GST Classification and Taxability Framework for Veterinary and Pet-Care Service Providers

A Professional Guidance Note for Clinics, Hospitals, Boarding Facilities, Grooming Centres, Training Providers, Retail Stores, and Integrated Pet-Care Chains

By CA Surekha S Ahuja

Introduction: The GST Challenge in Veterinary Ecosystems

Veterinary service providers today operate in a hybrid ecosystem that includes medical healthcare, grooming, wellness, lodging, training, physiotherapy, behavioural services, retail of pet goods, sale of live animals, and ancillary services. GST classification disputes frequently arise because the legislation provides a blanket exemption only to healthcare, leaving all non-medical activities squarely taxable.

The purpose of this guidance note is to provide a complete, authoritative, and defensible GST framework covering classification, SAC coding, tax rates, boundary identification, documentation, invoicing design, ITC optimisation, and audit risk management. This advisory consolidates the entire legal, practical, and technical landscape applicable in 2025–26.

Statutory Foundation: Healthcare Exemption for Veterinary Services

Under Entry 46 of Notification No. 12/2017 – Central Tax (Rate), “services by a veterinary clinic in relation to health care of animals or birds” are fully exempt from GST.

This exemption is broad but strictly limited to diagnosis, treatment, preventive medical procedures, surgical care, inpatient care, and post-operative services, including any intervention rooted in therapeutic intent.

To fall under the exemption, the service must satisfy three elements:

1. Clinical Assessment – The service should originate from or be supported by a veterinary assessment or documented clinical need.

2. Diagnostic or Therapeutic Purpose – The objective must relate to medical restoration, healing, recovery, or disease prevention.

3. Veterinarian-Led Delivery – The intervention must be either performed or directed by a qualified veterinary professional.

This legal foundation forms the guiding lens for classification throughout this note.

Comprehensive SAC and Taxability Classification

A. Exempt Veterinary Healthcare Services (SAC 9993 Series)

These services fall unequivocally under the exemption when adequately supported by clinical documentation.

Service Type	SAC	GST Rate	Key Requirements
Clinical consultation, physical examination	999311	Exempt	Clinical findings recorded
Diagnostic services (laboratory, imaging, pathology, ultrasound)	999312	Exempt	Diagnostic order and report
Surgeries including implants and anaesthesia	999313	Exempt	Operative notes and implant specifications
Hospitalisation and inpatient care	999321	Exempt	Admission/discharge notes
Post-operative treatment and medical physiotherapy	999391	Exempt	Treatment schedule and vet prescription
Emergency and critical care	999399	Exempt	Emergency assessment

Boundary logic: The presence of clinical documentation is the decisive element.

B. Grooming and Cosmetic Services (SAC 998612 at 18%)

Cosmetic grooming, aesthetic procedures, routine ear cleaning, bathing, hair trimming, styling, and de-shedding are fully taxable.

Tax shift rule:
If the grooming is medically indicated (parasite removal, wound dressing, dermatitis care), supported by vet notes, the service moves to SAC 999312 (Exempt).

C. Boarding, Lodging, and Day-care (SAC 996311 at 18%)

Boarding and lodging services are taxable when they are custodial, hospitality-based, or comfort-oriented.

However, medical boarding—i.e., boarding required post-surgery, during recovery, or as part of a treatment plan—falls under SAC 9993, and is exempt.

D. Behavioural Training, Obedience Schooling, Fitness and Agility Coaching (SAC 999799 at 18%)

These services are fully taxable unless they form part of a prescribed medical rehabilitation plan, in which case the service shifts to 999391 (Exempt).

E. Retail Sale of Goods (HSN-Based Taxability)

Where a veterinary business operates a retail counter or online store, the classification shifts to HSN-based taxation.

Goods Category	HSN	GST Rate
Pet food including wet, dry, treats	2309	18%
Veterinary medicines	3003/3004	5% or 12%
Pet accessories (collars, harnesses, beds, leashes, cages, toys, grooming equipment)	4201/4202/Other relevant HSN	18%
Nutraceuticals and supplements	Relevant HSN	12% or 18%

F. Sale of Live Animals

Type	HSN	Indicative Rate	Notes
Livestock (bovine, ovine, caprine, equine, poultry, fish)	0101–0106	Exempt or 5%	Species-specific
Pets (dogs, cats, ornamental fish, exotic pets)	0106	Typically 18%	Depends on species, breeding nature, notifications
Commercial pet store sales	0106	Usually 18%	Treated as supply of goods

The seller must ensure classification accuracy as misclassification of exotic animals attracts heightened scrutiny.

