GST Notice

[Sangeetha D]

This Person Dealing in Supply of both Exempted and Taxable Goods. They are Registered in GST Since 2017-18, From then they are filling only exempted and not Availing any ITC. In 2024 they have Received a notice for FY 2020-2021 form Department Stating that.

'Your Purchase Reflected in GSTR-2A Seems Taxable at the Rate of 12% and 18%, How come you have only filed Exempted Sales of 10,30,562.

Now the Department is demanding Tax on 10,30,562 at 18%, Now the person does not have any ITC Balance in their Electronic Credit Ledger,Since they did not availed any ITC at All.

In this case what can we do, Please Advice.

[KASTURI SETHI]

If your transactions  are genuine and you have acted in a bona fide manner, there is nothing to panic.

Note the word, 'seems' mentioned in the Notice. It means that  the department is not 100 % sure about taxability of the goods supplied by you.

 You are to justify the genuineness of your transactions with the books of accounts maintained by you to the effect that you have rightly availed exemption.

The department always 'targets' those returns wherein the registered person has declared exemption partially or fully and conditional or unconditional  and non-GST supplies.

It is a  statutory duty of the Proper Officer to safeguard Govt. revenue.

The  SCN does not imply that you are liable to pay GST. Treat it as an opportunity to defend yourself.

[VENU K]

The query itself seems to be vague

1.Person Dealing in Supply of both Exempted and Taxable Goods

The query itself says person is dealing in taxable goods. Then why there are no tax collection?

2.They are filling only exempted and not Availing any ITC.

Why taxable sales were not shown and no tax collected. Why IPT was not availed.

If this is a genuine case you can inform the officer accordingly. If the entire outward supply is not taxable then no tax can be demanded. Just clarify the issue.

A genuine case could be that of a diagnostic lab. They purchase a lot of taxable items. But their output tax shall be NIL because it is an exempt supply under health care service.

But if the party had neglected to collect tax on an otherwise taxable supply, then there is no excuse. He will loose entire ITC because it was not claimed in time and he will have to pay output tax  with interest and penalty.

However this is a case falling under Sec 73 and the time limit to issue SCN was only upto 30th November, 2024 if my understanding is correct. If SCN is issued under Sec 74 you can defend it because even the department has no case that you have collected tax and profited from it.

My opinion.

[KASTURI SETHI]

In case misdeclaration  or non-declaration is involved, Section 74 can be easily invoked because it is self-assessment.

[VENU K]

Sec 74 talks about "any wilful mistatement or suppression of facts to evade tax"

There is no coma between the words, so the qualifying words to evade tax applies to both words. After fraud there is a comma and hence fraud in itself is actionable under Sec 74. But the other two words require evation of tax to support Sec 74 is my humble opinion.

Tax evation is the crux of the issue here. Tax evation more or less requires

1. Knowledge about tax liability

2. Use of mis statement or suppression of facts to avoid tax payment.

3. Economic gains arising to the tax payer from such misstatement or suppression of facts

A genuine belief about non taxability cannot be equated to tax evation. The fact that the tax payer did not claim input tax credit and reported turnover as non-taxable are strong grounds for defending the case in my opinion.

Failure of revenue to act within the three years available to it is not reason enough for the department to allege tax evation in all cases.

[KASTURI SETHI]

Yes, you are absolutely right. Regarding invokation of Section 74, the burden of proof is cast upon the department. At the same time, the Noticee is also to prove his innocent. 

It appears to me that  the querist's transactions are genuine.

[Shilpi Jain]

There is vagueness in the query raised. If the taxpayer has set off its taxable supplies and ITC and only disclosed the remaining there could be an issue which has to be represented properly.

Else no issue if they have only exempted turnover.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir, 

As per the query, it seems that there was something wrong with the taxpayer. The reflection of ITC in GSTR-2A means the taxpayer was effected taxable purchases.  If no such purchases were effected, the fact has to be brought to the notice of the concerned authorities for wrong credits in GSTR-2A.

No ITC at the credit means the ITC was not availed in GSTR-3B and was foregone.

When the T.P. is engaged in both taxable and exempted transactions, declaring only exempted turnover is suspectful. Hence, the act of the Officer is correct. However, the burden of proof lies on T.P. to prove that he has not transacted in taxable supplies beyond doubtful producing financial statements, books of accounts, inward supply account, etc.

These are my guesses about the query not to be considered as opinions. 

AI Summary

Taxpayer Challenges GST Notice for 2020-2021 Over Exempted Sales Reporting; Must Justify Exemption Claim and Transactions Validity. A taxpayer registered under GST since 2017-18, dealing in both exempted and taxable goods, received a notice for the fiscal year 2020-2021. The notice questioned why only exempted sales were reported when purchases appeared taxable at 12% and 18%. The taxpayer did not claim any Input Tax Credit (ITC) and is now facing a tax demand on exempted sales. Responses suggest verifying the genuineness of transactions, clarifying any discrepancies, and defending against potential misdeclaration claims. The burden of proof lies on both the taxpayer and the department, with the taxpayer needing to justify the exemption claim.