Notice sec 73(9) inward supplies sales transaction treatment

Here's a clear explanation based on your query regarding Section 73(9) of the CGST Act and how it applies to inward supplies (purchases via e-way bills) and their treatment for tax liability for a composition dealer:

✅ Context Overview:

You're referring to a composition scheme dealer who has received a notice under Section 73(9) of the CGST Act. The notice is based on e-way bill inward supplies (purchases), and the department has used these to estimate sales turnover (by adding Gross Profit) and determined that GST is payable.

📌 Key Provisions & Terms:

🔹 Section 73(9), CGST Act:

This section relates to determination of tax not paid or short paid due to reasons other than fraud or willful misstatement.

• If tax is unpaid or short-paid, a show cause notice (SCN) is issued.

• After due process, the officer can determine tax liability.

• Sub-section (9) refers to the order passed after the SCN process.

🔹 Composition Dealer (Section 10):

• Pays tax at a fixed rate (e.g., 1% of turnover for traders).

• Cannot collect tax on sales or claim ITC.

• Has to file simplified returns (CMP-08, GSTR-4).

• Must deal only in intra-state supplies.

🔍 Issue Explained:

🔸 What the Department Did:

• They noticed high inward supplies (purchases) as per e-way bills.

• Assumed the dealer must have made corresponding outward supplies (sales).

• Added a Gross Profit (GP) margin to estimate total sales turnover.

• Calculated tax liability based on that turnover.

• Issued notice under Section 73(9) for non-payment of tax.

🧾 Tax Treatment & Legal Position:

⚖️ What Should the Dealer Do?

1. Check Actual Sales Turnover:

• If your actual sales are lower than what the department has estimated, maintain documentary evidence(purchase/sales registers, cash book, etc.)

2. Reply to the Notice:

• File a reply to the SCN or appeal against the order under Section 107 (if order is already passed).

• Explain:

  • Reason for inward supplies.

  • If any goods are unsold or used for own consumption.

  • Provide books of accounts, stock register, purchase bills.

3. Maintain Proper Records:

• Composition dealers often skip proper documentation. But without it, department estimations (via e-way bill data) are considered final.

✅ Summary:

• Yes, GST becomes compulsorily payable if the department establishes undisclosed turnover.

• You can contest the estimated turnover by:

  • Producing books of accounts

  • Providing alternate calculation of GP

  • Proving goods were not sold (e.g., stock in hand, damaged goods, etc.)

Thanks for your clarification. Let's summarize and directly answer your query in a structured and practical way, based on your facts:

🔍 Query Summary:

You asked:

A registered composition scheme dealer has received a Section 73(9) notice from the GST department. The department used inward supply e-way bill data, added a Gross Profit (GP) margin to estimate total sales turnover, and calculated GST payable. Is this treatment correct? And is GST payment compulsory?

✅ Direct Answer:

🔹 Is the GST department's approach legal?

Yes, under Section 73(9), the GST department can estimate undeclared sales turnover if:

• There is a mismatch between purchases (inward e-way bills) and declared turnover.

• The dealer has not maintained proper books or records.

• The department believes there is suppression of sales.

So, using inward supplies and adding GP to estimate sales is a standard method used by officers in investigations.

🔹 Can the dealer be forced to pay GST on estimated turnover?

Yes — if the dealer fails to justify:

• Why the goods shown in e-way bills were not sold.

• Why the declared turnover is less than the department's estimate.

If the dealer cannot prove otherwise, tax liability under composition scheme (Sec 10) becomes compulsory, along with:

• Interest under Section 50

• Possibly penalty under Section 73(11)

⚖️ Legal Basis:

• Section 73(1) – Tax not paid/short paid can be assessed without fraud.

• Section 73(9) – Final order passed if dealer doesn't prove their case.

• Composition dealer is liable for tax on total turnover in the state, not just sales shown.

• Department is allowed to use alternative methods like GP addition when books are missing or unreliable.

📌 What the Dealer Should Do Now:

1. File a Reply to Notice / Appeal (if Order Passed):

• Clearly explain:

  • Purpose of inward supplies

  • Whether goods are still in stock

  • If sales were already declared in earlier returns

  • Why estimated GP margin is incorrect

2. Provide Supporting Documents:

• Purchase bills

• Stock register

• Sale invoices

• Cash book / bank book

• Return filings (CMP-08, GSTR-4)

3. Negotiate if Necessary:

• If actual sales are lower than estimated turnover, try to get the tax reduced via personal hearing under the SCN process.

✍️ Practical Example:

If the dealer fails to respond, the above tax will be payable compulsorily.

✅ Conclusion:

• Yes, tax becomes compulsory if dealer does not dispute or explain.

• The e-way bill-based estimation + GP is accepted in law when records are not reliable.

• To avoid liability, prove actual turnover with books of account and stock proof.