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A critical legal debate exists within 含羞草社区 goods and services tax (GST) framework on “bunching” multiple financial years into a single, consolidated proceeding.

This issue arises because the tax authorities bundle multiple financial years in a single show cause notice, which is not envisaged under the Central Goods & Services Tax Act, 2017 (CGST Act).

This practice is done for administrative convenience, leading to a conflict with requirements. However, courts have issued conflicting rulings on this contentious issue, which only adds to the problem faced by taxpayers.

GST limitation: Section 73/74 clubbing

To appreciate the issue, it is imperative to understand the GST Law framework. Proceedings are initiated under two distinct spheres. First section 73 covers recovery of underpaid or unpaid taxes due to reasons other than fraud. It has a limitation period of three years from the filing of the annual return for a financial year.

Second, section 74 is initiated to recover tax in cases of fraud, wilful misstatement or suppression of facts undertaken with the intention of evading taxes. The limitation period for a section 74 notice is five years from the date of the filing of the annual return for a financial year.

A common reading of both is that limitation commences on the date of the annual return for the relevant financial year. But when initiating proceedings, the tax authorities club multiple financial years and apply a limitation based on the last financial year.

GST show cause notice clubs years

The practice adopted by the tax authorities of disregarding interpretation of sections 73 and 74 of the GST Act has reached judicial forums. In June 2025, Madras High Court, in Ms RA and Co v The Additional Commissioner of Central Taxes, South Commissionerate, held that bunching multiple years is impermissible under the CGST Act, and issuing a consolidated show cause notice constitutes jurisdictional overreach.

Also, it was held that, for the purposes of the GST law, each financial year is treated as a separate tax period, as returns are filed separately for each year; thus, clubbing is impermissible.

More recently the Madras High Court, in M/s Poppys Hotel Pvt Ltd v The Additional Commissioner of GST and Central Excise to the tax officers, while remanding the matter to the tax officers, held that bunching of show cause notices and their legality are matters of interpretation and shall be conclusively decided by higher authorities.

However, the clubbing of notices was deemed illegal and the revenue was given an opportunity to reissue show-cause notices for single financial years.

However, with respect to input tax credit utilisation, in Ambika Traders v Additional Commissioner, Adjudication, DGGSTI, Delhi High Court held that a series of transactions must be considered for tracking incorrect credit utilisation by a taxpayer, which may extend beyond a single financial year. This, in essence, authorises the GST department to issue consolidated notices.

Thereafter, in the case of Pramur Homes and Shelters v UOI & Ors, Karnataka High Court held that clubbing of show cause notices is invalid, impermissible and illegal under the CGST Act.

While considering section 74A, the court noted legislative intent to allow issuance of a show cause notice annually, and therefore specifically designed timelines in the statute cannot be overridden by clubbing multiple years into a single show cause notice.

CBIC backs GST notice clubbing

While various decisions have emphasised the need for tax authorities to refrain from clubbing multiple years into a single consolidated notice, the lacuna of legislative clarity persists.

Interestingly, the Central Board of Indirect Taxes and Customs (CBIC) issued a letter seeking comments from jurisdictional authorities on the issue in 2025, taking the position that clubbing of financial years is statutorily permitted, and that there is no violation of the CGST Act.

Although the letter is not a formal clarification issued through a circular, a contrary stand hints at protracted litigation on this subject for taxpayers.

Harsh Shukla is a counsel and Pratha Khanna is an associate at BMR Legal