WORKS CONTRACTORS - TDS DATA

[giri gattupalli]

respected sir,

in the light of insertion of sec 128A , please discuss this issue.

gst department has issued orders under SEC-74 during FY 2017-18,18-19,19-20 in the case of govt works contractors who did not disclose turnovers in GSTR-3B returns., based on data received from GSTR-7 returns (tds 2%) filed by contractee departments.

please let me know whether, in above conditions orders under sec 73 or sec 74 sustainable under GST law or not.

thanking you sir

[Sadanand Bulbule]

Dear Sir

The benefit of waiver of interest and penalty is available only in respect of an adjudication order passed under Section 73 of the Act. Since the impugned orders are already issued under Section 74, the benefit of Section 128A is not available in your case. You may double check this position.

[giri gattupalli]

ok sir. but my query is whether passing orders under SEC 74 is sustainable under law in above stated circumstances. my opinion is tds based assessment should be done under SEC 73 only. but not under sec 74. please discuss . is there any case law available in this regard.

thanking you

[Sadanand Bulbule]

Dear 

As long as there is apparent suppression of facts leading to evasion of tax, adjudication under section 74 is attracted.  Number of case laws are available on TMI Articles segment. Plz check. 

[KASTURI SETHI]

Dear querist,

Section 74 was correctly invoked in the SCN. Such detection is the very purpose of GSTR-07 return.  The Amnesty Scheme is not available in the facts & circumstances disclosed by you.                 

I agree with Sh.Sadanand Bulbule, Sir Ji.

[Shilpi Jain]

Further facts are required to be able to answer this.

Why is it the turnover was not disclosed? Was this turnover disclosed in GSTR-9 & 9C, etc.

Department always mechanically invokes 74 which is not correct in many cases.

[giri gattupalli]

respected sir,

thanks for your valuable opinions. taxable person has not reported taxable supplies in any return.

but has accepted the data present in gst login which is auto populated in TDS, TCS credit received tab well before issuance of notice by department. my query is once we accept the turnovers , whether  element of fraud which is essential for invoking of sec 74 exits or not  please discuss

thanking you 

[Shilpi Jain]

Is there any more turnover which is not reported in GST returns?

Why was only TDS turnover accepted 

[Sadanand Bulbule]

Dear Sir

The extended period under Section 74(1) of the CGST Act can be invoked only if the tax is not paid or levied by reason of fraud or collusion or wilful mis-statement or suppression of facts with an intent to evade tax.

Mere acceptance of turnover after its detection by the department would not exonerate the taxpayer from such proceedings under Section 74. So find out the factual position and decide  where exactly your case stands. In the case at hand, the subject turnover is admittedly not reported in any returns. This is not a case of debate but factual. Go with facts.

[giri gattupalli]

thank you all. discussion is very informative.

[KASTURI SETHI]

Dear Querist,

(i) There is not an iota of doubt that non-declaration of taxable value in GSTR-3B return amounts to suppression of facts and Section 74 is invocable as opined by Sh. Sadanand Bulbule, Sir.

(ii) However, I am also of the view that if you have recorded all the transactions in the books of account (statutory records) and have filed Income Tax Returns on the basis of the books of accounts, then you can prove your bona fides before the Appellate Authority. You can contest the invocation of Section 74 in the SCN and confirming the demand under Section 74 along with interest and penalty. There are case laws to this effect.

 (iii) You are to prove non-declaration of correct taxable value as unintentional. If the element of 'willful suppression with an intent to evade tax' is absent, Section 74 cannot be invoked and if invoked, that will not be sustainable. Peruse all the ingredients mentioned in Section 74 and rebut each.

 (iv) Also go through the scope of term, 'books of accounts' as detailed in the Company Act.

 (v) Last but not the least, in case all your transactions are genuine, you must contest. You will have to admit the lapse occurred but lay emphasis on the fact of bona fide mistake.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sirs, 

Sec. 74 of the CGST Act reads as,

Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any willful misstatement or suppression of facts to evade tax ….

In the above case, it is not proved that the tax was not paid with the intention of evasion of tax. The Contractor has undertaken the works contract for the Government and TDS was effected.  That means the liability comes to the knowledge of the Department through DRC-07. Mere non-filing of returns or nonpayment of tax cannot be construed as fraud, willful misstatement or suppression of facts. He admitted the facts as mentioned in Sl. No. 6.  So where is the reason and justification for deciding adjudication u/s 74 when no suppression was detected from other sources? [However, it is not mentioned in the query that relevant books of accounts were produced before the authority].

There is also an Article on TMI by Sri M.M. Govidarajan on 28-12-2023 under the head “SECTION 74(1) CANNOT BE INVOKED MERELY ON ACCOUNT OF NON PAYMENT OF GST”.

AI Summary

Extended period assessment requires fraud or willful suppression; accepting TDS credits later does not preclude extended proceedings. Invoking the extended limitation for assessment requires tax not to have been paid by reason of fraud, willful misstatement, or suppression of facts; mere acceptance of auto populated TDS credits after detection does not automatically eliminate the element of culpability. If taxable supplies were not reported in any returns and not recorded in statutory books, extended assessment is more likely sustainable. Conversely, contemporaneous books of account and related filings may enable the taxpayer to rebut allegations of willfulness and contest the invocation. Relief or amnesty mechanisms tied to ordinary adjudication may not apply to extended period cases.