SC & Patna HC: GST Demand Notices Should Be Followed by Small Taxpayers

In a recent case regarding dismissing a writ petition filed by a taxpayer against a GST assessment year, the Supreme Court upheld the move by the Patna High Court.

The directive given in the Vishwanath Traders case has significant implications for small and medium-sized enterprises (SMEs), micro, small, and medium enterprises (MSMEs), small business owners, and professionals due to a delay in filing an appeal, they directly approach the high courts to seek resolution against a demand notice. According to Sunil Gabhawalla, a founding partner of a Chartered Accountant (CA) firm, it is crucial to respond to a demand notice by filing an appeal within three months. If there is a delay, they can seek a one-month extension from the jurisdictional appellate commissioner. However, if the delay is more than four months, the only option available is to file a writ before the high courts.

Because the assessment orders bearing crucial demands are furnished online on the GST portal, several small taxpayers do not keep records. Generally, most of the demand raised is delayed for more than four months.

Manish Gadia, a partner at GMJ & Co, a chartered accountant firm, mentioned that the practice of issuing notices online through the common portal started in the fiscal year 2020-21. Unfortunately, smaller taxpayers lack the knowledge to check the portal regularly. This situation resulted in a massive backlog of notices and demands for many such taxpayers. This situation makes matters worse as bank accounts are attached due to unpaid dues over the past few months. Typically, it’s only at this point that these small taxpayers become aware of the notices.

According to tax experts, notifications via emails and text messages about uploaded demand notices on the portal are not sent timely. Moreover, the contact information provided by SMEs/MSMEs is usually that of an employee and high attrition indicates that these messages do not serve their purpose.

With the Supreme Court upholding a high court’s order to make it clear that a writ petition cannot be entertained, this course of action becomes challenging. Even though such decisions by the Supreme Court are correct legal interpretation, closes all the options for such taxpayers, stated Gabhawalla.

Gabhawalla also added that if the avenue of filing a writ petition closed, the entire amount mentioned in the notice must be paid. Typically, these tax demands are high and come with substantial penalties, along with mandatory interest.

Read Also: Impact of System-generated GST Notices on Honest Taxpayers

Both experts agree with the same point of view that SMEs need to be more vigilant in checking demand notices. The government might also consider necessary amendments in the act to allow delayed appeals in genuine cases involving SMEs and small taxpayers.