Classification Framework: Medical vs. Non-Medical Determination

Core Analytical Test: Clinical Documentation Test

A service is exempt only when clinical records support diagnostic or therapeutic intent. In the absence of documentation, the transaction defaults to taxable.

Additional Boundary Tests

• Purpose Test – Is the service medically required or cosmetic?
• Skill Requirement Test – Can a non-veterinarian perform it?
• Outcome Test – Does it restore health or improve appearance?
• Bundling Test – Is it naturally bundled with medical care?

This multi-layered test ensures defensible classification during audits.

Billing Structure: The Five-Invoice Model for Clean Segregation

To avoid composite supply disputes and maintain audit clarity, the following model is recommended:

1. Healthcare Invoice – Exempt; SAC 9993 series

2. Grooming Invoice – Taxable; SAC 998612

3. Training Invoice – Taxable; SAC 999799

4. Boarding Invoice – Taxable; SAC 996311 (unless medical)

5. Retail Invoice – Goods; relevant HSN

6. Sale of Live Animals – Goods; HSN 0106 series

Segregation ensures correct GSTR-1 mapping and prevents misclassification.

ITC Treatment for Mixed Operations

Where a veterinary business supplies both exempt (healthcare) and taxable (grooming, retail, boarding, training) services, ITC must be apportioned under Rules 42 and 43.

A. Monthly Rule 42 Formula

Eligible ITC = Total common ITC × (Taxable turnover ÷ Total turnover)

Example:
• Total revenue: ₹5,00,000
• Taxable revenue: 40 percent
• Eligible proportion of common ITC: 40 percent
• Remaining ITC reversed in GSTR-3B under Table 4(B)(2)

B. Capital Goods (Rule 43)

Capital goods used in both divisions (e.g., ultrasound machine, X-ray equipment) require proportional ITC reversal over 60 months.

Documentation and Compliance Requirements

For exempt healthcare services

• Examination notes
• Diagnostic orders and results
• Surgical and anesthesia records
• Discharge summaries
• Treatment plans
• Evidence of medical necessity for physiotherapy or boarding

For taxable services

• Detailed grooming and boarding registers
• Training logs
• Material consumption registers
• SAC mapping registers
• Clear separation between staff performing medical vs non-medical tasks

Return and Reconciliation Requirements

• Monthly reconciliation between GSTR-1, GSTR-3B, books, and e-invoices
• Turnover bifurcation ledger
• Exempt and taxable summary sheets
• Annual return mapping

Recommended Business Organisation Model

A two-division model offers the highest compliance efficiency.

Division A: Veterinary Healthcare (Exempt)

Purely therapeutic operations. No ITC claim.

Division B: Wellness, Grooming, Training, Boarding, Retail (Taxable)

Attracts 18 percent GST and offers full ITC credit.

Benefits:
• Zero risk of exemption disputes
• Optimised ITC
• Simplified accounting
• Clear business segmentation
• Strong audit defensibility

Quick Reference Summary Table

Category	SAC/HSN	GST Rate	Classification Principle
Veterinary healthcare	9993 series	Exempt	Clinical documentation required
Grooming	998612	18%	Cosmetic unless medically prescribed
Boarding	996311	18%	Medical boarding exempt
Training	999799	18%	Rehabilitation therapy exempt
Retail	Relevant HSN	5–18%	Goods classification
Live animals	0101–0106	Exempt–18%	Species-specific

Conclusion

The veterinary sector sits at the intersection of exempt healthcare and taxable wellness services, making accurate GST classification essential for risk mitigation, pricing strategy, and operational efficiency. This guidance note provides a complete framework that integrates statutory interpretation, SAC classification, ITC rules, practical billing methodology, and documentation discipline into a single, comprehensive compliance model.

Veterinary service providers that implement the layered classification tests, maintain disciplined documentation, and adopt the five-invoice structure can operate with confidence, reduced audit exposure, and optimal tax efficiency.

