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What is the role of the Adjudicating Authority under GST?

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By Shreyansh Singh
9 min read

What is the role of the Adjudicating Authority under GST?

Key Takeaways

  • The Adjudicating Authority under GST is the official body authorized to make legal judgments on GST-related issues and disputes.
  • Legal provisions for adjudication under GST include the issuance of notices, the opportunity for a fair hearing, and the right to appeal.
  • Circumstances leading to an adjudication notice include discrepancies in tax returns, mismatches in input tax credit, and non-payment of tax.
  • The adjudicating authority has the power to assess taxes, determine refunds, impose penalties, and adjudicate disputes.
  • Taxpayers have the right to appeal against an adjudication order, emphasizing the importance of understanding the GST adjudication process for safeguarding interests.

In the realm of Goods and Services Tax (GST) in India, knowing the intricacies of adjudication notices and the authority responsible for their issuance is paramount for taxpayers. The article goes on to discuss the adjudicating authority in GST thoroughly; Its role, basic legalization procedures are specified; also the adjudication process and practical advice on dealing with various notices are also included.

It is the only quick reference guide for GST taxpayers that can be helpful in taking decision in GST adjudication process.

What is a Adjudicating Authority under GST?

adjudicating authority under gst

The Adjudicating Authority under the Goods and Services Tax (GST) framework in India refers to the official body or officials authorized to make legal judgments and decisions on various issues and disputes related to GST.

This jurisdiction has the mandate to deal with the cases that query how much tax bracket an individual falls into and if the tax is to be filed or not. Generally, it is concerned with the situations where a formal decision is required to resolve the dispute regarding the application of tax law to the specified taxpayer.

Role of Adjudicating Authority

The role of the Adjudicating Authority includes the examination of facts, relevant documents, and arguments presented by taxpayers or their representatives, as well as the enforcement of the GST laws.

It is empowered to issue rulings on disputes between taxpayers and the tax department, determine tax liabilities, impose penalties, and grant relief in certain cases. The Adjudicating Authority’s decisions are vital as they determine the obligations, rights of both of taxpayers and tax collectors in GST.

Adjudication by proper officer (Section 73, 74, 76 of CGST Act 2017)

Adjudicating Authority Components

The authority is typically composed of officers from the tax departments, including Central and State GST departments, who are designated at various levels to handle disputes of differing complexities and financial thresholds.

The procedure includes issuance of the show cause order, the involvement of the audience, and finally making the decision considering what is good in the case.

  • Central and State GST Officers: These officers are empowered to adjudicate cases involving tax disputes, classification, valuation issues, and determination of eligibility for input tax credits. They operate at various levels depending on the monetary value of the case.
  • First Appellate Authority: This component consists of officers appointed by the government who handle appeals against the decisions made by the primary adjudicating officers. They present the first level of recourse to taxpayers who wish to contest an adjudication order.
  • National and State Benches of the GST Appellate Tribunal: For disputes exceeding a certain monetary threshold, the Appellate Tribunal serves as the second level of appeal. It comprises of both judicial as well as technical members who lend a finer blend of legal knowledge and extension of domain expertise to the resolution of conflicts.
  • Revisional Authority: Certain high-ranking officials within the GST framework are designated as Revisional Authorities. They hold the authority to check orders of the subordinate officers to ascertain whether they are legal or not. This instrument serves as a remedy for possible errors or misinterpretations during the adjudication stage.
  • Special Procedures under the Law: The GST law outlines special procedures for dealing with specific types of disputes or for the expedited resolution of certain issues. This encompasses stipulations on the settlement, mediation, and other out-of-court dispute resolution methods.
  • GST Council: While not directly involved in the adjudication of individual cases, the GST Council plays a pivotal role in setting policies, rules, and guidelines that govern the functioning of the Adjudicating Authority. The Council’s decisions can influence the broader legal and procedural framework within which adjudication occurs.

The Significance of Understanding an Adjudication Notice

Understanding an adjudication notice in the context of the Goods and Services Tax (GST) is crucial for several reasons, making it a significant aspect for businesses and taxpayers.

