Business to get 'reasonable time' to explain reasons before recovery action
New Delhi: Tax officers will give reasonable time to erring business to explain reasons for mismatch in turnover reported in sales return GSTR-1 and tax payment form 3B before initiating recovery action for short payment or non-payment of taxes.
Apex indirect tax body CBIC has issued guidelines on recovery proceedings. As per the changes in the GST law effective January 1, GST officers were allowed to directly initiate recovery action against those errant businesses which showed higher sales in monthly return GSTR-1 but under-report it while tax payment in GSTR-3B.
The move was aimed at curbing the menace of fake billing whereby sellers would show higher sales in GSTR-1 to enable a purchaser to claim an input tax credit (ITC) but report suppressed sales in GSTR-3B to lower GST liability.
So far, under the goods and services tax law, show-cause notices were first issued and then a recovery process was initiated in such cases of mismatch in GSTR-1 and GSTR-3B. Following doubts raised by the trade and the field formations regarding modalities for initiation of the recovery proceedings, the Central Board of Indirect Taxes and Customs (CBIC) on January 7 issued guidelines, saying that an opportunity needs to be provided to the concerned businesses for short payment or non-payment of the amount of self-assessed tax liability.
It noted that in some cases there may be a genuine reason for the difference between the details of outward supplies declared in GSTR-1 and those declared in GSTR-3B.
"If the concerned person is able to justify the differences between GSTR-I and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, to the satisfaction of the proper officer, or pays the amount such short paid or not paid, then there may not be any requirement to initiate proceedings for recovery under section 79, the CBIC said.
However, if the registered person either fails to reply to the communication, or fails to make the payment of such amount short paid or not paid, within the time prescribed in the communication, or fails to explain the reasons for such difference/short payment of tax to the satisfaction of the proper officer, then the tax officer may proceed for recovery, it added.
