Why tax officers issue show cause notices after the filing of GSTR-10?

Scenarios Where a Tax Officer May Issue a Show Cause Notice (SCN) After Filing GSTR-10

Even after filing GSTR-10 (Final Return), a Show Cause Notice (SCN) may be issued by the tax officer in the following cases:

1️⃣ Discrepancies in ITC Reversal

📌 If the taxpayer fails to reverse the required Input Tax Credit (ITC) on closing stock, capital goods, or inputs.

📌 If the ITC reversal amount declared is lower than what is actually required.

💡 Example: The taxpayer has closing stock worth ₹10 lakh but reverses ITC on only ₹5 lakh. The tax officer may issue an SCN to demand the remaining reversal.

2️⃣ Underreported or Pending Tax Liabilities

📌 If there are unpaid tax dues or differences between GSTR-10 and past returns (GSTR-1 & GSTR-3B).

📌 If there is any previous tax liability pending, the officer may demand its payment before approving cancellation.

💡 Example: The GST portal auto-computes pending tax based on past filings, but the taxpayer fails to clear outstanding dues before filing GSTR-10.

3️⃣ Mismatch in Sales Turnover & Tax Paid

📌 If the declared turnover in GSTR-1, GSTR-3B, and GSTR-10 do not match, an SCN may be issued.

📌 If output tax liability is lower than what was reported in previous returns, the tax officer may demand clarification.

💡 Example: If past GSTR-1 shows ₹50 lakh in sales, but GSTR-10 reflects lower turnover or incorrect liability, an SCN may be issued.

4️⃣ Non-Filing or Late Filing of GSTR-10

📌 If the taxpayer fails to file GSTR-10 within the due date (3 months from cancellation approval).

📌 A notice may be issued under Section 46 of the CGST Act, directing the taxpayer to file immediately or face penalties.

💡 Example: A business that closed in January 2025 must file GSTR-10 by April 2025. If not filed, an SCN may be sent.

5️⃣ Non-Payment of Interest or Late Fees

📌 If there are pending interest dues or late fees for delayed payments in past returns.

📌 If the taxpayer fails to pay applicable penalties or interest while filing GSTR-10.

💡 Example: If the taxpayer has outstanding late fees from delayed past GSTR filings, the officer may issue an SCN before approving cancellation.

6️⃣ Failure to Provide Supporting Documents

📌 If the tax officer requires additional documents for verification and the taxpayer fails to provide them.

📌 Documents like ITC-03 (for ITC reversal), Stock Details, CA Certificate (if ITC reversal exceeds ₹2 lakhs) may be requested.

💡 Example: If the taxpayer does not submit a CA Certificate for ITC reversal above ₹2 lakhs, an SCN may be issued.

7️⃣ Suspected Tax Evasion or Fraudulent Transactions

📌 If the department suspects fake invoicing, tax evasion, or fraudulent claims before cancellation.

📌 If the taxpayer has large ITC claims with no actual business operations, scrutiny may be conducted.

💡 Example: If a business claimed high ITC but had no genuine purchases, the officer may issue an SCN to investigate before cancellation.

What Happens After Receiving a Show Cause Notice?

✅ Respond within the specified deadline (typically 15-30 days).

✅ Provide explanations & supporting documents to justify discrepancies.

✅ If the tax officer is satisfied, the SCN may be withdrawn.

✅ If the response is unsatisfactory, penalties or additional tax liabilities may be imposed.

Conclusion

To avoid SCNs, ensure that GSTR-10 is filed correctly, all liabilities are cleared, and ITC is reversed properly.

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