Foreign Asset Disclosure in ITR – AY 2025–26

Professional Compliance, Risk Analysis, and Practical Guidance
By CA Surekha S Ahuja

Introduction: The Compliance Imperative

In today’s interconnected financial world, foreign assets are fully traceable. India participates in CRS and FATCA, enabling the Income Tax Department to receive verified data from hundreds of jurisdictions.

For AY 2025–26, the Department has identified high-risk cases where foreign assets are not reported in ITRs. SMS and email alerts have been sent to taxpayers, who now have until 31 December 2025 to revise returns or face penalties.

This note provides a comprehensive professional guide, covering law, intent, enforcement, penalties, risks, and procedural solutions, including revised ITR for AY 2025–26 and ITR-U for earlier years.

Legal Framework: Statutory Obligations

• Income-tax Act, 1961

  • Section 139(1): Requires all ROR taxpayers to disclose all foreign assets in Schedule FA.

  • Section 149: Reopening of assessments for foreign matters up to 16 years.

  • Rule 12 & ITR Forms: Specify reporting format and timeline.

• Black Money (Undisclosed Foreign Income & Assets) Act, 2015 (BMA)

  • Tax: 30% of asset value

  • Penalty: 90% of asset value

  • Prosecution: Up to 10 years

  • Applies even to historic assets or if foreign tax has been paid.

• CRS & FATCA Data Exchange

  • Annual sharing of bank accounts, investments, pensions, insurance, trusts, and entities.

  • Automatic cross-verification with ITR filings.

  • Non-disclosure flags high-risk cases.

Key Principle: Any foreign asset over which the taxpayer has ownership, control, or beneficial interest must be disclosed.

Legislative Intent: Purpose Behind Disclosure

1. Prevent Offshore Tax Evasion: Identify undisclosed accounts, layered investments, and untaxed foreign income.

2. Encourage Voluntary Compliance: Early correction reduces penalties and prosecution risk.

3. Align with Global Norms: CRS and FATCA obligations require domestic transparency.

Scope of Schedule FA: What to Disclose

• Bank Accounts: Active, dormant, joint, inherited, closed

• Investments: Foreign equities, bonds, mutual funds, ETFs, RSUs/ESOPs

• Insurance & Retirement Funds: 401(k), IRA, superannuation, foreign pensions

• Business/Entity Interests: Foreign companies, partnerships, trusts (all roles)

• Property Abroad: Residential, commercial, direct, or indirect

• Digital/Crypto Assets: Foreign wallets, exchanges

• Other Rights: Royalties, IP income, nominee accounts

Rule of Thumb: If the asset exists outside India and provides financial benefit, it must be disclosed.

Current Enforcement: AY 2025–26 Posture

• High-Risk Identification: AI-driven matching of foreign asset data vs. Schedule FA.

• SMS/Email Nudges: Alert taxpayers to revise ITRs by 31 December 2025.

• Past Year Performance: 24,678 taxpayers revised returns, disclosing ₹29,208 crore in assets and ₹1,089.88 crore in foreign-source income.

• Frequently Affected Groups: Senior citizens, retired NRIs, parents with joint accounts, RSU/ESOP holders.

Voluntary revision now avoids presumptions of concealment.

Consequences of Non-Disclosure

Income-tax Act

• Reopening under Section 149

• Penalty under Section 270A (200% of under-reported tax)

• Prosecution under Sections 276C/277

Black Money Act

• Tax: 30% of asset value

• Penalty: 90% of asset value

• Combined: 120% of asset value

• Prosecution: Up to 10 years

• Confiscation possible

Additional Risks: PAN flagged high-risk, restricted remittances, FEMA scrutiny, loss of treaty benefits, reputational and financial risk.

Procedural Solutions: Corrective Measures

1. Audit All Foreign Assets: Bank accounts, ESOPs, pensions, trusts, property.

2. Reconcile with Schedule FA: Confirm balances, ownership, and foreign-source income.

3. File Revised or Updated ITR:

   • AY 2025–26: File a revised ITR before 31 December 2025.

   • Earlier two years: Use ITR-U (Updated ITR) to report previously undisclosed foreign assets.

4. Maintain Documentation: Bank statements, acquisition proofs, foreign taxes paid, valuations.

5. Respond Promptly to Notices: Address SMS/email alerts professionally.

6. Seek Expert Guidance: Complex assets like trusts, RSUs, crypto, and cross-border investments require professional interpretation.

