The GST Council has issued detailed guidelines on authority regarding action consequential to issuance of show cause notice (SCN). The guidelines also prescribe mechanism to be followed in case of recurring SCN.

This issue is critical as GST assesses are distributed between Centre and States on the basis of annual turnover. Of total taxpayers having an annual turnover of less than ₹1.5 crore, 90 per cent will under administrative control of State Tax Department, while the remaining 10 per cent are with the Centre. In case of taxpayers with turnover above ₹1.5 crore , all administrative control shall be divided equally in the ratio of 50% each for Central and State tax administration.

Division of taxpayers in each State is done by computer, based on stratified random sampling and could also take into account the geographical location and type of taxpayers.

Enforcement action

Since enforcement action against any of taxpayer can be initiated by both, so there is always complication and confusion too in taking the enforcement action forward. Keeping this in mind, GST Council Secretariat has brought in template for uniform action. This is based on recommendation by GST Council meeting held in June.

Accordingly, it has been said that a taxpayer located within a State is open to enforcement action by both authorities. For example, an enforcement action against a taxpayer assigned to State tax authorities, can be initiated by Central tax authorities (and vice versa). In such cases, all consequential action relating to the case including (but not limited to) appeal, review, adjudication, rectification, revision will lie with the authority that initiated the enforcement action i.e. the Central tax authorities in the instant case. Refund in such cases may, however, be granted only by jurisdictional tax authority, administering the taxpayer.

Since issuance of recurring SCNs does not involve any fresh investigation, “it may be desirable that such further/ recurring SCNs are issued by the actual jurisdictional authorities (that is responsible for assessment of the taxpayer’s returns). This, as they will be in a position to access records and returns taxpayers, and to check whether the grounds of SCN still exist or not, and take a view/ action for issuance of recurring SCN, based on facts in the said period.“

This means even if the initial SCN is issued central administration, but the taxpayer concerned is under State administration, then recurring SCN will need to issued only by States and vice versa.