Section 73 of the Central Goods and Services Tax (CGST)

Section 73 of the Central Goods and Services Tax (CGST) Act, 2017, pertains to the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or willful misstatement or suppression of facts. This section lays out the procedures and timelines for the adjudication process and the actions that can be taken by tax authorities in such cases.

 

  Key Provisions of Section 73 of the CGST Act

 

 # 1. Scope

Section 73 applies when:

- Tax has not been paid.

- Tax has been short-paid.

- Refunds have been erroneously granted.

- Input tax credit (ITC) has been wrongly availed or utilized.

The above instances should be for reasons other than fraud, willful misstatement, or suppression of facts. If fraud or willful misstatement is involved, Section 74 would be applicable instead.

 

 # 2. Show Cause Notice (SCN)

- **Issuance of Notice**: The tax officer is required to issue a show cause notice (SCN) to the taxpayer, indicating the amount of tax unpaid or short paid or erroneously refunded or ITC wrongly availed/utilized.

- **Time Limit for SCN**: The SCN must be issued at least three months before the time limit for adjudication. This means the notice should be issued within 33 months from the due date for filing the annual return for the financial year to which the demand pertains.

 

 # 3. Determination of Tax

- **Adjudication Order**: After considering the taxpayer’s response to the SCN, if any, the tax officer will issue an adjudication order specifying the amount of tax due.

- **Time Limit for Adjudication**: The order must be issued within three years from the due date for filing the annual return for the financial year to which the tax relates. For example, for the financial year 2021-22, if the annual return filing due date is 31st December 2022, the adjudication order must be issued by 31st December 2025.

 

 # 4. Voluntary Payment Before Issuance of SCN

- **Payment with Interest**: If the taxpayer makes a voluntary payment of the unpaid tax along with interest before the issuance of the SCN, no penalty is levied, and proceedings are deemed to be concluded.

- **Intimation of Payment**: The taxpayer must inform the tax authorities in writing about the payment made.

 

 # 5. Payment After Issuance of SCN

- **Reduced Penalty**: If the taxpayer pays the tax amount along with interest within 30 days of the SCN, a penalty of 10% of the tax amount or ₹10,000, whichever is higher, is levied. The proceedings are then concluded.

 

 # 6. Conclusion of Proceedings

- **No Further Action**: Once the tax, interest, and penalty (if applicable) are paid within the stipulated time frames, no further proceedings are required.

- **Subsequent Orders**: If the taxpayer does not respond to the SCN or fails to make the payment within the specified period, the tax officer will proceed to issue an adjudication order and determine the tax, interest, and applicable penalty.

 

  Summary of Timelines Under Section 73

 

| Action                                       | Timeline                                                        |

|----------------------------------------------|-----------------------------------------------------------------|

| Issuance of SCN                              | Within 33 months from the due date for filing the annual return |

| Adjudication order issuance                  | Within 3 years from the due date for filing the annual return   |

| Voluntary payment before SCN                 | No penalty, proceedings concluded                               |

| Payment within 30 days of SCN                | 10% of tax or ₹10,000 (whichever is higher) penalty             |

 

  Conclusion

 

Section 73 of the CGST Act provides a structured process for the recovery of unpaid or short-paid taxes, erroneous refunds, and wrongly availed or utilized ITC when no fraudulent intent is involved. This section aims to ensure that taxpayers who make errors or omissions in their tax payments have the opportunity to rectify them with minimal penalties, provided they comply within specified timelines. This encourages voluntary compliance and timely correction of genuine mistakes while allowing the tax authorities to recover due amounts efficiently.