Foreign Asset Disclosure Checklist

• ✔ Bank accounts (active, dormant, joint, closed)

• ✔ Brokerage/custodial accounts, RSUs/ESOPs

• ✔ Foreign shares, ETFs, bonds

• ✔ Overseas property (residential/commercial)

• ✔ Foreign entities, trusts, partnerships

• ✔ Insurance and retirement funds

• ✔ Crypto or digital assets abroad

• ✔ Foreign royalties, IP income, nominee accounts

Guiding Principle: When in doubt, disclose it.

Conclusion: Transparency as Protection

Foreign asset disclosure is no longer a formality—it is financial self-protection.

Proactive, accurate, and well-documented disclosure ensures compliance, preserves legacy, and mitigates severe penalties.

“What you voluntarily disclose today will always cost less than what the system discovers tomorrow.”

For AY 2025–26, revision and professional documentation are critical, while earlier years can be regularized using ITR-U, ensuring full compliance and minimizing enforcement risk.

Black Money Act: Procedural Safeguards, Defence Walls, and Protecting Honest Taxpayers Across Scenarios

A Professional and Authoritative Guide for Deceased Assessees, Legal Heirs, Seniors, and NRIs

By CA Surekha S. Ahuja

Introduction — When the Law Protects the Innocent

The Black Money (Undisclosed Foreign Income and Assets) Act, 2015 (BMA) is India’s most stringent fiscal law. Penalties are severe, including tax and equal penalties, with potential prosecution exposure.

Yet, the law is procedural at its core. Every misstep by authorities — issuing rash SCNs, ignoring replies, failing approvals, or relying on assumptions — can invalidate penalties.

This guide addresses all eventualities where taxpayers are affected:

• Orders issued rashly or mechanically

• Posthumous penalties

• Impact on legal heirs

• Senior citizens or citizens with prior full tax compliance

• NRIs with overseas income/assets

• Prior search or ITAT assessments with clean findings

Key Truth: If the department misapplies the law, how can any honest citizen — young, old, educated, uneducated, resident, or NRI — rest peacefully, having paid full taxes in their lifetime?

This post equips readers with procedural weapons, defence walls, and winning strategies.

Rash or Mechanical SCNs — The Achilles Heel

A majority of BMA penalties fail because SCNs:

• Do not acknowledge submitted replies

• Ignore prior search or ITAT assessments

• Assume ownership or benefit mechanically

• Impose deadlines without statutory justification

Legal Foundation:

• SC – Mohinder Singh Gill: natural justice requires meaningful reply consideration

• Delhi HC – Sabh Infrastructure: mechanical orders without reasoning = null and void

Winning Strategy:

• Document all replies submitted

• Point out non-application of mind

• Emphasize absence of specific evidence

Deceased Assessees — Law Shields the Dead

Orders issued posthumously violate natural justice:

• SCN to deceased = void ab initio

• Legal heirs cannot be penalized without proof of benefit or control

• Prior search-based assessments (AYs 2005-06 to 2015-16) with no adverse finding are binding

Procedure:

• Submit death certificate & succession proof

• Attach prior ITAT or search assessment orders

• Demonstrate absence of beneficial ownership or inflow to heirs

Outcome: Departments issuing posthumous SCNs risk complete nullification of penalties, and courts consistently protect estates.

Legal Heirs — Protecting Innocent Parties

Legal heirs are sometimes implicated without evidence of actual benefit.

• Liability arises only if heirs funded, controlled, or benefited

• Mere inheritance or nominee designation is insufficient

Strategy:

• Affidavits from heirs confirming no benefit received

• Map fund flows and corporate records

• Forensic CA certificates tracing funds and ownership

Verdict Trend: Courts have repeatedly held heirs cannot be penalized for inherited assets or unearned benefits, unless deliberately misused.

Senior Citizens, Law-Abiding Taxpayers, and NRIs

Many honest taxpayers — including seniors, residents, and NRIs — have:

• Paid all taxes fully

• Disclosed income transparently

• Submitted IT returns for decades

Reality: They may still receive rash SCNs alleging foreign assets.

