GST Show Cause Notice

To eliminate the duplication or cascading effects of taxes, such as a tax on tax, India introduced GST in July 2017 and repealed many indirect taxes. GST essentially combines a number of indirect taxes into one. In 2021, four years from now, there are a number of difficulties with GST that taxpayers and professionals should be aware of.

SCNs (Show Cause Notices) under GST:

For short-levy, non-levy, short-paid, non-paid, erroneous refund, inappropriate availment, and inaccurate use of input tax credit, demand and recovery can be initiated. The issue of a show-cause notice kicks off all demand and recovery actions under GST. What is a Show Cause Notice (SCN)? What is its significance, and when is it considered to be served? We delve deeper into the GST show-cause notice in this article.

What is the meaning of a show-cause notice (SCN)?

A show-cause notice is a formal communication to a person requesting that he or she explain his or her side of the issue raised in the notice. It is usually issued in the event of a breach or misbehaviour on the recipient’s part. A notice must be given telling the assesses of their wrongdoing. Demanding that the person who is liable for tax show cause why the stated amount of tax should not be collected from him.

What is the aim of a show-cause notice (SCN)? 

It is given to the recipient to permit him to precise his side of the story. The principle of natural justice gives it its potency. Before any action is taken against an individual, he or she has the proper to be heard. 

Issuing an SCN – What are the Statutory Provisions?

Section 73-

Determination of tax not paid, underpaid, incorrectly reimbursed, or input reduction wrongfully availed or utilized for any reason aside from fraud or willful fabrication or suppression of facts. 

The cut-off date for issuance of a piece 73 SCN is three months before the issuance of an order, and also the deadline for passing order is three years from the day of the month for filing an annual return for the yr that tax wasn’t paid or was underpaid or 3 years from the date of an erroneous refund.

Section 74-

Determination of tax not paid, underpaid, incorrectly refunded, or input tax credit improperly gained or used as a result of fraud, deliberate fabrication, or suppression of facts.

The time limit for issuance of a Section 74 SCN is 6 months prior to the issuance of an order, and the time limit for passing order is 5 years from the due date for filing an annual return for the financial year for which tax was not paid or was underpaid or 5 years from the date of an erroneous refund.


Except for applicability, limitation period, and penalty amount, the provisions of sections 73 and 74 are nearly identical. The provisions have been created in such a way that the taxable person has the option of settling the dispute by paying the tax, interest, and relevant penalty before or after the ruling is issued. It is possible that actions taken under these sections will not always result in the passing of the order. If the order is u/s 74, the taxable person has the opportunity to make payment of dues within thirty days after serving the order to avoid a penalty of 50%.

However, where the ruling is based on Section 73, no such reduction in the penalty amount is permissible. An aggrieved taxable person has the option of filing an application u/s 161 for rectification of an error obvious on the face of the record or filing an appeal u/s 107 to the Appellate Authority within three months. Otherwise, after three months, dues will be available for recovery, and the proper officer will begin the recovery process.