The GST Council has recommended a series of measures to simplify dispute resolution, reduce avoidable litigation and ease the financial burden on taxpayers. The proposed reforms cover the issuance of show cause notices, adjudication and appeal orders, penalties for non-compliance, and pre-deposits required for filing appeals under the GST law.
Among the key recommendations are a minimum threshold of ₹10,000 for issuing show cause notices, a reduction in the maximum general penalty under Section 125 of the Central Goods and Services Tax (CGST) Act, 2017, and a proposed 5% penalty in specified non-fraud cases where tax and interest are paid within the prescribed period.
The Council has also recommended capping appeal pre-deposits at ₹40 crore in cases where an order involves only a penalty and no tax demand. These proposals are intended to reduce compliance costs, improve consistency in tax administration and make dispute resolution more accessible to taxpayers.
Official copy of the Reforms related to dispute resolution is as follows
The GST Council recommended issuance of a circular to provide comprehensive guidelines to the tax officers to streamline process of issuance of demand notices, adjudication orders and appeal orders, inter alia , covering issues relating to, quality of demand notices and adjudication/appeal orders, timely issuance such notices/orders, proper invocation of grounds of fraud, wilful misstatement or suppression of facts only based on merits in each case, adherence to the principles of natural justice including the conduct of personal hearings.
Further, to reduce compliance burden and litigation, the Council further recommended amendment in section 73, section 74 and section 74A of the CGST Act, 2017, to inter-alia provide:
- minimum threshold of Rs. 10,000/- (CGST + SGST + IGST + Cess) for issuance of show cause notices. Thus, no notices will be issued if the tax amount involved is less than Rs. 10,000/-. The Council also recommended for a statutory provision to provide that any notices and appeals, involving an amount less than Rs. 10,000, and pending on date of the provision for the said minimum threshold coming into force, will be decided as if the said threshold of Rs. 10,000/- had been in force when the notice was issued.
- for deeming penalty amount as ‘charge’, where full tax amount is voluntarily paid, alongwith interest and penalty, within the specified time limit.
- for a reduced penalty of 5% in non-fraud cases, where tax along with interest is discharged within 30 days (under section 73) or 60 days (under section 74A) of the adjudication order.
- removal of condition of minimum penalty of Rs. 10,000/-, in non-fraud cases.
The GST Council recommended reducing the maximum general penalty under section 125 of the CGST Act, 2017 from Rs. 25,000/- to Rs. 10,000/-.
The Council recommended amendment in the provisos to section 107(6) and section 112(8) of the CGST Act,2017 to provide an upper limit of ₹40 crore (Rs. 20 crore under CGST and Rs. 20 crore under SGST/UTGST) on the pre-deposit payable for filing an appeal before the Appellate Authority or the Appellate Tribunal, respectively, in cases where the order involves only penalty and no demand of tax. This will ease the financial burden on taxpayers and make it easier for them to access appellate remedies in such cases.
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