NOTICE U/S 74(5) FOR THE CURRENT F.Y.

[Renju Joy]

I have missed to show reverse charge on inward supplies in GSTR 3B for the month of June 2019.

Now I have received a notice dated 29.02.2020 u/s 74(5) for this non payment. Am I able to show this in the GSTR 3B of Feb, which is pending to be filed or should I pay the tax along with penalty and interest through DRC-03.

Thanks & Regards.

[KASTURI SETHI]

Chances are bleak.

[Renju Joy]

Department has issued notice under section 74(5) for mere delay in payment of reverse charge.The credit for reverse tax paid in a month can be availed for the subsequent month and can be set off against the tax dues as provided in sub section 62 (b) of section 2 of the CGST Act. Had there been any reverse tax liability in a return period and remitted the same could have been taken credit in the subsequent return period, in such a situation there is no loss of revenue to the department in any manner, that being the procedure, the only omission caused from my part is reverse tax was not remitted as and when due and subsequently credit was not availed.Why was notice issued under sec.74 and not 73?

[CSSANJAY MALHOTRA]

Mr. Renju,

Show the tax liability alongwith interest in forthcoming GSTR-3B to be filed and avail the tax credit. RCM is Revenue Neutral and does not amount to suppression of facts, .....Don't make any payment for penalty. In RCM, department does not stand to loose revenue if you are eligible for ITC.

It's on the department to establish that provisions of Section 74 of CGST applies in your case and if you have recorded transactions in accounting books, no suppression. Mere notice from department does not amount to fraud, suppression. Department in majority of cases have tendency to issue letter u/s 74(5) of CGST Act and they failed to establsih same in higher courts.

We should understand what exactly Section 74 in context with section 17(5) of CGST Act refers to. Nothing has been concluded or agreed upon by you at this stage as to contravention of Section 74. You pay tax and avail ITC, catera of citations are available of higher courts.

[SHARAD ANADA]

GUJARAT HIGH COURT

M/S. CERA SANITARYWARE LIMITED VERSUS STATE OF GUJARAT & 1 OTHER (S) = 2020 (7) TMI 445 - GUJARAT HIGH COURT

 

[KASTURI SETHI]

A notice issued under Section 74(5) of CGST Act to any tax payer is a matter of grave concern. The department does not issue such notice without any basis. The charge of fraud, suppression etc. with an intent to evade tax whether it is by way of notice or show cause notice should not be taken lightly by any person. Such notice is an opportunity to deposit Govt. dues and settle the matter at the first stage.

[CA Seshukumar]

Honerable High Court has cleared mentoned that it is just a notice and whch is upto the petitioner to give weightage or not. if not given then Department may issue actual notice i.e SCN under sec.74(1). hence if any assessee pays tax upon being served any notice under 74(5) will not have any serious actions that are envisaged under Sec.17(5).

[KASTURI SETHI]

I agree with Sh.Seshu Kumar CA. Correctly understood and expressed.

[KASTURI SETHI]

In continuation of above , but if paid under Section 74 (5) ITC will not be allowed.

[Ganesh Pawle]

Buying dealer has got valid tax invoice, e way bills, transport receipts, goods actually received. All payments including tax has also been paid by account payee cheques. The supplier has also filed GSTR 3B. Buyer is not involved in any kind of fraud in the transaction. Department has cancelled the registration of supplier retrospectively and issued notice under section 73(5) and 74(5). What is the remedy available to the buyer? and what are the case laws to defend?.

[SHARAD ANADA]

Notification No. 79 /2020 – Central Tax New Delhi, the 15th October, 2020

In the said rules, in rule 142, in sub-rule (1A), (i) for the words “proper officer shall”, the words “proper officer may” shall be substituted;

(ii) for the words “shall communicate”, the word “communicate” shall be substituted.

So now it is not mendatory for proper officer to issue Notice in Form DRC 01 before show-cause notice.

AI Summary

Payment under fraud recovery provisions bars input tax credit; pay tax with interest, seek waiver of penalty and officer concurrence.
A communication under Section 74(5) permits voluntary payment of the ascertained tax with statutory interest and a 15% penalty and requires informing the proper officer; taxes paid under the recovery provisions for evasion are commonly treated as ineligible for input tax credit. Practitioners disagree whether a subsection (5) intimation is a procedural notice triggering adjudication or merely an invitation to self-assess and pay; the choice to pay, report in a subsequent return with officer concurrence, or await a formal show cause notice carries distinct credit and penalty consequences.