Section 73 of the CGST Act (Central Goods and Services Tax Act) Â pertains to the determination of tax not paid, short paid, or erroneously refunded, or input tax credit wrongly availed or utilized for reasons other than fraud or any willful misstatement or suppression of facts. This section outlines the process for issuing a show-cause notice, providing an opportunity for the taxpayer to explain why they should not be required to pay the amount specified. It also specifies the time limits for the issuance of such notices and the subsequent order, ensuring that the assessment is completed within a prescribed period. The section aims to ensure compliance and recover any tax dues in a fair and transparent manner, safeguarding the interests of both the taxpayer and the revenue.
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What Does Section 73 of the CGST Act Cover?
Section 73 is related to the Determination of the following:
- Tax not paid or short paid or erroneously refunded, or
- ITC (input tax credit) wrongly availed or utilised
NOT due to fraud or any willful misstatement or suppression of facts. It is important to note that if the above two were because of fraud or any willful misstatement or suppression of facts, Section 74 of the CGST Act would have been applied instead of Section 73.
How proceedings are initiated under Section 73 of the CGST Act?
Proceedings are initiated with the issuance of a Show Cause Notice (SCN) under section 73 along with the issuance of a prescribed summary in Form DRC-01 or DRC-01, as applicable by the jurisdictional GST Authority.
What is the limitation for issuing notice under Section 73 of the CGST Act?
There is no direct limitation as to what time notice (SCN) can be issued under section 73 of the CGST Act, instead, there is an indirect limitation for which a little bit of maths needs to be applied while calculating the limitation.
The Maths
- The order for determination, under section 73, of tax not paid / short paid or ITC wrongly availed or utilized shall be issued within three years from the due date for furnishing the annual return for the financial year in question and the notice for such order shall be issued at least three months before issuance of the order. In simple terms, the due date for issuance of the SCN (notices) is 3 months before the expiry of 3 years from the due date of annual return of the respective FY.
Example – For FY 2019-20, the due date of the annual return was 31st December 2020, if there is a tax not paid / short paid or ITC wrongly availed or utilized, then the order for determination of said alleged amount can be passed until 31st December 2023, and consequently the notice (SCN) shall be issued at least three months before 31st December 2023, i.e., until 30th September 2023.
- The order for determination, under section 73, of erroneous refund shall be issued within three years from the date of the erroneous refund and the notice for such order shall be issued at least three months before issuance of the order. In simple terms, the due date for issuance of the SCN (notices) is 3 months before the expiry of 3 years from the date of the erroneous refund.
Example – For FY 2019-20, the erroneous refund was received on 15th June 2021, the order for determination of said erroneous refund can be passed until 15th June 2024, and consequently the notice (SCN) shall be issued at least three months before 15th June 2024, i.e., until 15th March 2024.
