TAX DEMANDED UNDER SEC 7(1) & SEC 9 OF CGST ACT

[Vinod jadhav]

After Audit the department issued SCN and demand tax under sec 7 (1) & sec 9 of CGST Act.

one of the issue of SCN is as below.

During the course of Audit, on P&L and Balance sheet and VAT returns, it is observed that there is a short declaration in the value of taxable turnover when compared VAT returns, GSTRs and P&L of Rs. 77,59,004/- during the financial year 2017-18 under Sec 7 (1) of CGST Act, 2017. Further Tax payer has not provided any clarification on non-payment of GST on the above turnover. Hence the same is liable to tax on which the taxpayer has to discharge tax liability @ 18% Rs 13,96,621/-.

In view of the above, the TP requested to pay an amount of Rs. 13,96,621/-.(CGST Rs. 698311/- SGST Rs. 698311/-) under Sec 7 (1) & Sec 9 of CGST Act, 2017 along with interest under Section 50 of CGST Act, 2017 and Penalty under Section 74 of CGST Act, 2017.

My Question is :

The SCN issued under Section 7 (1) (Scope of Supply) and Section 9 (Levy and Collection) is vague and lacks supporting details, basis of liability, or nature of liability. Because the GST is ultimately levied under Section 7 (1) within the scope of supply.

[Shilpi Jain]

Agreed. Mere reco differences cannot lead to demand of tax. The department is bound to show what is the supply made against which the demand is being raised.

[Vinod jadhav]

Are there any case laws regarding sSCN issued only based on Sections 7 and 9 without providing the nature of service, classification, etc.?

[Shilpi Jain]

Many such cases exists in the previous tax regime. Service Tax to be more specific. 

The same principle can apply to GST as well , legislations being pari materia.

[KASTURI SETHI]

Case laws are available on this issue in your support.

AI Summary

Scope of supply vagueness invalidates GST demand where nature and classification of supply are not specified. Post-audit SCN alleges short declaration of taxable turnover and demands GST, interest and penalty under sections 7(1), 9, 50 and 74 based on reconciliation differences between VAT, GSTRs and financial statements. The taxpayer contends the notice is vague and fails to identify the nature or classification of the supply or the factual basis for linking specific supplies to the asserted tax liability. Contributors observe that mere reconciliation discrepancies cannot establish a supply and cite analogous service-tax precedents applying pari materia reasoning.