Maharashtra GST Department Issues Circular On Assessment Of Non Genuine/ Non Existent Taxpayers

Vide internal circular no. 03A of 2022, dated 25.02.2022, the Maharashtra GST department has issued guidelines on assessment of non genuine/ non existent taxpayers under GST.

The Circular can be read as under:

Synopsis

Assessment of return non-filers w/s 62 is done as a measure to ensure filing of return. However, the taxpayers are detected as non-existent / non-genuine and the registrations are cancelled consequently, the issue of addressing the liability arising out of the UAO has cropped up which is dealt with in this circular.

1.) Background:

Best judgment non-filer assessment orders u/s 62 in case of return non-filers (hereinafter referred to as ‘UAO’), is very widely used in follow up of return defaulters who do not file return even after service of notice under section 46 (GSTR-3A notice). The guidelines for prioritization in passing of UAOs and subsequent action thereupon have been issued vide Internal Circular referred above at Sr. No. 01. However, certain issues have been cropped up in some of UAOs due to detection of non-genuine / non-existent taxpayers subsequent to such UAO. It has been noticed that demands of tax are raised under UAOs against such non-existent / non-genuine entities under the presumption of supplies made by them. However, these entities are indulged in bill trading or fake bill issuing without any underlying supply of goods or services and they are persons of no means. The demand raised under these UAOs is based on presumption of supply, which doesn’t exist in the cases of non-existent / non-genuine entity. Hence enforcing such demand from such non-existent / non-genuine entities would amounts to imposition of GST on transaction without supply of goods or services, which don’t augur to the test of law. The actual benefit of fake invoices issued without supply of goods or services are availed by actual beneficiary recipients of such non-existent / non-genuine entities. The conditions provided in section 16 (2) of the GST Act, which are pre-requisite for availing ITC, are not satisfied in case of ITC availed on the strength of fake invoices / bills. Therefore, the recovery actions to this effect needs to be enforced upon actual beneficiary. These presumptive demands in UAOs would un-necessarily give an opportunity to actual beneficiary recipients of such fake invoices to take shelter against recovery from them, which makes this issue of dues on account of non- an issue prejudicial to the interest of revenue.