In line with the recommendations of the 53rd GST Council Meeting held recently, the Central Government has, in the Union Budget 2024 presented today (23 July 2024), proposed a new Section 74A in the Central Goods and Services Tax Act, 2017 for the purpose of ‘Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason’. Refer clause 134 of the Finance (No. 2) Bill, 2024 for the purpose.
The new provision, which will be applicable only in cases of demand pertaining to Financial Year 2024-25 onwards, provides for the same limitation period for issuing demand notices and orders in respect of demands, irrespective of whether the charges of fraud, wilful misstatement, or suppression of facts are invoked or not.
The new time-period for issuance of show cause notice will be 42 months 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 42 months from the date of erroneous refund.
However, it may be noted that the new provision provides for a higher penalty for cases involving fraud, wilful misstatement, or suppression of facts. Accordingly, penalty in cases involving fraud or wilful-misstatement or suppression of facts will be equal to the tax due. In other cases, it would be 10% of tax due or INR 10,000, whichever is higher.
Additionally, extra time will now be available for payment of tax after issuance of notice or order, along with payment of 15% or 25% penalty respectively, for conclusion of all proceedings in respect of the notice. The new provision provides for payment of tax along with reduced penalty within 60 days, while at present, such tax and penalty need to be paid within 30 days of the notice or order.
Further, it may be noted that proper officer must determine the amount of tax, interest and penalty due and issue an order within 12 months (extendable by 6 months) from the date of issuance of notice.