Obligations of GST Authorities: Timelines, Fair Process & Transparency Basics

Goods and Services Tax (GST) law places duties not only on taxpayers but also on GST authorities. These duties control how officers conduct audits, issue notices, pass orders, and recover tax. When these duties are ignored, proceedings often fail before appellate authorities and courts. Many GST demands collapse not on tax merits, but on procedural lapses.

This article explains the obligations of GST authorities with specific timelines, procedural steps, and documents and explains what they mean in practice.

Acting Only Within Legal Powers

Under Section 5 of the CGST Act, GST officers can exercise only those powers that are assigned to them by law. Every audit, notice, summons, order, or recovery action must trace back to a statutory provision.

In practice, this means an officer cannot:

• demand documents not required under the Act or Rules,
• insist on payment without passing an order, or
• adopt procedures not prescribed by law.

Any action without legal backing has no legal force and is open to challenge.

Respecting Audit Timelines and Procedure

Audit under Section 65

GST audit must follow a fixed process and timeline.

Authorities must:

• issue audit notice in FORM GST ADT-01,
• give at least 15 working days’ prior notice before starting audit, and
• complete audit within 3 months from the date of commencement.

The audit period can be extended once by a further 6 months, but only with recorded reasons.

After audit completion, authorities must:

• communicate findings in FORM GST ADT-02.

In practice, audit findings must be shared before any demand is raised. Audit cannot directly convert into adjudication without following these steps.

Issuing Show Cause Notices Within Limitation

Adjudication Timelines

For non-fraud cases under Section 73:

• show cause notice must be issued within the prescribed limitation, and
• final order must be passed within 3 years from the due date of annual return.

For fraud cases under Section 74:

• limitation is longer, but
• final order must be passed within 5 years from the due date of annual return.

Orders passed beyond these limits are time-barred and legally unsustainable.

Correct Classification Between Fraud and Non-Fraud

Authorities must choose the correct section.

• Section 73 applies where there is no fraud.
• Section 74 applies only where fraud, wilful misstatement, or suppression with intent is proved.

Audit guidance clarifies that:

• accounting mistakes,
• clerical errors, and
• interpretation disputes

do not amount to fraud. Wrong classification exposes the proceedings to challenge because it affects limitation and penalty.

Giving Adequate Time to Respond

Under Section 75(4), authorities must grant opportunity of hearing where an adverse decision is proposed.

This means:

• reasonable time must be given to file a reply,
• taxpayers must be allowed time to collect records and prepare reconciliations.

Very short deadlines defeat fairness. Courts frequently set aside orders passed without meaningful opportunity.

Granting Personal Hearing

Personal hearing is mandatory when:

• the taxpayer requests it in writing, or
• the authority proposes an adverse order.

Authorities must:

• issue hearing notice,
• allow oral submissions, and
• consider submissions in the final order.

Orders passed without granting requested hearing are routinely quashed for violation of natural justice.

Staying Within the Scope of the Show Cause Notice

Under Section 75(7):

• tax, interest, or penalty cannot be confirmed on grounds not mentioned in the show cause notice.

In practice:

• the notice defines the case,
• the order cannot introduce new allegations.

If authorities wish to rely on new grounds, they must issue a fresh notice. Orders travelling beyond the notice fail judicial scrutiny.

Passing Reasoned and Speaking Orders

Under Section 75(6), orders must:

• set out relevant facts,
• deal with the taxpayer’s reply, and
• explain the basis of the decision.

In practice:

• mere repetition of allegations is not enough,
• reasons must be clear and specific.

Non-speaking orders are treated as arbitrary and unsustainable.

Disclosing Material Relied Upon

Authorities must disclose:

• portal data,
• third-party information,
• internal reports, and
• documents relied upon for forming adverse view.

Taxpayers cannot defend against undisclosed material. Use of hidden data violates fairness and weakens proceedings.

Transparent Computation of Demand

Under Section 75(1), tax must be properly determined before recovery.

Authorities must clearly show:

• tax calculation,
• interest computation, and
• penalty basis.

Lump-sum or unexplained figures create confusion and litigation.

Using Summons With Restraint

Under Section 70, the summons power exists for investigation.

Authorities must not:

• issue routine summons during audit,
• repeatedly summon officers without cause.

Audit guidance warns that misuse of summons disrupts business and attracts judicial criticism.

Proper Service of Orders and Notices

Under Section 169, orders and notices must be served through prescribed modes such as:

• GST portal,
• registered email, or
• physical service.

Improper service affects enforceability and appeal rights.

Facilitating Appeal Rights

Under Section 107, taxpayers have 3 months from communication of order to file appeal.

Authorities must ensure:

• orders are properly communicated, and
• appeal remedy is clear.

Confusion on appeal rights harms access to justice.

Proportionate Penalty and Lawful Recovery

Under Section 126, penalty is not automatic and must be proportionate.

Under Section 79, recovery can start only:

• after passing valid order, and
• after expiry of payment period.

Coercive recovery during audit or before adjudication violates law.

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