CGST Section 73 — Determination of tax not paid or short paid or erroneously refunded or input tax credit w

CGST Act · Determination of tax not paid or short paid or erroneously refunded or input tax credit w

CGST 45 Case Laws 1 Amendment 60 views

Quick Answer

Section 73 of the CGST Act, 2017 governs Determination of tax not paid or short paid or erroneously refunded or input tax credit w. It provides the core statutory basis, outlining the essential legal principles, rights, and liabilities under Indian indirect tax law. Section 73 GST: Determination of tax not paid or short paid or erroneously — eligibility, conditions, case laws and compliance impact under Indian tax law.

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Plain-English Explanation

Plain English Summary

Act Section 73 deals with situations where tax hasn't been paid correctly, has been refunded erroneously, or Input Tax Credit (ITC) has been wrongly availed or utilized, but importantly, not due to fraud or willful misstatement. This section lays out the procedures for tax authorities to determine the correct tax liability, demand payment, and impose penalties in such cases, pertaining to the period up to Financial Year 2023-24.

This section applies to any registered person under GST who has:

Not paid the correct amount of tax.
Paid less tax than required (short paid).
Received a tax refund in error.
Wrongly claimed or used Input Tax Credit (ITC).

Key Conditions and Exceptions:

No Fraud/Willful Misstatement: This section only applies when the error or omission isn't due to intentional fraud, deliberate misrepresentation, or concealment of facts with the intention to evade tax. If fraud is suspected, Section 74 (which carries significantly higher penalties and a longer limitation period) comes into play.
Show Cause Notice (SCN): The tax officer must issue a show cause notice to the taxpayer, explaining the reasons for the potential tax shortfall, erroneous refund, or incorrect ITC claim. This notice requires the taxpayer to explain why they shouldn't pay the demanded tax, interest (under Section 50), and penalty. The SCN must be issued at least three months before the time limit to issue the order.
Voluntary Payment Before Notice: If the taxpayer, before receiving the SCN or a statement containing details of the tax outstanding, realizes the error and pays the tax along with interest, the tax officer cannot issue the SCN for the amount already paid.
Payment After Notice: If the taxpayer pays the tax and interest within 30 days of receiving the SCN, no penalty will be levied, and the proceedings are considered closed.
Penalty: If the taxpayer doesn't pay within 30 days of the SCN and the tax officer determines tax is due, a penalty equivalent to 10% of the tax due or INR 10,000, whichever is higher, can be imposed.
Time Limit: The tax officer must issue the final order determining the tax liability within three years from the due date for furnishing the annual return for the relevant financial year, or within three years from the date of the erroneous refund.
Self-Assessed Tax: Penalty under sub-section (9) is applicable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

Practical Examples:

Short Payment of Tax: A restaurant owner inadvertently uses an incorrect tax rate on a particular menu item, resulting in a shortfall in the tax remitted to the government. If the mistake isn't intentional and they pay the difference with interest after receiving a notice under Section 73, they avoid a penalty.
Erroneous Refund: A company claims an ITC refund based on an export invoice. Later, it's discovered that the export didn't actually occur. Section 73 allows the authorities to recover the erroneously refunded amount, along with interest and potentially a penalty.
Wrong ITC Availment: A manufacturer mistakenly claims ITC on items used for personal consumption. Upon detection, Section 73 would be invoked to recover the wrongfully availed ITC, interest, and possibly a penalty.

Important Amendments
Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024 inserted sub section (1) and sub section (12). Sub section (1) pertains to the period up to Financial Year 2023-24. Sub section (12) states that the provisions of this section shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24.

* Section73.Determination of tax , pertaining to the period up to Financial Year 2023-24,¹ not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts.-

(1)Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon undersection 50and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2)The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

(3)Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.

(4)The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

(5)The person chargeable with tax may, before service of notice under subsection (1) or, as the case may be, the statement under sub-section

(3), pay the amount of tax along with interest payable thereon undersection 50on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6)The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

(7)Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

(8)Where any person chargeable with tax under sub-section (1) or sub-section

(3)pays the said tax along with interest payable undersection 50within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

(9)The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order. **(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

(11)Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

(12) The provisions of this section shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24.¹ ** Kindly also refer to Notification No. 13/2022 Central Tax dated 5 th Jul, 2022 (w.e.f. 01.03.2020) .

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