Arnav Enterprises, a registered supplier located in Madhya Pradesh, has duly filed its monthly GST returns for the financial year 2024-25. During…

(1) The proper officer can issue a show cause notice within 42 months from the due date of furnishing the annual return for relevant financial year to which short payment relates to [Section 74A (2) ]. For the financial year 2024–25, the due date for furnishing the annual return is 31 st December, 2025. Therefore, the last date by which show cause notice can be issued by the proper officer for the amount of tax short paid by Arnav Enterprises is 30 th June 2029. Further, section 74A stipulates the same limitation period for issuance of show cause notice whether the short payment is on account of fraud or on account of a bonafide error. Thus, answer will remain same if the short payment of tax is on account of fraud. (2) The person chargeable with tax where any tax has been short paid, may, before service of show cause notice, pay the amount of tax along with interest payable under section 50 of such tax on the basis of his own ascertainment of such tax and inform the proper officer in writing of such payment, and the proper officer, on receipt of such information shall not serve any show cause notice in respect of the tax so paid or any penalty payable under the provisions of the CGST Act or the rules made thereunder [Section 74A (8) (i) ]. Thus, no penalty is payable by Arnav Enterprises in respect of payment of tax of 1,00,000 before issuance of show cause notice. No show cause notice will be issued by the proper officer in respect of the tax of 1,00,000 so paid. However, in case where the short payment of tax is on account of fraud, the person chargeable with tax, may before service of show cause notice, pay the amount of tax along with interest payable under section 50 and a penalty equivalent to 15% of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment, and the proper officer, on receipt of such information, shall not serve any show cause notice, in respect of the tax so paid or any penalty payable under the provisions of the CGST Act or the rules made thereunder [Section 74A (9) (i) ]. Thus, a penalty of 15,000 [₹ 1,00,000 × 15%] is payable by Arnav Enterprises alongwith payment of tax of 1,00,000 with applicable interest, before issuance of show cause notice. No show cause notice will be served by the proper officer after payment of tax alongwith interest and penalty, in respect of the tax so paid. (3) Since Arnav Enterprises has paid the tax of 1,00,000 alongwith interest before issuance of show cause notice, no show cause notice will be issued by the proper officer in respect of the tax so paid [Section 74A (8) (i) ]. However, where the proper officer is of the opinion that the amount paid under section 74A (8) (i) falls short of the amount actually payable, he shall proceed to issue the show cause notice in respect of such amount which falls short of the amount actually payable [Section 74A (10) ]. Thus, in the given case, the proper officer will issue the notice for the remaining tax of 3,60,000 [₹ 4,60,000 -1,00,000]. In case where the short-payment is on account of fraud, answer will be as follows: Since Arnav Enterprises has paid the tax of 1,00,000 alongwith applicable interest and penalty before issuance of show cause notice, no show cause notice will be issued by the proper officer in respect of the tax so paid [Section 74A (9) (i) ]. However, where the proper officer is of the opinion that the amount paid under section 74A (9) (i) falls short of the amount actually payable, he shall proceed to issue the show cause notice in respect of such amount which falls short of the amount actually payable [Section 74A (10) ]. Thus, in the given case, the proper officer will issue the notice for the remaining tax of 3,60,000 [₹ 4,60,000 -1,00,000]. Further, the proper officer is required to issue the order within 12 months from the date of issuance of show cause notice, in both fraud and non-fraud cases [Section 74A (7) ]. Thus, in the given case, the proper officer has to issue the order on or before 10 th October, 2026, whether the short payment is on account of fraud or on account of a bonafide error. (4) Where the person chargeable with tax, where any tax has been short paid, pays the said tax along with interest payable under section 50 within 60 days of issue of show cause notice, and on doing so, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded [Section 74A (8) (ii) ]. Thus, in the given case, since Arnav Enterprises has paid the tax of 3,60,000 alongwith applicable interest within 60 days of issuance of show cause notice, i.e. on or before 9 th December, 2025, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded. In case where the short-payment is on account of fraud, answer will be as follows: Where the person chargeable with tax, where any tax has been short paid, pays the said tax along with interest payable under section 50 and a penalty equivalent to 25% of such tax within 60 days of issue of the notice, and on doing so, all proceedings in respect of the said notice shall be deemed to be concluded [Section 74A (9) (ii) ]. Thus, in the given case, Arnav Enterprises has to pay penalty of 90,000 [₹ 3,60,000 ×25%]. If Arnav Enterprises has paid the tax of 3,60,000 alongwith applicable interest and penalty of 90,000 [₹ 3,60,000 ×25%] on 5 th December, 2025, which is within 60 days of issuance of show cause notice, i.e. on or before 9 th December, 2025, all proceedings in respect of the said notice shall be deemed to be concluded.