GST Show Cause Notice Lawyer in Bengaluru
Legal Basis of SCNs in Bengaluru
A Show Cause Notice (SCN) under GST in Bengaluru is a formal demand issued under Section 73 (non-fraud) or Section 74 (fraud/suppression). The process involves DRC-01A (intimation), DRC-01 (notice summary), and DRC-06 (reply). Given Bengaluru’s focus on the IT/ITES and startup ecosystem, SCNs often involve complex issues of classification and place of supply.
Common Grounds for SCNs in Bengaluru Matters
- Place of Supply Disputes: Characterization of services as “export of services” vs. “intermediary services,” particularly for IT support, back-office, and SaaS companies.
- Input Tax Credit (ITC): Ineligibility of ITC on common inputs for taxable and exempt supplies, and issues related to Rule 86A (blocking of credit).
- Valuation: Disputes regarding the valuation of software, intellectual property, and inter-company cross-charges.
- E-invoicing and E-way Bill: Mismatches and compliance gaps related to the digital reporting framework.
Procedural Steps for an Effective Reply
- Analysis of Notice: Scrutinize the SCN for allegations related to service classification, place of supply, and ITC. Verify the period and quantification.
- Evidence Collation: Compile Master Service Agreements (MSAs), Statements of Work (SOWs), foreign inward remittance certificates (FIRCs), software invoices, and detailed cost allocation workings.
- Reconciliation: Prepare reconciliations of revenue as per financials vs. GSTR-1, and ITC as per books vs. GSTR-2B, paying special attention to export and zero-rated supply data.
- Drafting the Reply (DRC-06): Draft a detailed reply addressing the specific nature of the services provided, substantiating the “export” status with evidence, and providing a legal basis for ITC claims.
- Filing and Hearing: Submit the reply via the GST portal and prepare a technical synopsis for the personal hearing, often involving detailed process walkthroughs.
Evidence and Documentation Checklist
- Complete SCN with all annexures.
- MSAs, SOWs, and other client contracts.
- Invoices with foreign currency and corresponding FIRCs/bank statements.
- Employee cost allocation and other workings for common ITC.
- GSTR-1, GSTR-3B, GSTR-2B, and annual returns.
- Correspondence with overseas clients establishing the nature of the service.
AMLEGALS – Bengaluru Office
For assistance with GST Show Cause Notices in Bengaluru, please contact our local office for a Confidential Consultation at info@amlegals.com or call on boardline on 91-8448548549.
Frequently Asked Questions (FAQs)
1. How do we defend our services as “export of services” and not “intermediary”? The defense rests on proving you are the principal service provider to the overseas client, not merely an agent facilitating a supply. This is evidenced through contracts (MSAs/SOWs), invoicing in your name, and receiving payment directly from the foreign entity.
2. What documents are crucial for defending ITC on common inputs? An Input Service Distributor (ISD) registration, a clear cost allocation methodology note, board resolutions, and detailed workings demonstrating the nexus of the input service with both taxable and zero-rated supplies are crucial.
3. How to respond to an SCN based on Rule 86A (blocked credit)? The reply must challenge the basis for the “reason to believe” that the credit is fraudulent or ineligible. Provide evidence of genuine transactions, vendor payments, and receipt of goods/services to seek the unblocking of the credit.
4. What if the SCN misinterprets our SaaS business model? Your reply must include a detailed note explaining your business model, how the software is delivered, the revenue recognition policy, and why it qualifies as a specific type of service (e.g., OIDAR) under the correct place of supply rules.
5. Is a pesonal hearing available in SCNs? A personal hearing (physical or virtual) is always necessary and should be requested.
6. Can we submit expert opinions (e.g., from a technical expert) with our reply? Yes, for complex classification or valuation disputes, a supporting opinion from a relevant industry or technical expert can be submitted as part of your annexures to strengthen your case.
7. How should we handle SCNs related to ESOPs or cross-charges from a foreign parent company? The reply must address the valuation principles under GST rules for related-party transactions. Provide documentation like transfer pricing studies, agreements, and debit notes to justify the valuation method adopted.
8. What is the time limit for filing an appeal against an adjudication order? The time limit is three months from the date of communication of the order to file an appeal with the first appellate authority under Section 107.
