Section 73(11), Goods and Services Tax - GST

[Komal Agarwal]

FY 2018-19 RCM liability paid at the time of GSTR 9/9C on Feb 2021 but ITC not claimed. Now the GST officer is demanding interest U/s 50 and penalty U/s 73(11). Whether penalty u/s 73(11) is applicable? Any remedy/ argument available to us against penalty.

Thanks

Posts / Replies

[DR.MARIAPPAN GOVINDARAJAN]

Why?  Please give the details of your case.

[Shilpi Jain]

Is it an RCM relating to unregistered persons' supplies?

Keeping aside the time limit was ITC eligible if it would have been paid on time?

If yes, then plea of revenue neutrality can be taken to defend the penalty imposed.

[Amit Agrawal]

One of the option is to pay interest (against delayed payment of RCM liability) within 30 days of the SCN (assuming the SCN is issued)) and seek relief from penalty u/s 73(8).

If SCN is not yet issued, you can pay interest (against delayed payment of RCM liability) and seek relief from penalty u/s 73(5).

If your situation is NOT covered in any of above two scenarios, please share more factual details and I will try to give "other" options / arguments. 

P.S. From your query, I have presumed that issue is not about 'alleged' wrong availment of any ITC (as ITC was not claimed by you) and you are willing to pay interest u/s 50(1) against delayed payment of RCM liability. If I misunderstood anything, kindly elaborate. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Dear Querist,

From the drafting of your query, it appears that the SCN has been issued. You have not paid tax within due date. It is undisputed.  Section 73 (11) has been invoked in the SCN. Thus the department's view is legally correct. 

[Komal Agarwal]

Thanks for your opinion. I am elaborating my query.

RCM liability of 18-19 of Rs 6400/- in CGST and Rs 6400/- in SGST paid at the time of GSTR 9/9C on Feb 2021 without interest and penalty. GST officer had issued SCN u/s 73 in January 2024 and demanding interest U/s 50 and penalty of Rs 10,000 in each head U/s 73(11). We are willing to pay interest.      Question : Whether we have to pay penalty of Rs 10000 in cgst and 10000 in sgst u/s 73(11)?  Any remedy/ argument available to us against penalty.

[Amit Agrawal]

Dear Querist,

Potential arguments in facts & circumstances of your case, which are without prejudice to each other:

A. As you have never challenged interest-liability & its quantum, Dept. should not have issued subject SCN in view of Section 79(3). Dept. should have simply asked you to pay interest and if not done, directly start recovery proceedings u/s 79. As entire SCN itself is invalid, there is no question of penalty u/s 73(11).  Kindly pay interest first using Form DRC-03 and attach the same with your reply. 

B. One can argue that penalty u/s 73(9) read with Section 73(11) is NOT mandatory as same is neither a fixed sum nor expressed as a fixed percentage, but same is 'fixed sum or a a fixed percentage, whichever is higher' and then, plead for either or very less penalty considering very low quantum involved, using Section 126.

C. As there is no demand raised for 'taxes' in the SCN (as same is only for interest & penalty, as per your last post) considering Section 73(7), penalty u/s 73(9) read with Section 73(11) should not be levied as this is case of non-payment of interest only & not non-payment of taxes. 

Please note that these should not be taken as my views / opinion per se. But same are just some line of argument/s if you want to contest the penalty. As jurisprudence of GST law is at nascent stage and still evolving, these arguments will be thoroughly tested in courts of law over a period in future.

Also, if any amnesty scheme comes in future (one cannot predict or to be sure about it happening, though many are hopeful), your penalty will be dropped. But, for that, you need to contest the penalty and keep alive through judicial means (i.e. by challenging penalty, filing appeal & so on).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Please read in above post as: ....... keep matter alive .....

[KASTURI SETHI]

Sub-section (9)  is mentioned in Section 73 (11) of CGST Act. Both sub-sections contain the word, 'shall'. The word, 'shall' signifies that imposition of penalty is mandatory. The Proper Officer has no power to reduce penalty. The benefit of reduced penalty is not available as time limit has been crossed. So penalty of Rs.10,000/- under both CGST and SGST  separately  has to be deposited. Total amount of penalty of  Rs.20,000/- is payable. 

Time limits crossed in all respects.

[Padmanathan Kollengode]

Dear querist, pls clarify this aspect:

Whether demand for tax (RCM) has been raised and appropriated in the SCN or

SCN itself is only for interest and penalty?

[Komal Agarwal]

Dear Sir, 

SCN is for RCM liability + Interest + Penalty. We had replied that we had already paid RCM liability. Now they are asking for Interest and Penalty.

[Amit Agrawal]

In continuation of my post at serial No. 6 & 7 above, one of  the recommendations  of 53rd GST Council Meeting held on 22-06-2024, is as follows:

"Insertion of Section 128A in CGST Act, to provide for conditional waiver of interest or penalty or both, relating to demands raised under Section 73, for FY 2017-18 to FY 2019-20 : Considering the difficulties faced by the taxpayers, during the initial years of implementation of GST,  the GST Council recommended, waiving interest and penalties for demand notices issued under Section 73 of the CGST Act for the fiscal years 2017-18, 2018-19 and 2019-20, in cases where the taxpayer pays the full amount of tax demanded in the notice upto 31.03.2025. The waiver does not cover demand of erroneous refunds. To implement this, the GST Council has recommended insertion of Section 128A in CGST Act, 2017."

Attention is also invited to the Note from Press Release: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of the stakeholders. The same would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.