Responding to a GST notice issued under Section 73 or Section 74 of the CGST Act requires careful planning and a detailed approach. These notices often arise due to discrepancies in GST returns, Input Tax Credit (ITC) mismatches, or allegations of fraud or non-compliance. This guide provides an actionable framework to handle these notices effectively.

Understanding GST Notices Under Sections 73 and 74

• Section 73: Issued for discrepancies in GST filings where no fraud or willful misstatement is alleged.

• Section 74: Pertains to cases involving fraud, willful misstatement, or suppression of facts.

Notices under these sections are typically issued in Form DRC-01 by tax officers. To respond effectively, taxpayers should be familiar with the types of assessments under the CGST Act:

1. Self-Assessment (Section 59): Taxpayers assess their own liability.

2. Provisional Assessment (Section 60): Used when clarification on tax liability is required.

3. Scrutiny of Returns (Section 61): Officers verify discrepancies in returns, often preceding actions under Sections 73 or 74. Notices under Section 61 are issued in Form GST ASMT-10.

4. Assessment for Non-Filers (Section 62): Issued when returns are not filed.

5. Assessment for Unregistered Persons (Section 63): For entities liable to register but failing to do so.

6. Summary Assessment (Section 64): Conducted in special cases to protect revenue.

Scrutiny under Section 61 is particularly significant, as unresolved issues can escalate to a Show Cause Notice (SCN) under Sections 73 or 74.

Key Steps for Responding to GST Notices

1. Review the Show Cause Notice (SCN)

• Examine the notice thoroughly to understand the allegations, discrepancies, and demands.

• Confirm whether the notice includes a Document Identification Number (DIN) as mandated by CBIC Circulars No. 122/2019 and 128/2019. Notices without a valid DIN may be legally invalid.

2. Verify Procedural Compliance

• Check whether Form GST ASMT-10 under Section 61 was issued before the SCN. SCNs issued without following due process can be challenged.

• Ensure that the SCN is issued by the proper officer with jurisdiction over your GSTIN.

3. Address Discrepancies in Detail

• Prepare a comprehensive response to the SCN, addressing each discrepancy with supporting evidence.

• For ITC mismatches, request a detailed, party-wise breakdown of disallowed ITC along with the reasons for denial.

• If there is an undisputed tax liability, pay it promptly with applicable interest to avoid penalties under Section 73(8).

4. Reference Relevant Judgments

• In cases involving retrospective ITC denial, refer to the landmark decision in Gargo Traders vs. Joint Commissioner by the Calcutta High Court, which ruled against ITC denial due to supplier deregistration.

5. Seek Professional Assistance

• For complex cases or legal ambiguities, consult a qualified GST professional to ensure compliance with procedural and legal requirements.

Critical Observations and Challenges

1. Time Limits for SCNs:
   Notifications extending the time limit for issuing orders under Section 73 have been challenged in courts. Ensure that the SCN is issued within legally valid timelines.

2. Jurisdictional Issues:
   SCNs are often issued by State Tax Officers. Verify jurisdictional compliance to avoid procedural lapses.

Best Practices for Handling GST Notices

• Avoid rushed or generic responses. Take time to analyze and address all points raised in the SCN.

• Maintain detailed documentation of all communications with tax authorities.

• Promptly pay undisputed tax amounts to reduce liabilities and avoid penalties.

• Stay updated on CBIC clarifications, such as Circular No. 183/15/2022, which provides guidance on resolving ITC mismatches.

Conclusion

Responding to GST notices under Sections 73 and 74 requires a methodical approach, legal knowledge, and adherence to procedural norms. By understanding the legal framework, addressing discrepancies effectively, and seeking professional advice when needed, taxpayers can resolve GST disputes efficiently while protecting their interests.