GST Council Notifies Authorities On Actions To Be Taken Consequential To The Issuance Of A Show Cause Notice And Recurring SCNs In The Case Of Enforcement Actions

The Goods and Service Tax Council has notified the authorities regarding action consequential to the issuance of a Show Cause Notice and for the issuance of a recurring Show Cause Notice in the case of an enforcement action initiated by the Central authorities against a taxpayer assigned to a State and vice versa.

It has been noted that varied practices are followed by the field formations regarding the issuance of recurring SCN and other consequential actions in cases where an investigation has been initiated and finalised by Central tax authorities in respect of the taxpayers under State tax Administration and vice versa.

In some cases, the authority that initiates the investigation is also issuing recurring SCN, whereas in some other cases, it is left to the concerned jurisdictional tax authority, who is administering the taxpayer, to issue recurring SCN. This may create confusion and may lead to a situation in which none of the authorities issues the recurring SCN in a timely manner. Therefore, there is a need to have uniform practice in such matters.

The matter was deliberated upon by the GST Council at its 47th meeting, where the Council recommended clarifying the issue.

It was clarified that a taxpayer located within a state is open to enforcement action by both authorities. For example, enforcement action against a taxpayer, assigned to state tax authorities, can be initiated by the central tax authorities (and vice versa). All subsequent actions relating to the case, including but not limited to appeal, review, adjudication, rectification, and revision, will be handled by the authority that initiated the enforcement action, in this case, the Central Tax Authorities. Refunds may, however, be granted only by the jurisdictional tax authority administering the taxpayer.

Issuance of recurring SCNs does not involve any fresh investigation as the subject matter as well as the ground of SCN remain the same. Therefore, it may be desirable that further/recurring SCNs are issued by the actual jurisdictional authorities, as they will be in a position to access the records and returns of the taxpayers, check whether the grounds for SCN still exist or not, and take a view/action for the issuance of recurring SCNs based on facts. Besides, if the authority that has taken enforcement-based action is mandated to issue recurring SCN also, it will put an unnecessary burden on the investigating tax authority to keep track of the subsequent practice of the taxpayer after the conclusion of the investigation and to collect all the data and records for the issuance of recurring SCN.

The recurring SCNs may be issued by the concerned jurisdictional tax authorities administering the taxpayer even if an investigation is conducted by central tax authorities and an initial SCN is issued by them. The recurring SCN may only be issued by the jurisdictional tax authority that administers the taxpayer; if that jurisdictional tax authority is a state tax authority, the recurring SCN may be issued by the concerned state tax authority.