India's corporate sector is currently grappling with a flood of show-cause notices regarding Goods and Services Tax (GST) payments, prompting a call for increased scrutiny and a shift towards risk-based assessments by state authorities. Sources within the Union Finance Ministry reveal that while the surge in notices may appear alarming, it largely stems from a clustering effect before due dates, rather than a sustained issue. However, concerns have been raised regarding the disparity in the number of notices issued by different states, with some exhibiting notably higher rates.
A senior official highlighted the historical approach of certain states under the erstwhile value-added tax (VAT) regime, where comprehensive assessment of every return was routine. In contrast, under the GST framework, only 1% of returns are assessed by Central GST authorities, with the bulk falling under the jurisdiction of state authorities. The Finance Ministry's analysis aims to identify states with disproportionate notice issuance relative to their taxpayer base.
Emphasizing the need for a refined approach, sources stress the importance of transitioning to risk-based assessments to target tax evaders more effectively. The objective is to streamline the process and curtail the issuance of unnecessary notices. This sentiment was echoed by Central Board of Indirect Taxes and Customs Chairman, Sanjay Kumar Agarwal, who cautioned against indiscriminate notice issuance, warning of potential future litigation.
In response to the mounting pressure, the timeline for issuing show-cause notices for GST liabilities for fiscal years 2018-19 and 2019-20 has been extended. The new deadlines provide additional time for thorough consideration of facts and documentation submitted by taxpayers, aiming to mitigate unwarranted legal disputes. The extended deadlines for issuing notices for fiscal years 2018-19 and 2019-20 are January 31, 2024, and May 31, 2024, respectively.
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