CBIC introduced an automated return scrutiny module for GST Returns through ACES-GST backend application for central tax officers. This enables officers to scrutinize the GST Returns of the registered taxpayers. It is identified based on data analytics and risk parameters. It automatically sends alerts to officers in case of non-compliance.
Its objective is to enhance the tax compliance and reduce manual intervention. It streamlines communication and action between tax officers and taxpayers and creates a more efficient and transparent system.
Implementation:
It has already been rolled out, beginning with the scrutiny of GST Returns for the Financial Year 2019-20.
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How the Automated System works?
Any discrepancies due to risks associated with a GST return will be flagged and an automated scrutiny notice will be sent out to the taxpayer in Form ASMT-10. These discrepancies are also displayed to the tax officers, who are then provided with a workflow to interact with the taxpayer through the GST common portal. Previously, Form ASMT-10 used to be sent out on the GST portal after tax officers manually picked up GST returns for scrutiny. Now, the GST portal will automatically send out Form ASMT-10 to non-compliant taxpayers detected by the system and then send out alerts to the GST officers.
Once intimated in Form ASMT-10, taxpayers may reply using Form ASMT-11 on the GST portal. If the tax officer finds the action taken and response by the taxpayer to be satisfactory, the officer will acknowledge the same in Form ASMT-12. If not, the officer will issue a show cause notice or initiate an audit or investigation.
Risk Parameters for GST Returns being subjected to scrutiny:
Where the data declared in GST Returns do not match with the corresponding tables of the summary GST Return or the statement of Input Tax Credit. Various information which will be compared is:
a. Tax liability in respect of outward supplies
b. Tax liability in respect of RCM supplies
c. Tax liability in respect of RCM supplies
d. Tax liability offset in cash pertaining to the RCM supplies
e. ITC availed in respect of inward supplies from an Input Service Distributor (ISD)
f. ITC availed under ‘All other ITC’
g. The taxable value on account of outward taxable supplies (other than zero-rated, nil rated and exempted)
h. The liability on account of outward supplies
i. ITC availed in regard to the import of goods
1. Where ITC has been availed in respect of invoices and debit notes issued by suppliers who have not filed their GSTR-3B returns for the relevant tax period.
2. When ITC is claimed after the effective date of cancellation of registration of a supplier.
3. When the GSTR-3B for a tax period is filed after the deadline for claiming ITC in respect of any invoice or debit note as per Section 16(4) of the CGST Act. As per Section 16(4), ITC may be claimed only till 30th November of the year following the financial year or the furnishing of the relevant annual return, whichever is earlier. Hence, if the GSTR-3B happens to be filed after the deadline as per Section 16(4), such ITC will be inadmissible.
4. Where interest is payable as per Section 50 of the CGST Act, and the same has not been paid.
5. Where late fees are payable as per Section 47 of the CGST Act, and the same has not been paid.
6. Where the taxpayer has not reversed ITC as per the provisions of Rule 42 and Rule 43 of the CGST Rules. It is to be noted that Rule 42 of the CGST Rules lays down the manner of determination of ITC in respect of inputs/input services and reversal thereof, while Rule 43 lays down the manner for determining input tax credit in respect of capital goods and reversals thereof in certain cases.
Impact on Taxpayers:
It makes taxpayers prone to receiving scrutiny and demand notices from the GSTN as every minute error or discrepancy will now be detected by the system. Earlier, it was up to the discretion of the tax officer to send out a notice. Now, with automated scrutiny and automated notices to taxpayers, all taxpayers that have mismatches in their GST returns that exceed the tolerance limits imposed by the GSTN could receive a scrutiny notice.
It will also add an additional burden on taxpayers to prove that there has been no intention to evade tax. Taxpayers must now give utmost importance to regular reconciliations of data sets to avoid discrepancies before the periodic returns are filed. Taxpayers will also need to have the documentation and evidence at hand pertaining to the current year as well as the past four years and a proper audit trail maintained to respond to these notices. Failure to maintain the same would result in hardships in proving that the taxpayer did not intend to evade tax and may result in the taxpayer having to pay unnecessary interest and penalties. Hence it is crucial that taxpayers take action before filing returns to avoid coming under the radar of the automated scrutiny system.