Legal Protection:

• Section 46 & 47 BMA — SCN must provide reason, evidence, hearing, and be time-bound

• Prior assessments (ITAT, search) are binding unless fresh evidence emerges

• Natural justice applies equally to all, irrespective of age, status, or NRI status

A Practical Reality: Many taxpayers save money to ensure their children, settled abroad, can live with dignity or pursue opportunities outside India. They pay full taxes but face harassment from mechanical BMA orders. Children, seeing parents’ age, illness, and tension, often do not wish to return to India, fearing repeated scrutiny.

Policy Insight: The BMA was intended for undisclosed income of corrupt officers, politicians, or powerful individuals, not honest citizens. Punitive action should target procedural lapses by officers, not taxpayers who have lived and complied by the law. “Jiska khaya, usko maro” should never guide law enforcement. Courts increasingly recognize that procedure, evidence, and fairness protect compliant taxpayers from arbitrary action.

Prior Search Assessments — Finality Defence

• ITAT and search-based assessments are final unless fresh evidence exists

• Mechanical reopening of concluded cases = invalid (CIT vs Reliance Industries, SC – Sahara India)

Strategy:

• Attach prior orders as primary evidence

• Emphasize compliance and absence of undisclosed assets

• Challenge posthumous or heir-targeted SCNs as assumption-based

Beneficial Ownership — The Indestructible 10-Layer Defence Wall

Even complex corporate/fund allegations fail when taxpayers produce a comprehensive ownership defence:

1. Domestic & foreign fund-flow trail

2. Foreign bank statements proving credit source

3. Deceased/assessee ITRs + Schedule FA

4. Corporate ownership/trust documents

5. POA or nomination letters

6. Loan/dividend agreements, if applicable

7. Affidavits confirming source of funding

8. Affidavits by heirs confirming no benefit received

9. Evidence of no inflows/dividends

10. Forensic CA certificate mapping all flows

Impact: AO assumptions collapse. Penalties rarely survive this defence.

Limitation and Mandatory Approvals — Jurisdictional Shields

• Section 47 BMA: Penalty must be passed within one year of end of FY of SCN issuance

• Mandatory approvals: JCIT/ACIT depending on case

Strategy:

• Highlight any delay or missing approvals in appeals

• Use as procedural weapon, often neutralizing the penalty before facts are even argued

Evidence and Natural Justice — Core Anchors

• AO must provide all evidence relied upon (CRS, bank statements, audit trails)

• Failure = breach of natural justice → penalty void

• SCs and HCs have repeatedly emphasized speaking orders and reasoning

Strategy: Demand disclosure formally and attach ignored replies in appeal

Departmental Failures — When Law Is Ignored

The department may issue SCNs or orders despite:

• Prior ITAT/search assessments showing no adverse findings

• Deceased or senior citizens being unable to respond

• Legal heirs having no beneficial ownership

• NRIs already compliant under foreign tax regimes

Human and Policy Perspective: Honest taxpayers — including NRIs and heirs — often refrain from returning to India due to harassment and repeated scrutiny, even when assets and income are fully declared. The system, if misapplied, discourages voluntary compliance and lawful savings, forces stress, and may separate families. Courts favor procedure, evidence, and natural justice, ensuring taxpayers are not penalized for officers’ overreach or ignorance of law.

Practical Justice: Those who have lived and paid their taxes fully should not face punitive action. Law should target actual wrongdoers — politicians, government officers, or persons concealing assets, not compliant seniors, NRIs, or heirs. “Jiska khaya, usko maro” has no place in law.

Strategic Steps — Your Stepwise Defence

1. Track timeline: SCN, replies, orders, deadlines

2. Gather documentation: ITAT/search orders, death/succession certificates, fund flows

3. Review procedural compliance: Section 46 & 47, approvals, hearing, limitation

4. Apply the 10-layer beneficial ownership defence

5. Prepare formal appeal: NFAC or writ petition highlighting procedural and jurisdictional defects

6. Engage professional representation for technical evidence and fund tracing

Conclusion — Procedure, Evidence, and Jurisprudence Are Your Arsenal

The Black Money Act is draconian, but it is procedural to its core.

