GST is an advancing law and there are numerous things that businesses and taxpayers are required to take care of on a daily basis. There are return filing requirements, keeping a track of vendor data, analyzing the input tax credits, and now with the e-way bill system and e-invoicing coming into the picture, it has become even more crucial for businesses to be on the top of their game when managing their indirect taxation. Tax assessments/ litigation and departmental audits are the terms that no taxpayer or assessee likes to hear. However, it is a part and parcel of business in the GST regime.
The term ‘litigation’ is officially defined as the process of taking legal action in a court of law. Majorly, there are two main types of tax litigation – Direct Tax and Indirect Tax. GST Litigation falls under the indirect tax litigation in India.
In this article, we will discuss the basics of GST litigation and how you can manage the same.
What is GST Litigation?
In simple words, all the litigation related to GST including – carry forward of transitional credits from the previous indirect tax system, eligibility for input tax credit on various goods/services and denial of refund claims, non or short payment of output tax liability – comes under the umbrella of GST Litigation.
When it comes to GST, filing returns, claiming ITC, and GST refunds are the other actions companies take in the course of handling their business, and there are several mishaps that get converted into litigation later on.
The taxpayers must be made aware that they are prone to the risk of being audited by the tax authorities during which all their tax positions, payments and compliances would be verified. Further the revenue department has the necessary infrastructure to conduct such audits in a seamless manner. Moreover, clear guidelines should also be in place to assist the officer in conducting such audits. It should be borne in mind that such audits are not for annoying the taxpayers but as a means to conduct an evaluation of tax compliances.
As a fallout of the above points, the taxpayers must be made aware that in case of defaults noticed during audits, penalties would be levied. Interest implications could also arise for non-payment or short payment of taxes.
In a situation where the taxpayers do not agree with the outcome of audits or assessments, a fair appeal mechanism is in place. Such appeal mechanisms are independent and unbiased towards the parties.
Considering an evolving law like GST, businesses are required to understand the nitty-gritties of Departmental Audits and GST Litigation to ensure they are well-prepared to defend their cases. Further, when litigations across multiple GSTINs in a legal entity or multiple entities in a group are handled, the following are the most common pain points of the Industry given the sensitivity attached to litigations:
- To keep a track of all the actionables,
- To monitor the preparedness & progress of the litigations on a regular basis
- To have all the information/documents required for facing such litigations right from its source.
Particularly considering the fact that GST is an evolving law, it is crucial to update the case files of these litigations with recent developments in terms of judicial precedences and/or notifications/circulars.
Types of Notices that GST department can issue
Pre-Litigation Notices under:
- Section 61: Scrutiny of Returns
- Section 65: Notice to Conduct Audit by tax authorities
- Section 66: Special Audit by Chartered Accountant appointed by Tax authorities
- Section 67: Inspection, Search & Seizure
- Section 70: Summons
Litigation Notices under:
- Section 73: Show Cause Notice (SCN) for Demand under Normal Period – Can be issued within 33 months of the GSTR-9 due date.
- Section 74: SCN for Demand under Extended Period – Can be issued within 54 months of the GSTR-9 due date
- Section 76: Notice for the demand of Tax collected but not deposited
Other Notices under GST Litigation
- Blocking of Credit under Rule 86A – 20%/10%/5% ITC Rule – 2A Reco
- Notice under Sec 79 for remitting – outstanding amount due to a Vendor – to the department on account of Vendor default
- E-Way Bill Notices
- Investigations by : Intelligence/Preventive/Anti- Evasion/CAG
What is the GST Litigation Process?
The assessee can follow the below process in order to streamline multiple ongoing cases/litigations.
Analyzing the Notice/ SCN/ Order: After receiving the notice or show cause notice (SCN) from the GST department, it is important for the company to analyze it and verify it.
Briefing the company and discussing the way forward: The next step is to prepare the company brief and decide how to deal with the notice, and make a plan of action to ensure defending the company at all costs.
Collating required data/information/reconciliations: In order to prove your company’s case, you will need a lot of pieces of evidence, documents, data and related information that you need to collate and produce before the officials.
Verifying and Validating the aforesaid data/information: After collecting the data, it is also necessary to verify and validate it so as to maintain accuracy.
Drafting suitable Reply/Appeal after in-depth research for legal precedence: Once the information and documentation is in place, now you need to draft a suitable reply to the notice received.
Submitting the Reply/Appeal: Once the reply or your appeal is ready, you need to submit it to the department. No
Appearance before Adjudicating Authority/Commissioner (A)/Tribunal: The last part of the process is taking part in the case appearance before the Adjudicating Authority to defend your case.
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If you want to simplify your GST litigation process, assessments, and be better prepared for departmental audits, choose IRIS LMS today!
How can IRIS LMS help you?
IRIS LMS is a Litigation Management Solution (LMS) developed by IRIS in association with DAA Consulting, a specialized Indirect Tax Consulting Organization with in-depth experience in litigation, knowledge of the subject and understanding of the practical difficulties faced by various industries.
IRIS-DAA have combined their individual strengths of Technology and Subject Matter Experiences & Expertise to develop a robust product anticipating the needs of the industry in light of the faceless assessments under GST which is in pipeline.
LMS is a cloud-based litigation management software with Artificial Intelligence, a proactive alert mechanism, extensive reporting and an analytics dashboard for enterprises.
LMS is here to assist you in facing GST departmental audits and efficiently manage GST litigation.
Further, Integration through API with GSTN Portal is under request with GSTN to enable better tracking.
What can you do with IRIS LMS?
- Track: Status of Litigations on real-time basis at GSTIN Level
- Store: Complete trail of Litigation from 1st Letter to Replies, Hearing Proceedings to Final Order
- Retrieve: Data through friendly UI with custom categorizations
- Archive: Gst Returns Data and Various Reconciliations to handle Departmental Audit in the future
- Alerts: For various Due Dates for Pending Replies, Appeals, Personal Hearings, Written Submissions
