Notice Under Section 74 of the CGST ACt

[Rajendra Prasad]

Dear Sir,

A notice was issued u/s 74 of the CGST Act to pay tax at 12% instead of 5%. If I pay the tax now , can my customer get the ITC based on my debit note .

[KASTURI SETHI]

NO. ITC cannnot be taken as the same is hit by Section 17(5) of CGST Act. which is as follows:-

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :-

(i) any tax paid in accordance with the provisions of sections 74,129 and 130.

[Rajendra Prasad]

Dear Sir,

Thank you sir for your reply. Now notice is issued u/s 74. Can I pay the tax now for the difference before issuing the order and can my supplier take the ITC Now.

Please clarify.

[KASTURI SETHI]

No. Once the show cause notice is issued, your client shall forfeit his right of taking ITC on the differential amount tax to be paid as already explained above in my reply. You may please go through language of Section 74 of CGST Act. ITC is allowed only if your client pays tax into Govt.'s account on his own.(as a law abiding citizen)

AI Summary

Clarification: No Input Tax Credit on 12% Tax Payment Under Section 74 of CGST Act Due to Section 17(5) Restrictions. A query was raised regarding a notice under Section 74 of the CGST Act, requiring payment of tax at 12% instead of 5%, and whether the customer could claim Input Tax Credit (ITC) based on a debit note. It was clarified that ITC cannot be claimed as it is restricted by Section 17(5) of the CGST Act, which prohibits ITC on taxes paid under sections 74, 129, and 130. Even if the tax is paid before an order is issued, the right to claim ITC is forfeited once a show cause notice is issued.