• Rash SCNs, posthumous notices, or mechanical penalties are prime candidates for appeal

• Deceased persons and legal heirs are protected under natural justice

• Senior citizens, law-abiding taxpayers, and NRIs cannot be penalized for lawful disclosure

• Prior search/ITAT assessments create a legal fortress

• Comprehensive beneficial ownership mapping, affidavits, and procedural compliance crush AO assumptions

Verdict Pattern: Courts consistently strike down orders where:

• Procedure is ignored

• Replies are not considered

• Beneficial ownership is incorrectly assumed

• Prior clean assessments exist

Key Takeaway: Procedure, law, and evidence are your strongest weapons — ensuring peace of mind for taxpayers, heirs, and deceased estates, no matter how harshly or rashly a BMA order is issued.

Policy Note: The BMA should target actual tax evaders — officers or politicians hiding income, not law-abiding taxpayers who “have eaten according to law” and wish to live peacefully with family. Arbitrary enforcement disrupts lives, causes tension, and may separate families unnecessarily. Courts and procedural safeguards exist to protect the innocent and compliant.

MCA Expands Small Company Definition to ₹10 Cr Capital & ₹100 Cr Turnover

Notification No. G.S.R. 880(E) | Effective 01 December 2025

By CA Surekha S Ahuja

The Ministry of Corporate Affairs has issued the Companies (Specification of Definition Details) Amendment Rules, 2025, significantly widening the category of Small Companies under Section 2(85) of the Companies Act, 2013.

Revised Thresholds for Small Companies

Criteria	Earlier Limit	Revised Limit (Effective 01.12.2025)
Paid-up Capital	≤ ₹4 crore	≤ ₹10 crore
Turnover (preceding FY)	≤ ₹40 crore	≤ ₹100 crore

Mandatory ‘AND’ Condition for Classification

A company will be treated as a Small Company only if both limits are satisfied:

Condition	Requirement
Paid-up Capital	Must be ≤ ₹10 crore
Turnover	Must be ≤ ₹100 crore (preceding FY)
Interpretation	Both conditions must be met together (AND condition)

Even if one condition is breached, the company does not qualify as a Small Company.

Complete Benefits & Exemptions for Small Companies 

Benefit / Exemption	Provision	Advantage
Abridged Board’s Report	Rule 8A	Simplified reporting, fewer disclosures
No Cash Flow Statement	Schedule III exemption	Reduced audit & reporting burden
Lower Penalties (50% reduction)	Section 446B	Reduced financial exposure for non-compliance
Only Two Board Meetings per year	Section 173(5)	Ease of management for closely-held entities
No IFC reporting by auditors	CARO exemption	Lower audit complexity
No Auditor Rotation	Section 139(2) exemption	Cost savings and stability
Relaxed disclosures	Rules 5, 8 exemptions	Less documentation and compliance work
CSR not applicable	Outside Section 135 thresholds	No CSR reporting or spend
Easy Strike-Off / Closure	Section 248	Quicker exit process
Eligible for Fast-Track Merger	Section 233	NCLT-free merger, faster approval

Who Benefits Most?

Category of Companies	Why They Benefit
MSMEs	Lower compliance cost and simpler governance
Family Businesses	Simpler reporting structure
Startups	Compliance-light environment as they scale
Professional firms (CA/Legal/Consulting)	Easier corporate structure maintenance
Manufacturing & Trading Units	Flexibility in growth without extra compliance

Conclusion

With G.S.R. 880(E), companies meeting both conditions —

Paid-up Capital ≤ ₹10 crore AND Turnover ≤ ₹100 crore —

will now enjoy reduced compliance, lower penalties, simplified reporting, and faster restructuring routes.

This is one of the most impactful ease-of-doing-business reforms for small and growing companies in recent years.

When Numbers Are Not Enough: Supreme Court Flags Section 74 GST SCNs Without Facts as Prima Facie Unsustainable

 Case: GR Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors., Order dated 21.11.2025

By CA Surekha S Ahuja

Introduction: Section 74 Is Not Routine – It Is Penal and Serious

Section 74 of the CGST/SGST Act represents the sharpest instrument in the GST adjudication toolkit. It is invoked only when the department alleges:

• Fraud

• Wilful misstatement

• Wilful suppression of facts

• Intent to evade tax

These are intention-based penal charges. Unlike normal tax adjustments, Section 74 attracts:

• Extended limitation of five years

• Penalties equal to the tax evaded

• Potential quasi-criminal implications

• Reversal of input tax credits

Because of this, the notice itself must be speaking, fact-based, and reasoned. Mere numerical discrepancies or computations cannot substitute for allegations of fraud or suppression.

