Understanding the Liability of unregistered persons under GST Laws
The implementation of the Goods and Services Tax (GST) in India brought about significant changes in the taxation system, aiming to streamline processes and enhance compliance. Among the various provisions outlined in the Central Goods and Services Tax (CGST) Act, Section 63 stands out as a crucial aspect concerning the assessment of unregistered persons under the GST regime. In this comprehensive write-up, we delve into the intricacies of Section 63, analysing its provisions, implications, and potential concerns.
1. Introduction to Section 63
Section 63 of the CGST Act serves as a pivotal provision governing the assessment of unregistered persons who are liable to obtain registration under Section 22 but have failed to do so. The section begins with a non-obstante clause, indicating that its provisions supersede those of Section 73 or 74 of the Act. Essentially, it empowers proper officers to assess taxable transactions and enforce demands, even in cases where the taxable person is unregistered.
2. Analysis of Section 63
One of the remarkable aspects of Section 63 is its jurisdictional reach. Despite being unregistered, individuals fall within the purview of assessment under this section. Proper officers are vested with the authority not only to identify taxable transactions but also to pass orders on a best judgment basis, independent of Sections 73 and 74. However, it is essential to note that procedures from these sections may apply to the extent they are not inconsistent with Section 63.
3. Key Ingredients for Attraction of Section 63
Several conditions must be met for Section 63 to apply effectively. Firstly, the taxable person must fail to obtain registration under Section 22. Additionally, cases where registration was cancelled under Section 29(2) are also covered by this provision. The issuance of a notice by the proper officer, typically in FORM GST ASMT-14 + DRC 1, initiates the assessment process.
4. Concerns and Issues
While Section 63 empowers proper officers to assess unregistered persons, its discretionary nature raises certain concerns. The need for substantial information before initiating proceedings under this section is crucial to ensure fairness and compliance. Moreover, unregistered persons are not subject to annual returns or audits under the CGST Act, which may pose challenges in assessing their tax liabilities accurately.
5. Judicial Review
Any procedure bypassing the issuance of a show cause notice (SCN) is open to judicial review for illegality, irrationality, procedural impropriety, and proportionality. Courts play a crucial role in ensuring adherence to the rule of law and natural justice principles. Judicial intervention may be sought to address any violations or irregularities in the assessment process under Section 63.
Conclusion
In conclusion, Section 63 of the CGST Act plays a significant role in the assessment of unregistered persons under the GST regime. While it grants jurisdiction to proper officers to assess tax liabilities, its application and implications are subject to scrutiny and judicial review. Upholding the principles of fairness, legality, and natural justice is essential in ensuring the effectiveness and integrity of the GST assessment process.
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