Under GST act, main thrust is on self compliance. Therefore , self assessment has given great importance in the scheme of the act. It is specifically provided in section 59 that every registered person should self assess his tax liability as per provision of act and after payment of such tax, and furnish valid return for each tax period , as specified in section 39 of the act. Sometimes , in complex cases taxable person is unable to determine correct value of supply and rate of tax applicable on supply and thereby could not self assess the tax payable correctly. In existing law of service tax, in such situation, there was provision of provisional assessment of tax payer. Section 60 has been provided in the GST act for provisional assessment of taxable person, in specified contingencies. Provisional assessment provides method for determining tax liability, in case correct tax liability can not be determined at the time of supply. Payment of provisional tax is allowed only against bond and security .
CBEC has published flyer on the topic of provisional assessment in GST act and thereby clarified purpose and intention behind this concept. Same is reproduced hereunder .
“A supplier come to know the extent of his tax liability which has to be discharged on continuous and regular basis only after assessment. Assessment means determination of tax liability and includes self assessment, reassessment, provisional assessment, summary assessment and best judgment assessment. The major determinant of the tax liability are generally applicable tax rate and value. There might be situation when these determinant might not be readily ascertainable and maybe subject to outcome of process that requires deliberation and time . Hence, like under previous law, when due to various circumstances it might not be always possible, at that point of time, to carry out an assessment and determine exact tax liability GST act also provide for provisional assessment.”
WHO IS ELIGIBLE TO APPLY FOR PROVISIONAL ASSESSMENT .
A taxable person who is unable to determine the value of supply of goods or service, or rate of tax applicable thereto is eligible for provisional assessment. He has to submit an application electronically on common portal, in FORM GST- ASMT -01 ,with request to give decision on rate of tax or value of supply, by giving reason with supporting documents, for payment of tax on provisional basis. No application can not be entertained without reasons. Registered person or person liable for registration under the GST act is eligible for provisional assessment subject to fulfillment of prescribed conditions.
ORDER FOR PAYMENT OF TAX ON PROVISIONAL BASIS
After receipt of an application, Proper Officer may issue notice in FORM- GST – ASMT 02 requiring the applicant to furnish additional information and documents in support of his request . An applicant should file reply in FORM –GST – ASMT – 03 and may attend to the proceeding if he so desire. There after Proper Officer shall pass an order u/s 60 (1) of the act ,in FORM – GST- ASMT-04, allowing the payment of tax on provisional basis indicating, value or the rate or both on the basis of which the assessment is to be allowed on provisional basis and the amount for which the bond is to be executed and security to be furnished not exceeding twenty five percent of the amount covered under bond. Section 60 (1) provides that such order should be passed within 90 days from the date of receipt of an application.
BOND AND SECURITY
An applicant has to execute BOND in the FORM – GST- ASMT -05 and furnish security in the form of Bank Guarantee for amount mentioned in the order passed u/s 60 (1). This is obtained to protect differential tax liability arising from final order of assessment passed u/s 60 (3) of the act . If the applicant failed to execute bond and furnish security within stipulated period, then order passed u/s 60 (1) would be null and void as if no such order has been passed. Therefore, it is necessary to furnish bond and security within stipulated date, in order avoid cancellation of order passed for payment of tax on provisional basis.
Security in the form of bank guarantee is taken to secure the differential tax dues on the supply of good or services in respect of which have been allowed to pay tax on provisional basis. Proper Officer will be at liberty to invoke Bank guarantee, where Person failed to furnish required documents and information to facilitates the finalization of provisional assessment. In view of above it is most important to submit compliance as per notice on or before appointed date.
PAYMENT OF TAX AS PER ORDER U/S 60 (1) .
After completion of bond and security process, supplier registered person can supply the goods or services and pay tax at the rate or on the value that has been indicated in the order. On the basis of this order, the applicant is required to self assess tax payable and to furnish prescribed valid returns as per provision of the act .
FINAL ASSESSMENT ORDER U/S 60 (3) .
Proper officer will give opportunity of hearing by issuing notice to produce information and record required for finalization of assessment. After considering facts and circumstances of the case and provisions of the act, Proper Officer has to determine rate of tax applicable on such supply or value of such supply and to pass final assessment order u/s 60 (3 ) of the act , in FORM – GST- ASMT- 07, before six months from the date of communication of order passed for payment of tax on provisional basis u/s 60 (1 ) of the act . After receipt of this order, the applicant registered person has to take corrective actions as per provision of the act.
TIME LIMIT – FINAL ASSESSMENT ORDER
As per section 60 (3) of the act, Proper Officer shall should pass order for final assessment within six month from date of communication of provisional order passed u/s 60 (1 ). It is further provided in the section that on sufficient cause being shown and for reason to be recorded in the writing, time limit be extended by Joint commissioner and Additional Commissioner for further period not exceeding six month and by the Commissioner for such further period not exceeding four years. Thus maximum time limit is four years. This order is not binding on any other authority. It is subject to review u/s 108 of the act by superior authority if found erroneous, improper and prejudicial to the interest of revenue.
LIABILITY OF INTEREST U/S 50
If as result of final assessment order , any tax amount becomes payable , then interest u/s 50 will be payable by registered person from first day of payment of tax till the date of actual payment, whether such payment is made before or after issuance of order for final assessment.
INTEREST ON REFUND
If registered person is entitled for refund , as a result of final assessment order ( subject to eligibility of refund and absence of unjust enrichment s 54 -8 ) then he is also eligible for interest on refund u/s 56 of the act.
13.RELEASE OF SECURITY
After passing of order of final assessment order, registered person may file an application in FORM- GST- ASMT -06 for release of the security. Proper Officer shall release the security, after amount payable in order has been paid.
WHETHER ORDERS PASSED U/S 60 ARE APPELLABLE
Both orders, provisional order u/s 60 (1) and final assessment order passed u/s 60(3) are appealable. Where applicant is not satisfied with the decision regarding value and rate of tax and aggrieved by these orders, he may file appeal u/s 107 to prescribed appellate authority, within three month from the date of receipt of order.
While making self assessment, registered person has to determine turnover of supply, amount of tax payable and amount of ITC admissible , to determine tax liability and to furnish valid return. For this purpose, he has to first determine rate of tax and value of supply . In certain situations, it is difficult to determine rate of tax and value correctly due some reasons. Therefore, he is unable to self assess tax payable and furnish returns. In this background, provision is made to allow the registered person to avail this alternate remedy by way of provisional assessment u/s 59. In other words provisional assessment provides method for determining the tax liability in case correct tax liability can not be determined at the time of supply.
M M Kanadje, Retired Joint Commissioner Of State Tax, Pune