Assessment proceedings are vital in any taxation laws, be it direct taxation like Income Tax laws or be it indirect taxation laws like State level VAT laws, Central Excise laws, Customs Laws and Goods and Services Tax (GST) laws. It is a process wherein the activities of a business entity are finally assessed for a particular period, generally a financial year. Such assessment could be done by the tax officer or by the taxpayer himself. Especially, indirect tax laws use the principles of self-assessment, wherein the taxpayer himself assesses the tax liability, with respect to a particular tax period, to be paid by him and pays such taxes along with filing of required returns in accordance with the law. Even after such self-assessment, such particulars and other relevant details may also be assessed by the Tax officer as he may find it necessary.
Through this article, an attempt has been made to understand the provisions relating to assessment in so far as these provisions are contained under Central Goods and Services Tax Act, 2017 (CGST Act) read with Central Goods and Services Tax Rules, 2017 (CGST Rules) and relevant notifications/circulars as the case may be.
PROVISIONS UNDER GST LAWS RELATING TO ASSESSMENT
Provisions relating to assessment are contained in Chapter XII of the CGST Act under Section 59 to Section 64 read with Chapter XI of CGST Rules under Rule 98 to Rule 100.
Section 2(11) of the CGST Act provides for the meaning of the term ‘assessment’. In terms of the said section, the term ‘assessment’ means determination of tax liability under this Act and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgement assessment. However, it is important to note here that there are no specific provisions, relating to ‘re-assessment’ under the law. As the law also permits a taxpayer to rectify or correct the errors or omissions made in the returns already furnished with the tax department, unless such rectification is on account of some scrutiny, inspection, audit etc. by the tax department or the same has gone time barred in terms of the law. Such activity of making corrections may be considered as an activity of re-assessment, as far as definition under section 2(11) is concerned.
Self-assessment [Section 59]
Section 59 of the CGST Act provides for provisions relating to self-assessment by the taxpayers. Self-assessment means an assessment made by the taxpayer himself and not an assessment which is carried out by the tax officer. Since, GST law also follows principles of self-assessment, it requires a registered tax payer to assess his tax liability in accordance with the provisions contained under the law and report the summary of such assessment in the form of a periodic return, as prescribed, to be filed. It is also important to note that self-assessment does not give any authority to the tax officer over the taxpayer and taxpayer has to exercise this liberty very diligently. Accordingly, self-assessment shall in no way mean ‘unsupervised self-administration’.
Provisional assessment [Section 60 read with Rule 98]
Section 60 of the CGST Act provides for provisions relating to ‘provisional assessment’. It provides that where a taxable person is unable to determine the value of goods or services or both supplied or is unable to determine the rate of tax applicable to such supply, he may request the proper officer, in writing, along with the reasons for payment of tax on provisional basis. Such written request to the officer shall be made by the taxable person in Form GST ASMT-01 along with the relevant supporting documents on the common portal.
It is important to note here that provisions relating to provisional assessment shall apply only in cases where the taxpayer is unable to determine the value of supply or rate of tax applicable to such supply. Cases of value not being determinable may include inability of the taxpayer to determine the transaction value i.e. open market value, items to be included or excluded therefrom, cases where price is not the sole consideration etc. Taxpayer may also be unable to determine the rate of tax applicable to the supply due to reasons which may include classification of goods or services, entitlement to any exemption notification etc. In these types of situations, provisional assessment can be resorted to by him. Provisions of this section cannot be extended to situations where there is uncertainty about the type of tax applicable, determination of time of supply, whether supply is to be treated as supply of goods or supply of services etc.
In case where the proper officer is not satisfied with the information furnished by the taxpayer in ASMT-01 along with the supporting thereof, he may ask such additional details/information as he may think necessary and shall issue notice in Form GST ASMT-02 seeking such additional information. Taxpayer shall be required to furnish the additional information, as asked by the officer, in Form GST ASMT-03 within 15 days from the receipt of such ASMT-02. The taxpayer can also appear before the tax officer provided a written request for personal hearing is made for the same.
Payment of tax on provisional basis shall be allowed subject to the following:
1. Taxable person shall execute a bond in Form GST ASMT-05, binding himself to pay differential tax (if any), arising on account of actual tax liability finally assessed being more than the amount provisionally paid, along with applicable interest in terms of section 50 of the CGST Act
2. The bond shall be executed along with a surety and security (in the form of bank guarantee) amount of up to 25% of the amount covered under bond.
Once such bond along with the requisite amount of security is furnished by the taxpayer, the proper officer shall allow the payment of tax on provisional basis and issue an order in Form GST ASMT-04 indicating the value or rate or both on the basis of which the provisional tax computations have been made and such tax is to be paid. Such order in Form GST ASMT-04 shall be required to passed by the officer within a period of 90 days from the date of receipt of application in Form GST ASMT-01.
The provisional assessment made shall be finalized by the tax officer after taking into account such information as may be required by him for finalizing the assessment. For the purposes of seeking additional information and records as may be required by him, the officer shall issue a notice in Form GST ASMT-06. The information as asked in ASMT-06 shall be required to be made available by the taxpayer within a period of 15 days from the date of communication of such notice. On the basis of information gathered, the officer shall make an order for final assessment in Form GST ASMT-07 within a period of 6 months from the date of communication of order of provisional assessment (ASMT-04). The period of 6 months allowed to issue final assessment order may be extended, for the reasons to be recorded in writing, by Joint Commissioner/ Additional Commissioner for a further period not exceeding 6 months and by Commissioner for a further period not exceeding 4 years.
