How To Handle GST Notices And Scrutiny Assessments?

Inaccuracies or errors in the information declared by GST registered taxpayers during the filing process, whether related to tax short payment, ITC mismatch, procedural non-compliance, etc., will be examined by the officer upon discovering inconsistencies in the filed GST returns. Therefore, addressing GST notices correctly is crucial to avoiding penalties and drawn-out legal proceedings. We have written a brief article explaining the procedure for handling GST notices and adjudication based on an interview with Brijesh Gandhi, Partner, GST Advisory, NPV & Associates LLP.

General Guidelines for Handling GST Notices

Understanding the Allegations: Carefully read the notice to understand the issue raised-whether it pertains to tax short payment, ITC mismatch, procedural non-compliance, etc.

Legal Analysis: Examine the legal provisions and circulars relevant to the matter. Cross-check GST portal data (GSTR-1, GSTR-3B, GSTR-2A/2B).

Drafting the Reply: Ensure clarity, proper referencing of evidence, and a professional tone in your response.

Timely Filing: Submit the reply within the specified period to avoid further escalation.

Representation: If a personal hearing is granted, prepare adequately and appear with necessary documents and legal backing.

Follow-Up: Track the status of the case regularly through the GST portal and stay updated with any new communication from the department.

1. Handling ASMT-10 (Notice for Scrutiny of Return)

Purpose: Issued when the officer finds discrepancies in the GST return filed.

Next Step: Reply to ASMT-10 in Form ASMT-11 within 30 days (or extended time if granted).

What to Include:

• Reconciliation statements (e.g., GSTR-3B vs GSTR-1, GSTR-2A/2B).
• Clarifications and justifications for each discrepancy raised.
• Documentary evidence such as invoices, ledger extracts, and tax payment proofs.

Avoid: Ignoring or providing vague responses as it may lead to DRC-01A or further adjudication.

2. Handling DRC-01A (Intimation of Tax ascertained before SCN)

Purpose: Issued before a Show Cause Notice, giving the taxpayer an opportunity to voluntarily pay the tax/interest/penalty or provide a reply.

Time to Reply: Response is filed in Part B of DRC-01A.

Options:

• Pay the amount fully or partially along with interest and penalty and inform in Form DRC-03.
• Submit a detailed written reply contesting the liability with supporting documents.

Strategy:

• If the issue is minor and payment is acceptable, settle via DRC-03 to avoid further litigation.
• For disputes, prepare a point-wise rebuttal supported by legal precedent and evidence.

3. Handling Show Cause Notice (SCN) / DRC-01

Purpose: Issued under Section 73 or 74 for tax short payment/non-payment or wrongful ITC.

What to Do:

• Analyze the legal section (73 or 74) mentioned - determines whether fraud/suppression is alleged.
• Prepare and file a reply in Form DRC-06.
• Attend personal hearing if granted.

Important Points:

• Strongly rebut all allegations with facts, documents, and legal interpretations.
• Emphasize procedural lapses, if any, by the department.
• Submit a reply before the date mentioned to avoid ex parte adjudication.

Conclusion

Proper handling of GST notices is essential to avoid penalties and prolonged litigation. A proactive approach, timely response, and well-prepared documentation are key to successful resolution. Engage a GST practitioner or legal expert for complex matters, especially at the adjudication or appeal stages.

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