Section 63: assessment of unregistered persons and of those whose registration was cancelled
The provision used against businesses that crossed the threshold quietly, and against those whose registration was cancelled retrospectively.
Section 63 permits the proper officer, notwithstanding Sections 73 and 74, to assess the tax liability of a taxable person who has failed to obtain registration although liable, or whose registration has been cancelled under Section 29(2) but who was liable to pay tax, for the relevant tax periods. The order may be passed within five years from the due date for furnishing the annual return for the year, and an opportunity of hearing must be given.
The two situations
A person liable to register who did not. The exposure runs from the date liability arose, and the assessment is on the best judgment basis with the five year outer limit.
A person whose registration was cancelled under Section 29(2) but who continued to be liable. This is the more common and more troubling situation, because a retrospective cancellation converts a compliant taxpayer into an unregistered one for past periods.
In both cases the proviso requires an opportunity of hearing, and an order without it is challengeable on the Section 75(4) line of authority.
The defences
Liability to register. Aggregate turnover as defined in Section 2(6), computed correctly, including exempt supplies and excluding what the definition excludes. Many Section 63 assessments rest on a turnover computation that includes amounts outside the definition.
The period. Liability to register arises when the threshold is crossed, and tax is payable from the date on which registration became liable, not from the beginning of the year.
Credit. A person assessed as liable for past periods should be permitted the credit available for those periods, and the denial of credit while taxing the output is a point worth pressing, notwithstanding the practical difficulty.
The cancellation itself. Where the assessment follows a retrospective cancellation, attack the cancellation order for absence of proposed retrospectivity in the notice and absence of reasons.
Limitation. Five years from the annual return due date for the year, and the computation must be shown.
The practical position
These matters are usually better resolved by regularising than by contesting. Registration, filing, payment of tax with interest, and a request that penalty be confined under Section 126 is often the cheapest outcome.
Where the amounts are large and the turnover computation is contestable, the assessment should be contested on the computation, because it is arithmetic and not judgment.
Where the exposure arises from a retrospective cancellation, the cancellation is the target, not the assessment.
What to do on Monday
Recompute aggregate turnover under Section 2(6) before responding; the computation is the case.
Where liability existed, regularise and argue penalty under Section 126 rather than contesting the tax.
Where the assessment follows a retrospective cancellation, attack the cancellation order.
Preserve purchase invoices for the assessed period so the credit argument can at least be made.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Is a notice required before a Section 63 assessment?
The section dispenses with Sections 73 and 74, but the proviso requires an opportunity of hearing, and in practice a notice in ASMT-14 is issued.
Can we claim credit for the assessed period?
It is difficult in practice and contested, but the argument that output tax cannot be assessed while the corresponding credit is denied should be made, with the invoices.
What is the limitation?
Five years from the due date for furnishing the annual return for the financial year to which the tax not paid relates.
Does voluntary registration before the notice help?
Materially. It shows bona fides, permits filing, and improves the position on penalty under Section 126.
What if turnover was below the threshold?
Then there was no liability to register, and the assessment fails at its foundation. Compute aggregate turnover under Section 2(6) precisely.
In this cluster
- GST show cause notice: how to read it, and how to answer it
- Section 73 versus Section 74: where the department overreaches, and how to prove it
- Section 74A: the unified limitation regime from FY 2024-25
- DRC-01A pre notice intimation: reply, pay, or wait?
- From DRC-01 to DRC-07: the adjudication chain in one page
- Vague and omnibus notices: how Amrit Foods, Brindavan Beverages and Oryx Fisheries decide GST demands
- Suppression of facts under Section 74: what the department must actually prove
- Personal hearing under Section 75(4): the right, and the consequence of denying it
- Orders that travel beyond the notice: Section 75(7) in practice
- Limitation for GST demands: the year by year table you should keep in every file
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.