The Supreme Court’s recent order in GR Infra Projects Limited has clarified, definitively, that a Section 74 SCN without foundational facts is prima facie unsustainable.

Background: The Defective SCN

The petitioner received a Section 74 SCN which:

• Contained only numerical tax differentials

• Did not disclose:

  • The acts constituting alleged suppression or misstatement

  • The documents relied upon

  • The reasoning for invoking the extended limitation period

  • Any basis for alleging intent to evade

The Madhya Pradesh High Court refused to quash the notice, requiring the assessee to respond to the Department. The petitioner moved the Supreme Court via SLP (C) No. 33594/2025.

The Core Issue

Whether a Section 74 SCN containing only tax figures, without allegations, factual bases, or material particulars, can create jurisdiction or is void ab initio.

Supreme Court’s Prima Facie Findings

The Supreme Court held:

• The assessee had “no idea” why fraud, wilful misstatement, or suppression was alleged.

• The SCN lacked foundational facts required under Section 74.

• Mere numerical discrepancies do not establish suppression or intent.

• The SCN failed to justify the extended limitation period.

Consequently:

• The Court issued notice to the Revenue (returnable in four weeks)

• Stayed all proceedings arising from the impugned SCN

• Highlighted that non-speaking, cryptic SCNs under Section 74 are prima facie unsustainable

While the Court did not decide the ultimate validity, its observations serve as a strong signal to taxpayers and authorities.

Legal Analysis: Why the Notice Fails

A. Section 74 Requires Specific Allegations

• Fraud, suppression, and wilful misstatement require active conduct and mens rea.

• Mere differences in tax figures cannot establish intention.

• Courts have consistently held this principle, including:

  • Pushpam Pharmaceuticals – suppression must be deliberate

  • Continental Foundation Joint Venture – intent must be proven

  • Oudh Sugar Mills – factual allegations cannot be inferred from numbers alone

B. Natural Justice Demands a Speaking Notice

• A taxpayer cannot respond meaningfully to a blank notice.

• Violation of audi alteram partem and Article 14 renders the SCN void.

C. Jurisdictional Defect Cannot Be Cured

• If the SCN lacks foundational facts, the authority has no jurisdiction to proceed.

• The defect cannot be remedied during adjudication.

D. Extended Limitation Period Requires Justification

• Section 74(1) permits 5-year limitation only when fraud or suppression is established.

• A mechanical invocation without factual explanation is illegal.

E. Numbers Cannot Substitute Narrative

• Section 74 is penal and intention-based.

• Numerical tables alone cannot trigger the provision.

Illustrative Comparison: Defective vs Proper SCN

A. Typical Defective SCN

• “Difference found in GSTR-1 vs GSTR-3B: ₹65,32,110”

• “Tax short paid; pay under Section 74”

• No acts, no allegations, no reasoning

B. Legally Sustainable SCN

• Specific invoice/transaction suppressed

• How concealment occurred

• Evidence relied upon

• Establishment of intent to evade

• Justification for invoking Section 74 instead of Section 73

• Annexures with detailed computations

Observation: Numbers are data, not allegations. A valid SCN must read like a charge-sheet, not a spreadsheet.

Practitioner’s 10-Point Validity Checklist

1. Are acts constituting suppression/fraud specifically described?

2. Are the foundational facts disclosed?

3. Are the documents relied upon identified/annexed?

4. Is intent (mens rea) specifically pleaded?

5. Is the extended limitation period justified with reasons?

6. Are quantifications linked to evidence?

7. Is the SCN internally consistent?

8. Does it distinguish between Section 73 and 74 applicability?

9. Can the assessee give an effective reply?

10. Is the SCN templated or mechanical?

If any of the first five fail → SCN is prima facie void.

Courtroom-Ready Defence Draft for Taxpayers

I. Preliminary Objection:

“The impugned SCN is cryptic, mechanical, and devoid of foundational facts. It merely presents figures without narrating acts constituting fraud, misstatement, or suppression. It is void ab initio.”

