CBEC’s FAQs on Settlement Commission under GST

The FAQs related to Settlement Commission under GST as per compilation made by the NACEN of CBEC to acquaint stakeholders with the Model GST Law and its nuances, are as under:

Q 1. What are the basic objective of Settlement Commission?

Ans. The basic objectives of setting up of the Settlement Commission are:-

i. to provide an alternate channel for dispute resolution for the taxpayer;

ii. to expedite payment of GST involved in disputes by avoiding costly and time consuming litigation process;

iii. to provide an opportunity to tax payers to come clean who may have evaded payment of tax;

iv. to serve as a forum for the taxpayer to apply for settlement of their cases, on the basis of true and complete disclosure of their tax liability;

v. to encourage quick settlement of disputes and save the business from the worries of prosecution in certain situations.

Q 2. Can tax disputes arising on account of both intra-state and inter-state transactions be settled under the MGL?

Ans. In the Model GST Law, the provisions for Settlement Commission are incorporated only under the IGST Act (sections 11 to 26). This implies that cases cannot be settled in relation to tax liability pertaining to intra-state transactions. However, there is a possibility that those state tax administrations which want to constitute Settlement Commission can do so on the basis of the template provided under the IGST Act and the CGST Act can have an enabling provision drawing from the IGST Act for such states.

Q 3. What is meant by a Case under the provisions of Settlement in the MGL?

Ans. As per Section 11, Case means any proceeding under the IGST Act for levy, assessment and collection of IGST before an IGST officer or before a First Appellate Authority in connection with such levy, assessment or collection of IGST pending on the date on which an application for settlement is made. Case will also mean an order passed by an adjudicating authority for which the period of appeal has not expired.

It is clarified in the definition that an appeal filed after the expiry of the period of appeal or a case remanded by a higher judicial authority to a lower one will not be treated as a proceeding pending and therefore no application for settlement can be made in such cases.

Q 4. What will be the composition of members which will consider/hear settlement application?

Ans. Every application for settlement shall be heard by a bench presided over by the State Chairman and shall consist of two other members. The State Chairman shall be a sitting or a retired judge of a High Court. The other two members will be Technical members drawn from the CGST administration.

Q 5. What happens when there is difference of opinion amongst members hearing the settlement application?

Ans. Section 14 of the IGST Act provides that where the members of a bench of Settlement Commission differ on any point, the decision shall be taken on the basis of the majority opinion. It is provided that a decision can also be taken by a bench consisting of only two members, if the third member is not available due to factors like absence, illness or vacancy. If there is a difference of opinion between such two members, the matter will then be referred to a third member, and decision will be taken by the majority opinion.

Q 6. Who can apply for settlement?

Ans As per section 15 of the IGST Act, any taxable person can apply for settlement of a case in relation to which he has been issued one or more show cause notice(s) under the IGST Act and the same is pending before the adjudicating authority or the First Appellate Authority.

Q 7. What should be the contents of the settlement application?

Ans. The settlement application should contain full and true disclosure of:

i. tax Liability which has not been disclosed to the proper officer of IGST;

ii. manner of deriving such tax liability;

iii. additional amount of tax which he accepts to be payable;

iv. other particulars such as misclassification, exemption notification because of which he admits to short payment.

Q 8. What are the conditions which must be fulfilled before application for settlement can be accepted?

Ans. As per section 15 of the IGST Act, the following conditions must be fulfilled before an application for settlement of a case can be accepted:

(a) the applicant has furnished the return(s), which he is or was required to furnish under the IGST Act or this requirement has been waived by the Settlement Commission after recording the reasons that it was satisfied that certain valid circumstances existed for not filing the return(s);

(b) the applicant has received a show cause notice for demand of tax or has received an order confirming the demand of tax issued by the IGST officer and the same is pending before the First Appellate Authority;

(c) the additional amount of tax accepted by the applicant in his application exceeds five lakh rupees; and

(d) the applicant has paid the additional amount of tax accepted by him along with the interest due thereon under section 36 of the CGST Act.

Q 9. What are the circumstances in which application for settlement cannot be entertained?

