Rupees 2 crores without any limit

Above Rupees 2 crores without any limit


General provisions relating to determination of tax

Section-75 CGST Act 2017

Where the service of notice or issuance of order is stayed by an order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in section 73(2) & (10) or section 74(2) & (10) i.e.3 years or 5 years.

Proper officer shall determine the tax payable by person, deeming as notice were issued u/s- 73(1), where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under section-74(1) is –

  1. Not sustainable for the reason that the charges of fraud or
  2. Any wilful-misstatement or
  3. Suppression of facts to evade tax has not been established against the person to whom the notice was issued.
  • Where any order is required to be issued in pursuance of the direction of Appellate Authority or Appellate Tribunal or a court, such order shall be issued within 2 years from the date of communication of the said direction.
  • An opportunity of hearing shall be granted, where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.
  • If sufficient cause is shown by the person chargeable with tax, Proper officer shall grant time to the said person and adjourn the hearing for reasons to be recorded in writing:
  • No such adjournment shall be granted for more than 3 times to a person during the proceedings.
  • Proper officer shall set out the relevant facts and the basis of his decision, in his order,
  • Amount of tax, interest and penalty shall not be in excess of the amount specified in notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.
  • Where Appellate Authority or Appellate Tribunal or court modifies the tax amount determined by proper officer, the amount of interest and penalty shall stand modified accordingly.
  • It is important to note that the interest on tax which short paid or not paid shall be payable, whether specified or not in the order
  • Adjudication proceedings shall be deemed to be concluded, if order is not issued within 3 years or within 5 years as the case may be.
  • An issue, on which a Appellate authority/Tribunal/High Court has given its decision which is prejudicial to the interest of the revenue and an appeal to Appellate Tribunal/High Court/Supreme Court against such decision is pending, then the period spent between the two dates of decision shall be excluded in computing the period of 3 years or 5 years respectively, for issue of order.
  • Where any amount of self-assessed tax remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered u/s 79.
  • Where any penalty is imposed u/s-73 or 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.

Tax collected but not paid to Government.

Section-76 CGST Act 2017-

  1. Every person, who has collected any tax amount from any other person and has not paid the said amount to Government, shall pay the said amount to the Government, irrespective of whether the supplies are taxable or not.
  2. In case of non payment of tax amount, proper officer may serve on the person liable to pay such amount, a notice along with summary in FORM GST DRC-01, requiring him to show cause as to why the said amount as specified in the notice, should not be paid by him to Government and why a penalty equivalent to the amount specified in notice should not be imposed on him.
  3. After considering the representation, if any, proper officer shall determine the amount due from such person and thereupon such person shall pay the amount so determined.
  4. Person shall pay interest, in addition to tax payable, at the rate specified u/s 50 ,from the date such amount was collected by him to the date such amount is paid to the Government.
  5. Where a request is received in writing from the person to whom the notice was issued to show cause, an opportunity of hearing shall be granted.
  6. Proper officer shall issue an order within 1 year from the date of issue of the notice.
  7. Where the issuance of order is stayed by an order of the Court/Appellate Tribunal, the period of such stay shall be excluded in computing the period of 1year.
  8. Proper officer, in his order, shall set out the relevant facts and the basis of his decision.
  9. Amount paid to Government u/s-76(1) or 76(3) shall be adjusted against the tax payable, if any, by person in relation to the supplies referred to in sub-section (1).
  10. Where any surplus is left after the adjustment u/s-76(9), the amount of such surplus shall either be credited to the Fund or refunded to the person, who has borne the incidence of such amount.
  11. Person who has borne the incidence of the amount, may apply for the refund of the same in accordance with the provisions of section 54.

Tax wrongfully collected and paid to Central Government or State Government

Section-77 CGST Act 2017

(1) A registered person, who has considered a transaction as an intra-State supply and paid the tax accordingly but which is subsequently held to be an inter-State supply, such tax amount shall be refunded.

2) A registered person, who has considered a transaction as an inter-State supply and paid accordingly but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of Central tax and State tax/ Union territory tax payable.

Related form


S.No.

Form No.

Related to

1

FORM GST DRC-01

Summary, Where notice is issued u/s 73(1),74(1) or 76(2)

2

FORM GST DRC-02

Summary, where statement is issued u/s 73(3) or 74(3)

3

FORM GST DRC-03

Intimation to Proper officer of payment as done before service of Notice

4

FORM GST DRC–04

Acknowledgement of payment

5

FORM GST DRC–05

Order concluding the proceeding the notice

6

FORM GST DRC–06

Representation u/s 73(9), 74(9) or76(3)

7

FORM GST DRC–07

Summary of order uploaded

8

FORM GST DRC–08

Rectification of order

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