GST Notices From Central, State, and Investigative GST authorities can be Expected Till April, Says Experts

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Indian companies have found themselves under the scrutiny of tax authorities as a wave of goods and services tax (GST) notices has swept across the nation since September. This surge is anticipated to continue until the end of April, with central, state, and investigative GST authorities sending out a flurry of notices.

The heightened frequency of GST notices, expected to peak this month, is attributed to approaching deadlines for issuing notices and orders related to the assessment year 2018-19 (April to March), according to experts. January is slated to witness a significant uptick in notices as it marks the deadline for the assessment year 2018-19.

Media reports indicate that GST authorities issued demand notices totaling about 1.45 trillion rupees in December alone, primarily targeting discrepancies in annual returns and claims for input tax credit for the financial year 2017-18.

Experts suggested that the number of scrutiny notices may decline over time, with only those issued by investigative offices like the DGGI and other anti-evasion authorities remaining relevant under exceptional circumstances.

In recent months, state and central GST authorities have issued notices to some of India’s prominent public and private sector companies, including Life Insurance Corporation of India (LIC), NTPC Ltd, Asian Paints Ltd, Vedanta Ltd, Nestle India Ltd, Grasim Industries Ltd, Maruti Suzuki India Ltd, ICICI Bank, Hindustan Unilever Ltd, UltraTech Cement Ltd, and Bharti Airtel Ltd.

The issuance of scrutiny notices is automated, flagging cases with discrepancies in details provided by companies in their GSTR form 1 and 3B. The reasons for issuing these notices include discrepancies in annual compliances, reversals of input tax credit, and the reconciliation of form GSTR 2A with form GSTR 3B.

The GST regime, implemented on July 1, 2017, encountered challenges in its initial years, resulting in discrepancies in return filings due to a lack of clarity. While yearly assessment is not mandatory under GST, scrutiny notices are being issued to address discrepancies from the initial years.

Notices have been notably served to insurance companies and online gaming companies. Insurance companies face scrutiny for availing input tax credit on marketing expenses, and online gaming companies received notices following the GST Council’s clarification in July, levying a 28% tax on the full face value from October 1.

Read More: 28% GST on Online Gaming w.e.f Oct 1st: Govt notifies amended CGST Rules

As of October 1, online gaming platforms, betting, and gambling now attract a uniform 28% tax on the full value of bets placed, resolving previous ambiguity. The finance ministry reported issuing GST-related notices worth 1.12 trillion rupees to online gaming companies between April 2022 and October 2023.

Read More: Online Gaming Companies Faces Rs. 1 Lakh Crore GST Show Cause Notices: Reports

Experts emphasise that while the surge in GST notices is not primarily aimed at increasing government revenues, the sheer volume of notices for the assessment years 2017-18 and 2018-19 may result in significant recoveries. However, the recovery percentage is expected to decrease in subsequent years, as entities and authorities mature, and the system becomes more formalised.

While the aggregate amount of tax notices appears substantial, the actual impact on government revenues remains uncertain, given the automated nature of the processes generating these notices. The government may need to wait until April, when the notice-sending period concludes, to gauge the extent of recovered alleged evaded money.

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