Actions available with Taxpayers subjected to scrutiny:
The taxpayers receiving the notice in Form ASMT-10 must submit a reply, whether or not they agree to the demand. They should reply in form ASMT-11 within thirty days of being informed in ASMT-10 or as long as the officer allows.
No manual intervention is encouraged under the automated return scrutiny module, as this follows faceless communication between officers and taxpayers. Hence, all documents or statements must be submitted as softcopies on the relevant portal. The taxpayers may accept the difference and pay tax, interest or dues while replying in ASMT-11 within the above time limit. They can make tax payments using DRC-03. The officer will verify and may issue the order to drop proceedings in form ASMT-12 if the reply is found satisfactory. In this case, the taxpayer need not take any further action.
On failure of reply or the reply sent is found unsatisfactory by the officer, they may initiate proceedings by sending a show cause notice under Sections 73/74, as the case may be or may also consider audit/investigations after seeking necessary permissions. In the latter case, the taxpayers may have to cooperate with the officer through the proceedings while fully disclosing information pertaining to such financial year.
How to avoid automated return scrutiny (ASMT-10 Notices):
With the system of automated return scrutiny in force, tax filers must be more cautious of the procedures and sanity checks followed while filing regular GST returns.
Ensure that the following checklist is followed at all times while filing GST returns-
- The tax liability in Tables 3.1(a) and (b) of GSTR-3B must match with tax liability in Tables 4,5,6,7A(1),7B(1),11A and 11B of GSTR-1 (net of amendments in Tables 9,10, and 11(II)).
- Advances adjusted are accurately reflected by reporting the same in Table 11B and Tables 4, 5, 6 and 7 of GSTR-1.
- Reporting and paying in cash the exact tax liability under the reverse charge mechanism using Tables 3.1(d) for tax liability and 4(A)(2) and 4(A)(3) for ITC claimed on it in GSTR-3B. Ensure that the value in GSTR-3B is more than the eligible ITC in Tables 3,4,5, and 6 of GSTR-2A.
- ITC claimed in Table 4(A)(4) of GSTR-3B must match with amounts marked as eligible ITC in Table 7 of GSTR-2A (net of amendments in Table 8).
- Sales subject to TCS or TDS under GST in GSTR-3B must match the TDS and TCS credit reflected under Column 6 of Table 9 of the GSTR-2A.
- In Tables 3.1(a) and (b) of the GSTR-3B, the tax liability should match the corresponding e-way bills.
- ITC is ineligible for claims for the period after the effective date of cancellation of the suppliers’ GST registrations, especially in case of retrospective cancellation of GST registrations.
- The GSTR-3B filing status of respective vendors must not be ‘No’ while claiming ITC of such invoice or debit note in the GST returns, despite it appearing in the GSTR-2A.
- Do not claim such ITC if the relevant period’s GSTR-3B is filed after the last date allowed under Section 16(4) of the CGST Act, i.e., 30th November of the year following the financial year in which such invoice/debit note is raised or date of filing annual returns, whichever is earlier.
- ITC on import of goods in Table 4(A)(1) of GSTR-3B must match with amounts in Tables 10 and 11 of GSTR-2A and data on ICEGATE.
- Adhere to CGST Rules 42 and 43 for accurate reversals of ITC in Table 4(B) of GSTR-3B.
- Do not miss computing and making late fee/interest payments as per Sections 47 and 50 of the CGST Act wherever return filing/tax payment is delayed.
- Reconcile the Sales Register with General Ledger (GL), i.e., Revenue GL with the sales register and output tax GL with the sales register. Ignore transactions under the same PAN, pure agent. Note that for positive tax figures in the sales register, the amount in tax GL will have negative figures and vice versa.
- Reconcile the e-invoices from the IRP vis à vis the draft GSTR-1 and sales register to not miss out on e-invoicing and invoice reporting in returns.
Author Bio
Dear sir,
upto how much percentage of ITC mismatch ASMT 10 automated return scrutiny will be issued..
Thanks and regards,
Sreekantha G S