Budget 2024 Update: New time limits for GST demand notices & orders (Section 74A)- Tax authorities now have 42 months to issue a demand notice & 12 months for a demand order

TL;DR: Budget 2024 introduced a new time limit for issuing GST demand notices and orders. Now, the tax authorities have 42 months to issue a demand notice from the due date of the annual return, and 12 months to issue a demand order from the date of the demand notice.

New Time Limits for GST Demand Notices and Orders

  • Previous time limits:
    • Section 73 (no fraud): 33 months from the due date of the annual return.
    • Section 74 (fraud): 54 months from the due date of the annual return.
  • New time limits:
    • Demand notice: 42 months from the due date of the annual return.
    • Demand order: 12 months from the date of the demand notice.

Impact of the Amendment

  • Uniform timeframe: The amendment establishes a uniform timeframe for issuing GST demand notices and orders, regardless of fraud allegations.
  • Longer time for errors: This gives tax authorities more time to issue notices for cases involving errors in interpretation.
  • Shorter time for fraud: This reduces the time limit for issuing notices for non/short payment of tax due to fraud.

Difference Between a GST Demand Notice and a GST Demand Order

  • Demand notice (SCN): Issued by tax authorities when they identify a non/short payment of tax or ineligible claim of credit. It proposes a demand for tax and asks the taxpayer to justify their position or pay the tax.
  • Demand order: Issued after the taxpayer submits a reply to the demand notice. The order confirms or drops the proposed demand. If the demand is confirmed, it becomes a demand order.

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