In a recent development, the Supreme Court upheld the Patna High Court's decision to dismiss a taxpayer's writ petition challenging a GST assessment order in the case of Vishwanath Traders. This ruling carries significant implications for SMEs, MSMEs, small business owners, and professionals. Many of these entities, due to delays in appealing, often directly approach high courts to address demand notices. Sunil Gabhawalla, a founding partner at a CA firm, highlighted that responding to a demand notice through an appeal must occur within three months. If there's a delay, individuals can seek a one-month extension from the jurisdictional appellate commissioner. However, if more than four months have passed, the only available course of action is to file a writ with the high courts.
Due to assessment orders being delivered online via the GST portal, many small taxpayers fail to stay updated. Frequently, the four-month window expires before they even become aware of the raised demand.
Manish Gadia, a partner at GMJ & Co, a chartered accountancy firm, remarked, "The practice of issuing notices electronically through the central portal commenced in the fiscal year 2020-21. Regrettably, smaller taxpayers lack the capacity to monitor the portal on a daily basis. For numerous such taxpayers, notifications and payment requests have accumulated. Adding to the predicament, bank accounts have started being seized due to outstanding payments over the last few months. Normally, it is at this juncture that the small taxpayer becomes conscious of the notice."
As per tax professionals, notifications via emails and text messages about an uploaded demand notice on the portal are not consistently dispatched. Furthermore, the contact details provided by SMEs/MSMEs typically belong to employees, and the frequent turnover rate results in these messages missing their mark.
With the highest court concurring with a high court's decision to dismiss a writ petition, this avenue becomes arduous. Gabhawalla remarked, "While the Supreme Court's ruling aligns with the accurate legal interpretation, it essentially closes off all available paths for such taxpayers."
"If the option of filing a writ petition is barred, the entire amount must be settled. Frequently, the tax assessment is escalated, leading to substantial fines... coupled with mandatory interest," Gabhawalla further elaborated.
Both tax experts share the sentiment that it's crucial for SMEs to be more vigilant in regularly checking for demand notices. The government might also contemplate amending the legislation to allow delayed appeals in authentic cases involving SMEs and small taxpayers.
