GST Rule 142(1A) Under Fire: Telangana HC Steps In

🚨 GST Rule 142(1A) Under Judicial Scrutiny: Telangana HC’s Intervention Explained

In a major development that could impact thousands of GST-registered taxpayers, the Telangana High Court has admitted a writ petition challenging the recent amendment to Rule 142(1A) of the CGST Rules, 2017. The rule pertains to pre-show cause notice (SCN) intimation of tax liabilities, an essential procedural safeguard before formal proceedings under Section 74 of the CGST Act, 2017.

🧠 What Is Rule 142(1A) of the CGST Rules?

Rule 142(1A) mandates that before issuing a show cause notice under Section 74 (for fraud or suppression cases), the proper officer must communicate the “tax, interest and penalty” due through a form called DRC-01A. It’s a pre-SCN intimation—offering taxpayers a chance to voluntarily pay and avoid penalties.

🔁 What Changed Recently?

A 2023 amendment (via Notification No. 38/2023 – Central Tax, dated 04.08.2023) altered the discretionary nature of this intimation. Previously, use of DRC-01A was optional. The amendment seemingly made it mandatory in all fraud-related GST cases—creating confusion and sparking legal challenges.

🏛️ Telangana HC’s Stand: Due Process and Natural Justice

The High Court bench, comprising Acting Chief Justice Sujoy Paul and Justice Renuka Yara, admitted the plea challenging the legal sustainability of multiple actions taken by GST authorities:

• Spot memo
• Show Cause Notice
• Order confirming demand for FY 2017–18 to 2021–22

Petitioner’s counsel argued the actions violated:

• Article 14 (Right to Equality)
• Article 19(1)(g) (Right to carry on business)
• Principles of natural justice

The Court has sought a response from the Central Board of Indirect Taxes and Customs (CBIC) and posted the matter for hearing on April 1, 2025.

🧾 Legal Backing and Case Law

In similar cases like:

• Siddharth Enterprises v. State of Gujarat (2019-VIL-537-GUJ): Gujarat HC held that procedural fairness under GST is vital.
• Bharat Mint and Allied Chemicals v. CCE & ST (2021): Allahabad HC quashed SCNs for not issuing DRC-01A.

These precedents strengthen the argument that non-compliance with Rule 142(1A) may invalidate subsequent GST demands.

🧑‍💼 Who Should Care?

• Business owners facing past GST demands (especially for FY 2017–2021)
• Tax consultants guiding clients through SCN responses
• Freelancers and SMEs issued tax memos without pre-SCN notice

📌 Key Takeaways (Repurposable for LinkedIn/Twitter)

1. Telangana HC admits plea against GST Rule 142(1A) amendment.
2. Pre-SCN communication is a taxpayer right—not a technicality.
3. Multiple past demands could be challenged if DRC-01A wasn’t served.
4. Next hearing is scheduled for April 1, 2025.
5. Businesses must consult tax professionals before replying to GST SCNs.