An adjudication notice is typically issued by the tax authorities when there is a dispute or discrepancy in the tax filings, or when there is a perceived non-compliance with the GST regulations. Here are the key reasons why comprehending an adjudication notice is essential:

understanding adjudication notices what you need to know
SignificanceDescription
Timely ResponseEnables taxpayers to respond within the stipulated timeframe, avoiding penalties.
Legal ComplianceHelps in identifying specific areas of non-compliance or disputes needing resolution.
Prevention of PenaltiesActing upon the notice can prevent potential penalties and fines due to discrepancies or non-compliance.
Facilitates Corrective ActionsServes as a prompt for reviewing tax filings and records to identify and correct mistakes.
Informed Decision MakingEssential for deciding whether to comply, contest, or seek resolution regarding the notice.
Dispute ResolutionAids in challenging the notice through proper legal channels, if disagreed with the findings.
Financial PlanningImpacts financial management by highlighting additional tax liabilities, penalties, and interest.
Maintaining Good StandingDemonstrates commitment to compliance, influencing future interactions with tax authorities.

Legal Provisions Governing Adjudication Notices

The GST legislation outlines specific provisions governing the issuance and handling of adjudication notices. These legal frameworks ensure fairness and transparency in the adjudication process, safeguarding the interests of both the taxpayers and the tax authorities.

  • Issuance of Notice: The GST laws specify the conditions under which the tax authorities can issue an adjudication notice. This usually occurs when there is a discrepancy in tax returns, failure to pay tax, or non-compliance with GST regulations.
  • Show Cause Notice (SCN): Before any adverse action is taken, the taxpayer is usually served with a Show Cause Notice (SCN), detailing the issues or discrepancies identified and asking the taxpayer to show cause why action should not be taken against them.
  • Reply to SCN: Taxpayers are given a specific timeframe to reply to the SCN, presenting their arguments, evidence, or documents to contest the allegations or discrepancies noted by the tax authority.
  • Hearing: Legal provisions ensure that taxpayers have the right to a fair hearing before any final decision is made. This gives them an opportunity to present their case in detail to the adjudicating authority.
  • Adjudication Order: After considering the taxpayer’s response and the evidence presented during the hearing, the adjudicating authority issues an adjudication order. This order includes any tax, penalty, or interest that the taxpayer must pay as well as the decision regarding the issue in dispute.
  • Time Limits: The GST legislation sets specific time limits for the completion of the adjudication process, aiming to ensure that disputes are resolved in a timely manner. This includes deadlines for issuing SCNs, replying to them, and concluding hearings.
  • Rights of Appeal: Taxpayers have the right to appeal against an adjudication order if they are dissatisfied with the decision. The legal provisions outline the appeal process, including the appellate authority for advance, time limits for filing of GST appeal, and the procedure to be followed.
  • Penalties and Consequences: The legislation specifies the penalties and consequences for non-compliance with an adjudication order, including fines, interest, and in severe cases, legal action.
  • Rectification and Revision: There are provisions for the rectification and revision of orders if mistakes are identified, allowing both taxpayers and tax authorities to request a review of the adjudication order within a specified period.
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Circumstances that May Lead to the Issuance of an Adjudication Notice

Various circumstances that point to non-compliance or discrepancies in tax matters can cause the issuance of an adjudication notice under the Goods and Services Tax (GST) regime.

These notices are part of the administrative process aimed at resolving disputes, assessing liabilities, or ensuring compliance with GST laws. Here are key circumstances that may lead to the issuance of an adjudication notice:

issuance of an adjudication notice
  • Discrepancies in Tax Returns: If there are inconsistencies or errors found in the GST returns filed by a taxpayer, such as underreported sales or overstated credits, it may trigger an adjudication notice.
  • Mismatch in Input Tax Credit (ITC): A significant discrepancy between the input tax credit claimed by a taxpayer and the information available to the GST authorities through GSTR-2A/2B forms can lead to scrutiny and subsequent issuance of an adjudication notice.
  • Non-Payment or Underpayment of Tax: Failure to pay the correct amount of GST due, either due to miscalculation or deliberate underreporting, is a common reason for receiving an adjudication notice.
  • Failure to File Returns: Taxpayers who fail to file their GST returns within the prescribed timelines may receive notices for non-compliance, leading to adjudication proceedings.
  • Audit Findings: GST audits conducted by tax authorities may uncover discrepancies, underreporting of income, or wrongful availing of input tax credit, leading to the issuance of an adjudication notice.
  • Investigation Results: Investigations into the business operations or tax compliance of a taxpayer can result in findings that necessitate the issuance of an adjudication notice to address any uncovered issues.
  • Non-Compliance with GST Notices or Summons: Ignoring or failing to comply with any notices or summons issued by the GST authorities for information, documents, or presence for a hearing can trigger further enforcement action, including adjudication.
  • Cross-Verification with Third-Party Data: Discrepancies arising from cross-verification of a taxpayer’s data with information from third parties (e.g., suppliers, customers, banks) may lead to questions regarding tax liabilities and the issuance of an adjudication notice.
  • Unjust Enrichment or Fraud: Instances where there is suspicion or evidence of unjust enrichment, such as claiming refunds fraudulently or manipulation of accounts to evade taxes, can lead to adjudication.
  • Other Statutory Violations: Violations of specific provisions of the GST law, beyond the filing of returns or payment of tax, such as not maintaining proper records or not complying with the rules for invoicing, can also result in adjudication notices.

