A seller sells goods, collects payment, collects tax. But, does not pay to the govt. Instead he keeps it in his pocket. Unfortunately this practice is followed by a number of people in our country. This dries up the revenue collection of govt and results in sluggish economical growth. 1 selfish act becomes a deterrent in nation building. But the picture might change under GST.
The provisions relating to demand and recovery are slightly different when it’s a case of fraud and when it’s a case of mistake.
For eg, when a offence relating to tax short paid/unpaid is committed without any intention of a fraud, it will be dealt differently than when the same is committed with an intention to defraud the govt.
These provisions under GST are quite similar to what have already been practiced under the Service Tax and Central Excise Act.
When the case is of ‘Fraud’ –
This section applies to cases of tax evasion involving:
This results in:
Time limit - Taxpayer will be served with a show cause notice. Proper office is bound to serve the notice 6 months before the time limit.
Time limit in this case is 5 years from the date of filing annual return of the year to which the amount relates.
Voluntary Payment – If a person self-assesses the tax unpaid/short paid and interest thereon or relies on the calculation made by the P.O and makes the payment along with 15% penalty, the proceedings will be deemed as concluded.
If officer finds short payment of tax, he can issue notice for the balance remaining.
If the taxpayer pays all the dues and penalty along with 25% within 30 days from the date of notice, the proceedings will be deemed as concluded and no notice/order shall be issued.
Issue of order – An order can issued within 5 years from the date of filing of annual return of the year to which the amount relates.
If the taxpayer pays all their dues along with 50% within 30 days from the date of order, the proceedings will be deemed as concluded.
When the case is NOT of ‘Fraud’ –
This section applies to non-fraud cases when:
——for any reason, other than fraud etc. i.e., there is no motive to evade tax.
Time limit - Taxpayer will be served with a show cause notice. Proper office is bound to serve the notice 3 months before the time limit.
Time limit in this case is 3 years from the date of filing annual return of the year to which the amount relates.
Voluntary Payment – If a person self-assesses the tax unpaid/short paid and interest thereon and makes the payment, the proceeding will be deemed as concluded and no notice shall be issued. Although payment shall be made with 10% penalty.
If officer finds short payment of tax, he can issue notice for the balance remaining.
Penalty – If taxpayer pays all their dues within 30 days from the date of notice, the proceeding will be deemed as concluded but penalty @ 10% will be levied.
The penalty will be applicable irrespective of whether or not the taxpayer pays before or after show cause notice. If he is paying 30 days after due date of payment, he will be liable to pay 10% penalty. This is a rather harsh provision considering GST is completely new and there will be many taxpayers making genuine mistakes. Taxpayers will be penalised for making genuine errors.