Ans. As per section 15 of the IGST Act, in the following circumstances, Settlement Commission will not accept an application for settlement:

i. If the case involved in the application is pending with the Appellate Tribunal or any Court;

ii. If the application involves determination of any question having a bearing on the rate of tax or determination of liability to pay tax on goods and/or services;

iii. If the fees as prescribed has not been paid.

Q 10. Can the applicant withdraw his settlement application once filed?

Ans. No. As per section 15 of IGST Act, once an application has been made, it cannot be allowed to be withdrawn by the applicant.

Q 11. What orders can be passed by the Settlement Commission?

Ans. Settlement Commission shall pass an order providing for terms of settlement which shall include:

i. the amount of tax, interest, fine or penalty that is payable by the applicant (if this amount is not paid within thirty days or a further extended period of three months, it shall be recovered along with interest as sums due to Central Government in accordance with section 54 of CGST Act ); (section 16)

ii. manner in which the sums due under the settlement shall be paid; (section 16)

iii. granting immunity from prosecution for any offence under the IGST Act if no proceedings for prosecution were instituted on the date of receipt of the application and if the Settlement Commission is satisfied that the applicant has made a full and true disclosure of his tax liability; (section 20)

iv. granting immunity from imposition of penalty either in full or part under the IGST Act; (section 20)

v. Order provisional attachment of property of the applicant during the pendency of any proceeding before it. Such provisional attachment shall cease to have effect, once sums due to the Central Government for which attachment order was made, stands discharged and the evidence to this effect is submitted to the Settlement Commission; (Section 17)

vi. Send a case back to the jurisdictional IGST officer or the First Appellate Authority if it is of the opinion that the applicant has not cooperated with the Settlement Commission. In such case, the relevant adjudicating authority is entitled to use all material and information produced by taxable person before the Settlement Commission or the results of an inquiry held by the Settlement Commission; (section 21)

vii. Reopen any proceeding connected with the case concluded earlier and pass appropriate order. This can be done only after taking concurrence of the applicant and if five years have not expired for the concluded proceeding, counting from the date of application for Settlement. ( Section 18)

Q 12. What are the circumstances in which order of Settlement Commission can be revoked?

Ans. (i) Order of Settlement Commission shall be void if it is later found that it was obtained by fraud or misrepresentation of facts. Thereafter proceedings covered by the settlement shall stand revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and shall be concluded by the relevant original or appellate authority within two years from the date of receiving such communication from the Settlement Commission. (Section 16)

(ii) Order of Settlement Commission granting immunity from prosecution or payment of penalty can be withdrawn where it finds later that the applicant had concealed any facts or had given any false evidence or if he has failed to pay the sum specified in the settlement order in the prescribed time. (Section 20)

Q 13. Who cannot use Settlement Commission?

Ans. The following persons cannot avail of the facility of Settlement Commission?

i. No person can avail the facility of settlement more than twice. (section 23)

ii. A person cannot apply for settlement in any other matter where after passing of a 182 183 settlement order, a person was convicted of any offence under the IGST Act in relation to that case or where due to lack of cooperation from the applicant, the Settlement Commission has sent back the case to the relevant adjudicating authority. (section 23)

Q 14. What are the powers of Settlement Commission?

Ans. The powers and procedures of Settlement Commission are given in sections 25 and 26 of IGST Act. It is vested with the powers of a civil court under the Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and examining him on oath, and compelling production of books of account and other records. Settlement Commission is deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973. Any proceeding before it shall be deemed to be a judicial proceeding under section 193 and 228 and for the purpose of section 196, of the Indian Penal Code, 1860. The Settlement Commission also has the power to regulate its own procedure.

Section 193 of IPC, 1860 contains penal provision for giving false evidence during the proceedings and section 228 of IPC, 1860 contains penal provisions for intentionally insulting or interrupting the Officer sitting in settlement proceedings. Accordingly these provisions of IPC can be invoked where the person gives false evidence or interrupts the proceedings of the Settlement Commission.

Section 24 of the IGST Act gives power to Settlement Commission to amend its order to rectify any mistake apparent from the record within a period of three months from the date of the order. Such mistake may be noticed by the Settlement Commission on its own accord or may be brought to its notice by the applicant or the jurisdictional IGST officer. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.

CBEC’s FAQs on GST