Functions and Powers of the Adjudicating Authority

The Adjudicating Authority under the Goods and Services Tax (GST) regime holds a pivotal role, with specific functions and powers designed to ensure compliance, resolve disputes, and enforce GST laws.

These functions and powers are critical for the effective administration of GST across India, affecting taxpayers and the broader tax system.

Here’s an overview of the key functions and powers of the Adjudicating Authority:

Functions of the Adjudicating Authority

  • Assessment of Taxes: The authority assesses taxes payable by a taxpayer, including any discrepancies or underpayments identified during audits, investigations, or through the filing process.
  • Determination of Refunds: It determines the eligibility and amount of refund payable to a taxpayer, ensuring that the process is in compliance with GST laws.
  • Levy of Penalties: In cases of non-compliance, such as late filing of returns, underpayment of taxes, or other violations of GST regulations, the authority is responsible for levying penalties.
  • Adjudication of Disputes: The authority adjudicates disputes between taxpayers and the tax department regarding tax liabilities, credits, refunds, and other GST-related matters.
  • Revision of Orders: It has the power to revise orders previously issued by lower authorities, ensuring justice and compliance with the legal framework.

Powers of the Adjudicating Authority

  • Summoning and Enforcement: The authority can summon taxpayers or any other person related to a proceeding, to appear before it and to produce documents or evidence as required.
  • Inspection of Records: It has the power to inspect the records and premises of a taxpayer to verify compliance with GST laws and the accuracy of tax filings.
  • Issue of Notices: The authority issues notices to taxpayers for non-compliance, discrepancies, audits, or any other matter requiring clarification or action under GST.
  • Passing Orders: After due process, the authority passes orders on various matters, including tax assessments, penalties, refunds, and adjudication of disputes.
  • Imposition of Fines and Penalties: It is empowered to impose fines and penalties in cases of fraud, evasion, or any other forms of non-compliance with GST laws.
  • Grant of Stay Orders: In certain cases, the authority may grant stay orders on its proceedings, providing temporary relief to taxpayers during the dispute resolution process.
  • Demand and Recovery: It has the power to demand and facilitate the recovery of unpaid taxes, interest, and penalties from taxpayers.
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Adjudication Process

The adjudication process under GST is a structured mechanism that involves several steps, starting from the issuance of a show cause notice to the final decision. Understanding this process is essential for taxpayers facing adjudication.

adjudication process under gst

Steps in the Adjudication Process

Step 1: Issuance of Show Cause Notice

The tax authorities issue a Show Cause Notice to the taxpayer, detailing specific discrepancies or non-compliance issues in their GST filings or transactions, along with the proposed penalties or adjustments.

Step 2: Submission of Reply by Taxpayer

The taxpayer is required to submit a detailed reply within a specified timeframe, addressing each issue raised in the SCN and providing evidence and arguments to support their case.

Step 3: Hearing

If the response to the SCN is deemed unsatisfactory or further clarification is needed, a hearing is scheduled. Here, the taxpayer can present their case in person, providing arguments and evidence to contest the findings or clarify their position.

Step 4: Decision by the Adjudicating Authority

After reviewing the taxpayer’s reply and considering the proceedings of the hearing, the adjudicating authority makes a final decision. This includes confirming, modifying, or canceling the proposed tax demand or penalties, and issuing an official order detailing the decision and required actions.

Practical Tips on How to Handle an Adjudication Notice

Upon receiving an adjudication notice, taxpayers should carefully review the contents, gather necessary documents, and consider seeking professional advice. Timely and appropriate responses can significantly influence the outcome.

