Authorities responsible for Goods and Services Tax (GST) enforcement across the nation have dispatched numerous notifications alleging tax payment shortfalls for the fiscal year 2018 (FY18). The deadline for issuing these notifications is September 30, and taxpayers are granted a 30-day window to respond to these automated notifications.
These notifications primarily revolve around discrepancies in GST output and liability, claims related to input tax credit, invalid tax credit requests, and the reversal of credit for exempt supplies, according to an individual with knowledge of the matter.
Government officials have confirmed that both central and state GST authorities have issued these notifications over the past two weeks.
Tax experts predict that this will lead to a surge in legal disputes over the next three months, impacting the cash flow of businesses, as they will be obligated to provide a 10% deposit of the total liability when filing an appeal. A tax expert emphasized, "Considering that the adjudication deadline for these show cause notifications is December 31, we anticipate a significant increase in litigation in the coming three months. Furthermore, given that a 10% deposit is required for appeals, a substantial amount of capital will be withdrawn from these industries' cash flows."
It's worth noting that tax authorities can continue to issue notifications beyond September 30, but they must substantiate claims of 'tax evasion' or 'fraud' on the part of the taxpayer.
Another expert pointed out that numerous notifications appear to have been issued without a thorough analysis of facts and figures. "Many of these notifications may ultimately be retracted, although they will result in unnecessary disputes and paperwork for the industry. In the future, authorities may consider better planning to minimize such occurrences," he suggested.
The expert further identified several common areas of dispute, including underpayment of tax on related party transactions, incorrect claims of input tax credit, issues related to exports (including refunds granted), and discrepancies in credit utilization and distribution among different states.
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