Small GST taxpayers need to keep tabs on demand notices
Mumbai, Aug 21, 2023
The Supreme Court recently upheld the action of the Patna high court in dismissing a writ petition filed by a taxpayer against a GST assessment order.
The order in the case of Vishwanath Traders has wide ramifications for SMEs, MSMEs, 'small business persons' and professionals, as many of them - owing to a time lapse in filing an appeal - approach the high courts directly for remedy against a demand notice. Sunil Gabhawalla, founding partner of a CA firm, said that a response (appeal) to a demand notice must be made within three months. In case of a delay, the jurisdictional appellate commissioner can be approached for seeking a one-month extension. In case more than four months have passed, the only recourse available is to file a writ with high courts.
As the assessment orders, which could contain significant demands, are served online through the GST portal, many small taxpayers do not keep track. Very often, the four-month period passes before they are aware of the demand raised.
Manish Gadia, partner at GMJ & Co, a firm of chartered accountants, said, "The process of serving notices online through the common portal first began in financial year 2020-21. Unfortunately, small taxpayers do not have the bandwidth to check the portal on a day-to-day basis. In the case of many such taxpayers, notices and demands have piled up. To make matters worse, since the past few months, bank accounts are being attached for non-payment. Typically, at this stage, the small taxpayer becomes aware of the notice."
According to tax experts, emails and text messages informing the taxpayer of a demand notice (that is uploaded on the portal) are not always sent. Further, the contacts provided by an SME/MSME are typically those of an employee - and high attrition means such messages do not serve their purpose.
With the apex court agreeing with the action of a high court in not entertaining a writ petition, this path becomes challenging. "Though a correct legal interpretation, the Supreme Court's order literally closes all doors available to such taxpayers," stated Gabhawalla.
"If the avenue of filing a writ petition is shut, the entire sum will have to be paid. More often than not, the tax demand is high-pitched and substantial penalties are imposed... plus there is an element of mandatory interest," added Gabhawalla.
Both tax experts hold the view that it is important for SMEs to be more vigilant in checking up on demand notices. The government may also consider amending the act to permit delayed appeals in genuine cases of SMEs and small taxpayers.
[The Times of India]