Here are practical tips on how to effectively manage an adjudication notice:

  • Read the Notice Carefully

Understand the Details: Carefully review the notice to understand the specific issues raised, the proposed adjustments or penalties, and the deadlines for response. This is crucial for formulating an appropriate action plan.

  • Gather Relevant Documentation
  1. Compile Evidence: Collect all relevant documents, invoices, bank statements, and records that can support your case or clarify the discrepancies noted in the notice.
  2. Organize Documentation: Ensure that the documents are organized systematically for easy reference during the response preparation and hearing.
  • Consult a GST Professional

Seek Expert Advice: Considering the complexities involved in GST laws, consulting with a GST expert or tax advisor is advisable. They can provide valuable insights into the legal provisions, help in preparing the response, and represent you during hearings if necessary.

  • Prepare a Detailed Response
  1. Address Each Point: Your response should address each issue raised in the notice comprehensively. Provide clear explanations and attach supporting documents as evidence.
  2. Be Concise and Factual: Ensure that the response is to the point, factual, and supported by relevant laws or precedents.
  • Submit the Response on Time
  1. Adhere to Deadlines: Submit your response within the specified timeframe. Late submissions may lead to adverse decisions or penalties.
  • Attend the Hearing
  1. Be Present or Represented: If a hearing is scheduled, ensure that you or your authorized representative attends it. This is your opportunity to present your case directly to the adjudicating authority.
  2. Prepare for the Hearing: Before the hearing, prepare your arguments, anticipate questions, and organize your documents for presentation.
  • Follow Up
  1. Stay Informed: After submitting your response or attending the hearing, stay in touch with the GST department for updates on your case.
  2. Keep Records: Maintain a record of all communications, submissions, and documents related to the adjudication notice for future reference.
  • Consider Appeal Options
  1. Understand Your Rights: If the decision is not in your favor, understand your rights to appeal the decision and the timeline for filing an appeal.
  2. Prepare for Appeal: If you decide to appeal, prepare your case thoroughly with the help of your GST advisor, focusing on the legal grounds for contesting the adjudication order.
  • Implement Corrective Measures
  1. Rectify Issues: Based on the adjudication process, take corrective measures to rectify any identified compliance issues or discrepancies in your GST filings or practices.
  • Maintain Good Compliance Practices
  1. Review GST Compliance: Regularly review your GST compliance processes to prevent future discrepancies or non-compliance issues.
  • Consequences of Non-Compliance

Non-compliance with an adjudication notice can lead to severe consequences, including fines, penalties, and legal action. It underscores the importance of adhering to GST regulations and promptly addressing notices.

  • Penalties and Fines
  1. Monetary Penalties: Non-compliance can result in hefty fines and penalties. The amount may vary depending on the nature of the non-compliance, such as late filing of returns, underreporting of sales, or failure to register under GST if required.
  2. Interest Charges: Late payments of GST liabilities attract interest charges, adding to the financial burden on the taxpayer.
  • Legal Action
  1. Prosecution: Serious offenses, such as tax evasion, fraud, or repeated non-compliance, can lead to legal prosecution. This could result in imprisonment, in addition to financial penalties.
  2. Suspension or Cancellation of GST Registration: Repeated or severe non-compliance can lead to the suspension or cancellation of the taxpayer’s GST registration, affecting the ability to conduct business.
  • Audit and Scrutiny
  1. Increased Scrutiny: Taxpayers who are non-compliant may be subjected to increased scrutiny from the tax authorities. This could involve detailed audits, inspections, and reviews of past filings.
  2. Disruption of Business Operations: The audit process can be time-consuming and disruptive to business operations, requiring significant resources to address the authorities’ inquiries.
  • Loss of Input Tax Credit (ITC)
  1. Ineligibility for ITC Claims: Non-compliance can lead to disqualification from claiming Input Tax Credit, impacting the business’s profitability and cash flow.
  2. Reversal of Claimed ITC: In cases of incorrect ITC claims, the authorities can demand a reversal of the credit, along with applicable interest and penalties.
  • Reputational Damage
  1. Negative Impact on Business Reputation: Legal actions, penalties, and audits can harm a business’s reputation, affecting its relationships with partners, suppliers, and customers.
  2. Loss of Trust: Non-compliance can lead to a loss of trust among stakeholders, including financial institutions, which may affect future financing opportunities.
  • Impact on Compliance Rating
  1. Lower Compliance Rating: GST authorities maintain a compliance rating for businesses, which can be negatively affected by instances of non-compliance.
  2. A lower rating can influence the willingness of other businesses to engage in transactions with the non-compliant entity.
  • Obstacles in Business Transactions
  1. Difficulty in Obtaining Refunds: Non-compliant taxpayers may face difficulties in obtaining refunds from the tax authorities.
  2. Challenges in Interstate Transactions: Cancellation or suspension of GST registration can hinder the ability to conduct interstate transactions, affecting the business’s market reach.
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Tips to Prevent the Issuance of an Adjudication Notice

