The central and state GST authorities have issued a demand notice to the companies belonging to sectors like consumer durables, smartphones, insurance, service providers, etc. LIC obtained one notice for Rs 290.5 cr in September as per the report. HDFC Life Insurance has been served a notice for failing to pay GST, with an outstanding amount of Rs 942 crore.
Similarly, Dabur, a prominent FMCG company, has received a notice for a tax shortfall of Rs 320 crore. While there is no dispute regarding the pursuit of valid tax claims by the authorities, there is a need for a more in-depth review of certain concerns raised about the nature of these notices.
These notices primarily relate to the initial phase of the GST regime, a period characterized by substantial uncertainty and initial challenges. They gained momentum as the limitation period approached its end on September 30. These notices expanded their scope to encompass issues like “underpayment” of taxes, “incorrect utilization of input tax credits,” and discrepancies in reconciliation between filed returns and financial records.
Concerns have arisen regarding the multitude of notices, the lack of a standardized procedure, and the absence of effective coordination between the central and state tax authorities.
In a particular instance, state tax authorities have requested information about a company’s GST payments, citing “media reports” regarding its merger with a company in another state.
Furthermore, recent GST notices have also been dispatched to several multinational companies concerning the taxation of expatriates and seconded employees working with them, following a court judgment on this matter.
Since the incorporation of the GST system has undergone constant adjustments and has experienced notable loopholes. Over the years, tax authorities have made efforts to rectify these deficiencies.
From April 2020 to September 2023, more than 6,000 cases of fraudulent input tax credit under GST have been uncovered, resulting in tax evasion exceeding Rs 57,000 crore. In the current fiscal year, 1,040 such cases, involving Rs 14,000 crore, have already been identified.
While the tax system must ensure that businesses pay their rightful share of taxes and minimize leaks, it is equally important to simplify tax regulations, reduce ambiguity and discretion within the system, and alleviate the GST compliance burden.
Failing to do so will likely result in further litigation, with the disputed amounts in direct taxes, including both corporate and personal income taxes, already reaching lakhs of crores.
