CBIC to close investigations on GST evasion/fraud cases

The Central Board of Indirect Taxes and Customs (CBIC) has issued instructions to its GST officers on 22nd September 2021. As per Instruction No. 02/2021-22 [GST-Investigation], Shri Vijay Mohan Jain, the Commissioner of GST Investigation, the CBIC has asked its officers to issue the Show-Cause Notices (SCN) in a time-bound manner.

The GST Investigation Wing issued an order directing top tax officials (Principal Director General(s)/Principal Chief Commissioner(s)/Chief Commissioner(s)) in their jurisdiction. They must review pending investigations or other cases that need the issuance of show-cause notices. Accordingly, they must take appropriate action to ensure that the investigations are completed within the time prescribed by the GST laws and that SCNs are issued on time.

The officers must complete the investigations within one year from its initiation. The issue has become critical since the deadline to file GST annual returns for the first three years, 2017-18, 2018-19 and 2019-20, has already passed. Further, the time frame for issuing orders for any discrepancies found in GST annual returns in Form GSTR-9 is ongoing.

The CBIC observed that the number of SCNs issued to GST evasion cases is very low. GST provisions define a time limit of three years and five years for the issuance of orders. It is laid down in Sections 73 and 74 of the CGST Act. 

The CBIC took this into account and felt that suppose the adjudicating authority pushed the issuance of SCNs closer to these last dates. It could leave them with very little time to pass orders by the given period as per the CGST Act.

The instruction quotes that it might lead to a scenario where the adjudicating authority cannot pass orders within the prescribed time, or the quality of adjudication may suffer. Hence, the present condition requires additional field formations and strict monitoring at the supervisory level.

The instruction also states that Section 74 of the CGST Act primarily covers aspects of the Input Tax Credit (ITC) frauds and tax evasion cases. However, certain circumstances need the notice issued under Section 73 of the CGST Act.

Section 73 states that the officer can issue show cause notices at least three months before three years get expired from the date of filing GST annual returns in Form GSTR-9 of such financial year. The year refers to the period when cases of tax unpaid or ITC availed more than eligible amounts or refunds are applied wrongfully.

On the other hand, Section 74 of the CGST Act puts forth a time limit for issuing SCNs in fraudulent cases. It is six months before the expiry of the five years from the GST annual return filing date of the financial year of the fraud.

Accordingly, the instruction reiterates the last dates for filing GST annual returns for different fiscal years. It is 5th and 7th February 2020 for FY 2017-18 and 31st December 2020 for FY 2018-19. Further, it is 31st March 2021 for FY 2019-20. Therefore, the three-year and five-year periods have kicked in, warranting the officers to act and close the issuance of SCNs where needed promptly.

The instruction cautions all taxpayers to make sure that they are filing accurate GST annual returns, where applicable to them. Further, they must ensure timely reconciliations of the data reported in the regular returns. It helps them maintain sufficient records that can help them avoid discrepancies or justify such differences later on with the department. 

Join our Telegram channel to keep getting updates on all things finance.

For any clarifications/feedback on the topic, please contact the writer at  annapoorna.m@cleartax.in