II. Section 74 Cannot Be Invoked Without Mens Rea:

“Section 74 is penal and intention-based. The SCN does not identify any transaction allegedly suppressed, nor establish intent. Invocation is arbitrary.”

III. Extended Period of Limitation Unjustified:

“Without factual narration, invocation of the extended period is legally unsustainable.”

IV. Reliance on Precedents:

Oryx Fisheries (SC), Mohinder Singh Gill (SC), Dharampal Satyapal (SC), GSP Power Ltd. (Allahabad HC) – Notices must be self-contained; defects cannot be cured during adjudication.

V. Relief Sought:

“Quash the SCN as void ab initio or stay proceedings until a valid, reasoned notice is issued.”

Key Takeaways for Taxpayers and Professionals

• Section 74 cannot be invoked mechanically; it requires fact-based allegations.

• Taxpayers now have a Supreme Court-tested defense shield.

• SCNs lacking particulars can be challenged on jurisdictional, constitutional, and procedural grounds.

• Compliance teams should vet SCNs for speaking, reasoned content before responding.

• Future GST litigation will focus on the quality of SCN as much as the alleged figures.

Conclusion

The GR Infra judgment reaffirms a simple yet powerful principle:

Numbers do not make allegations; allegations require facts, reasoning, and evidence.

A Section 74 SCN is a legal weapon and must be wielded with precision, reasoning, and fairness. Cryptic notices without material particulars collapse under their own insufficiency, protecting taxpayers from arbitrary action.

This judgment is a definitive guidepost for GST professionals, practitioners, and taxpayers seeking clarity on what constitutes a valid Section 74 show cause notice.

Geeta Jayanti Reflection: A Dharma Framework for Conflict Management in Family Businesses

How Parents Become the Silent Centre of the See-Saw

By CA Surekha S Ahuja

The Pain No One Sees

Every family business has two balance sheets—
one financial, one emotional.
The first is audited yearly.
The second is carried silently by parents.

When siblings disagree, parents stand in the centre—
not as judges
but as the fulcrum trying to balance two worlds.

Their suffering remains unspoken:
the guilt of being “unfair,”
the fear of losing harmony,
the heartbreak of watching children drift apart,
the silent tears when their life’s work becomes a battlefield.

In every conflict, parents bend first… and break deepest.

Why Geeta Jayanti Makes This Reflection Necessary

The Gita begins with Arjuna’s emotional collapse—
not due to lack of skill,
but due to attachment, confusion, and inner conflict.

This is exactly how family disputes unfold.

Krishna’s teachings offer a clear path:

• Ego is the real enemy, not the other person.

• Decisions made in emotional fog always cause damage.

• Dharma is choosing what preserves harmony, not what satisfies the ego.

• True leadership is emotional clarity, not authority.

Today, more than ever, this wisdom is needed in family businesses.

Parents: The Unseen Shock Absorbers

In most families with two children:

• both are educated

• both are capable

• both feel right

• both want space

And parents get stuck in the middle—
absorbing hurt from both ends.

They don’t choose sides.
They only choose peace.

But peace comes at a cost:
their own emotional wellbeing.

Children Suffer Too

Sibling conflict is rarely about business.
It is about feeling:

• unheard

• unequal

• overshadowed

• insecure

Both children hurt.
Both fear losing their place.
Both fear disappointing their parents.

But neither says it aloud.

A Simple Dharma Framework for Family Harmony

1. Saankhya — See Clearly

Understand the real cause of conflict before reacting.

2. Nishkaam Karma — Act Without Ego

Decide for the family, not personal victory.

3. Samatvam — Stay Emotionally Balanced

Not every difference needs escalation.

4. Swadharma — Right Role, Right Person

Let competence decide responsibilities, not entitlement.

Geeta Jayanti: A Day to Reset

Ask yourself:

• Are our words hurting our parents?

• Is ambition getting louder than affection?

• Are we fighting for roles or for recognition?

• Are we reacting from ego or responding from wisdom?

Krishna didn’t remove conflict.
He removed confusion.
Families must do the same.

Final Reflection

A business can recover from losses.
A family may not recover from broken relationships.

On this Geeta Jayanti, choose:

• wisdom over ego

• communication over assumptions

• understanding over pride

• unity over victory

Because the strongest family businesses are not the ones that earn the most—
but the ones that hurt the least.