GST Audit under ADT -1 and matters thereof

Gst Audit under section 65 – we were issued a memo ADT-01 for the Audit for the year 2018-19. We appeared before the ACCT (Audit), put our cae in writing. - we transferred fixed assets to a firm under an agreement for transfer of business as on concern. The Audit authority is taking view that for transferring fixed assets to transfree concern a tax invoice should have been raised as this is supply. Taking this technicality the deptt. Issued ADT – 02 and assessed CGST and SGST on entire block of fixed assets and demanded we defray liability. We can deposit 10% of demand and admitted tax and go for appeal. But we have decided 1) wait for the deptt to issue SCN under section 73 2) then we shall go for installments and conclude the matter for good. Is our plan Ok ? . we would be obliged to get your help on No.01 How long the deptt will take recourse to issue SCN under section 73 No.02 will this attract any penalty ? and No.3 is this kind of dues are eligible for payment under installment Your help will be appreciated

Hi M. Amin,

Your plan to deal with the GST audit and subsequent demand under ADT-1 and ADT-2 seems generally reasonable, but let me address your specific queries to help you navigate better:

1) Timeline for issuance of SCN under Section 73

The department has 3 years from the relevant date (usually the due date of filing return or date of filing return whichever is later) to issue a SCN for non-payment or short payment of tax (except in cases of fraud etc. where it is 5 years).
Since this is for FY 2018-19, the time limit may be nearing or may have extended if some period of stay or delay has occurred.
Usually, after the audit and ADT-2, the department takes few months to prepare and issue the SCN but no fixed timeline.

2) Penalty applicability

If the SCN under Section 73 results in demand of tax, the department may also impose interest and penalty.
Penalty can be up to 10% or 100% of tax amount depending on whether the default is due to negligence or fraud.
However, if you admit the tax and cooperate, the penalty is often reduced or waived in many cases.
Timely depositing 10% as you mentioned is a good step.

3) Installment facility for payment of demand

Under Section 80 of CGST Act, you may apply for payment of tax dues in installments.
The department usually allows installments for demands arising from audit, assessment, or adjudication.
However, approval is at the discretion of the jurisdictional officer and based on your justification.
Ensure you apply for installment facility proactively once the SCN/demand is finalized.

Additional suggestions:

Maintain thorough documentation of your transfer agreement and tax position.
Consider legal opinion on whether transfer of fixed assets to a firm under business transfer agreement is taxable supply.
Stay compliant and responsive to avoid harsher actions.