The Goods and Services Tax (GST) authorities across the country have sent out several thousands of notices claiming shortfalls in payment of tax for FY18. The deadline to issue notices is September 30 and the taxpayers have been given 30 days to respond to these automated notices.
These notices largely pertain to mismatches in GST output and liability, input tax credit, ineligible tax credit claims, and reversal of credit in case of exempt supplies, said a person privy to the development.
Both central and state GST authorities have sent these notices over the last fortnight, a government official said.
Tax experts said this would lead to an increase in litigation over the next three months while hitting cash flows of companies as they would be required to furnish 10% of the total liability as a deposit for filing an appeal.
“Given that the adjudication deadline for these show cause notices is December 31, we are going to see a huge litigation glut in the next three months,” said Bipin Sapra, partner, tax and regulatory services, indirect tax, EY. “Also, given that a deposit of 10% is necessary for appeal, a lot of money is going to be taken out of the cash flows of these industries.”
Tax authorities can send notices even after September 30, but they would need to prove a case of ‘tax evasion’ or ‘fraud’ on the part of the taxpayer.
Pratik Jain, partner, PwC, observed that several notices appear to have been issued without proper analysis of facts and figures.
“Many of them should be dropped later, though it will lead to avoidable disputes and paperwork for the industry. Going forward, the authorities may want to plan ahead so that these instances can be minimised,” Jain added.
“Short payment of tax on related party transactions, incorrect claims of input tax credit, export positions (including refunds granted), and state-wise credit availment and distribution are some of the common areas of disputes,” said Mahesh Jaising, Partner and National Indirect Tax Leader, Deloitte.
