Most cases revolving around the receipt of a demand notice from tax authorities come with some element of anxiety that should not be the case. There is no reason to worry if you have a GST notice or a notice pertaining to income tax. A fact driven compliance response can take care of most issues seamlessly. 

This blog is designed to provide a ‘how to handle’ guide to GST notice that will include how to respond to GST notice, compliance achievement, and mitigation of penalties. 

What is a Notice of GST? 

A GST notice is a formal message from a tax office to a taxpayer showing some gap in filing returns, not filing returns, factually late returns, or tax due that has ommitted and is suspected to avoid tax.

Common types of GST notices include: 

• Show Cause Notice (SCN): which means to explain or justify a particular non-compliance
• GST Demand Notice: which is issued when there is tax, interest payable, or a penalty close to payment.
• Notice Under Section 73/74: which is issued in regard to unpaid or shortpaid tax.
• Notice regarding Mismatch of GSTR-3B & GSTR-2B: issued regarding ITC mismatch or having excess Input Tax Credit claimed.

Why Did You Receive a GST Notice?

• GSTR-3B and GSTR-2B regarding lack of or mismatch.
• Input Tax Credit (ITC) claimed.
• Failure to submit or delays in submission of returns.
• Incorrect or inappropriate detailing of goods/services.
• Intent to evade payment of tax.
• Differences on e-invoices to actual turnover.
• Fraudulent GST registration or ineligible uploads of invoices claiming input.

Step by Step Guide to Respond to a GST Notice

Step 1: Read the Notice Carefully  

Pay particular attention to the very first paragraph of the notice and the number of the notice and to what date the notice has been issued, and the domain of the GST Act the notice is coming from. Also, do keep an eye on what date the reply to the GST notice is due.  

Step 2: Download the Notice from the GST Portal  

The first step is to log in to the GST portal. Then go to the option which says Services and then User Services, then to View Notices and Orders. Download the document and save it on the computer for future reference.

Step 3: Analyze the Issue

In the case of discrepancies, such as a mismatch of ITC in GSTR-3B and GSTR-2B, seek assistance from your CA or GST specialist, such as Optotax.

Step 4: Prepare a Response with Supporting Documents

Detail your response as formally as possible, substantiating all the points of the GST notice with relevant documentation, including invoices, receipts, reconciliations, and tax computations.

Step 5: File Your Reply Online

Navigate to the same section of the GST portal where the notice was filed. Attach all of your filed responses, and make sure that nothing is left out, since the escalation of the notice with incomplete documentation is considered a delay, and will also incur a penalty.

Step 6: Follow Up and Attend Hearings (If Required)

Assess the notice thoroughly in advance of the hearing and bring all relevant documents with you. Your CA is required to come with you if this is the case.

Consequences Of Non-Action  

• Fines for GST infractions  
• Penalties for late tax payment  
• Withdrawal of GST registration  
• Provisional seizure of bank accounts or other assets  
• Criminal prosecution for extreme tax avoidance  

Strategies to Prevent Any Future GST Notices  

• Regularly reconcile GSTR-2B with GSTR-3B  
• Pay all taxes punctually  
• Claim only eligible Input Tax Credit (ITC)  
• Engage professional consultants like Optotax for internal audits  
• Maintain comprehensive records of all financial transactions  
• Verify that all suppliers meet compliance requirements  

Conclusion  

Receiving a demand or show-cause GST notice might induce a state of panic, but if you take the time to analyze the situation and respond in the right manner, you’ll shield yourself from penalties and other problems down the line. Retaining a professional Chartered Accountant or GST advisor who is competent at dealing with these types of notices is a must. 

Optotax, for example, can provide guidance on notice responses, ITC reconciliation, and comprehensive GST requirements if you don’t know where to go or what to do next.  

Do you want dedicated guidance to respond to a GST notice? Speak with a specialist today to eliminate the prospect of incurring undue fines. Visit website: Income Tax Filling