Preventive measures, such as regular compliance checks, accurate tax filings, and maintaining proper records, can significantly reduce the risk of receiving an adjudication notice.

  • Rights of the Taxpayer during Adjudication

Taxpayers have specific rights during the adjudication process, including the right to be heard, the right to legal representation, and the right to appeal against adverse decisions.

  • Appeal Mechanism against Adjudication Orders

The appeal system under the GST framework has a structured process through which taxpayers can challenge the adjudication orders in higher authorities, and this way ensures fair and just solution to the disputes.

Conclusion

Taxpayers should embrace the role of the prudent in the compliance efforts and appreciate the rights they have during the adjudication, as well as the remedies for any review of the adjudication orders that may be performed.

Through the process of staying informed and prepared, taxpayers can navigate through the humongous complexity of GST adjudication more confidently, and at the same time, they can also be sure that they are paying their taxes correctly while at the same time protecting their interest from GST adjudication.

In summary, the adjudication procedure followed under GST is meant to be impartial, transparent, and effective, attempting to resolve disputes amicably while ensuring that people respect tax laws. Through an understanding of this process and interacting with it in a constructive way, taxpayers can help make it a more effective and equal tax system.

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FAQs

What triggers the issuance of an adjudication notice under GST?

An adjudication notice under GST is typically issued when there is a discrepancy or non-compliance detected during an audit, investigation, or assessment by tax authorities, such as underreported sales, incorrect tax credits claimed, or non-payment of taxes due. This notice serves as a formal intimation to the taxpayer about the issues identified and provides an opportunity to present their case before the final determination of tax liability. The process aims to ensure that the taxpayer’s rights are protected while upholding the integrity of the GST framework

How can taxpayers appeal against an adjudication order?

Taxpayers can appeal against an adjudication order under GST by filing an appeal with the Appellate Authority within three months from the date of receiving the adjudication order. The appeal must be supported by a detailed statement of facts, grounds of appeal, and any relevant evidence. If the taxpayer is not satisfied with the decision of the Appellate Authority, further appeals can be made to the Appellate Tribunal, and subsequently, to the High Court and the Supreme Court, based on the hierarchy of appeal.

What are the powers of the Adjudicating Authority under GST?

The Adjudicating Authority under GST has the power to determine tax liability, including assessing taxes, penalties, and interest due from taxpayers who are found non-compliant with GST laws. This authority can conduct hearings, review evidence, and make decisions regarding the applicability of taxes and penalties. It also has the power to demand relevant documents, enforce attendance of the person concerned, and order audits or inspections to ascertain the correct tax liability. These powers enable the authority to ensure compliance and enforce GST regulations effectively.

What steps should a taxpayer take upon receiving an adjudication notice?

Upon receiving an adjudication notice under GST, a taxpayer should carefully review the notice to understand the discrepancies or non-compliances identified. It’s crucial to gather all relevant documents and evidence that support the taxpayer’s case. Consulting a GST expert or legal advisor for guidance on the matter is advisable. The taxpayer should then respond to the notice within the specified timeframe, presenting their case and evidence to contest the findings or comply with the notice, as applicable.

How can taxpayers prevent the issuance of an adjudication notice?

To prevent the issuance of an adjudication notice under GST, taxpayers should ensure accurate and timely filing of returns, maintain proper records and documentation of all transactions, and adhere strictly to GST laws and regulations. Regular audits and reconciliations of GST transactions can help identify and rectify discrepancies before they attract scrutiny. Staying informed about changes in GST laws and seeking professional advice for complex transactions are also key to ensuring compliance and avoiding potential disputes.

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