The taxpayer shall be liable to pay interest on any tax payable on supply of goods or services or both under provisional assessment but not paid on or before the due date of filing the periodic tax return. Such interest shall be payable at the rate specified under section 50(1) from the first day after the due date of payment of tax till the date of actual payment, whether such amount is paid before or after the issuance of final assessment order. Where the provisionally paid tax is found to be in excess of what is actually due, the excess amount shall be allowed as refund in terms of the provisions relating to refund as contained under GST laws along with applicable interest in terms of section 56 of the CGST Act.
Once the assessment is finalized and all dues under the case are settled, the taxpayer may make an application in Form ASMT-08 for the release of security furnished at the time of making application for provisional assessment of tax. Proper officer shall make sure that all the dues have been paid by the taxpayer and shall issue an order in Form ASMT-09 releasing the security, within a period of 7 working days from the date of receipt of application in Form GST ASMT-08.
Registered person intending to avail the facility of provisional assessment in terms of the abovesaid provisions should exercise thorough judgement and only after careful consideration should proceed with the same, as any claim for refund of excess amount paid provisionally would attract refund provisions in terms of section 54 of the CGST Act read with relevant rules. Where incidence of such tax paid has not be borne by the person paying such tax and such incidence has been passed on to the other person, it shall, instead of being refunded, be credited to consumer welfare fund. Limitation period in respect of filing refund application shall be in terms of explanation to section 54 i.e. such refund application shall be required to be filed within a period of 2 years from date of adjustment of tax after the final assessment.
It may be noted that, in the statement of outward supply to be furnished by a registered person under section 37(1) i.e. in Form GSTR-1, the invoices in respect of which tax is paid under provisional assessment are required to be reported.
Scrutiny of returns [Section 61 read with Rule 99]
Section 61 of CGST Act provides for the provisions relating to scrutiny of returns. In terms of the said section, the proper officer may scrutinize the return and related particulars furnished by the registered person. Such scrutiny of returns or related particulars may be done to verify the correctness of the return and in legal parlance may be considered as pre-adjudication process as the adjudication is provided in section 73 to section 75 of the CGST Act.
Important points to be noted in respect of the above are as under;
1. Section 61 can be invoked only in respect of scrutiny of ‘return’ which are furnished by the registered taxpayers. A ‘return’ here means any return prescribed or otherwise required to be furnished under the Act or rules made thereunder. In terms of the definition of ‘return’, it could be viewed that such scrutiny cannot be carried out in respect of GSTR-1 only, as GSTR-1 is not a return in terms of the law, though such scrutiny once taken up in respect of GSTR 3B, GSTR-1 could amount to particulars related to such return, as envisaged by section 61.
2. Only the officer having jurisdiction over the taxpayer can undertake the scrutiny. Cross-empowered officer can access the return but has no authority under section 61 to scrutinize such returns.
3. Discrepancy here would mean the inaccuracy or inconsistency which is to be identified by the officer from the returns furnished by the taxpayer. The section does not permit investigation into new areas which are not emerging from the returns furnished.
Where the officer notices certain discrepancy in the return furnished, he shall issue a notice in Form GST ASMT-10 informing the taxpayer about such discrepancy and shall seek explanation to the same. Further, in case possible, the officer shall also quantify the amount of tax, interest or any other amount payable in relation to such discrepancy.
The taxpayer may accept the discrepancy and pay the amount of tax, interest etc. and inform the same to the officer or may furnish an explanation for the discrepancy in Form GST ASMT-11 within the time period allowed in the said notice but not exceeding 30 days from the date of service of the notice in Form GST ASMT-10 or such extended period as officer may allow. Where the explanation given in Form ASMT-11 is found to be satisfactory and acceptable, the officer shall inform the taxpayer for the same in Form GST ASMT-12 and no further action shall be taken in this regard.
In case no satisfactory explanation is furnished within a period of 30 days of being informed in Form ASMT-10 or within the extended time allowed or where the discrepancies have been accepted by the taxpayer but he fails to take corrective actions in his return in the month in which such discrepancies were accepted, the officer shall be at liberty to initiate appropriate proceedings including those provided under section 65 (Departmental audit) or section 66 (Special audit) or section 67 (Inspection, search or seizure). Further, officer may also proceed to determine the tax and other dues under the Act in terms of section 73 or section 74 of the CGST Act.
Assessment of non-filers of returns [Section 62 read with Rule 100]
Section 62 of CGST Act provides for the provisions concerning assessment of non-filers of returns under the law. In terms of the said section, where a registered person fails to furnish return under section 39 (monthly return i.e. GSTR 3B etc.) or return under section 45 (final return on cancellation of registration) after the issuance of notice (in Form GSTR-3A) under section 46, the proper officer may proceed to determine the liability of the registered person on the best of his judgment taking into account all the relevant material which is available or which such officer has gathered. Order of such assessment (Form GST ASMT-13) shall be issued within a period of 5 years from the date specified for furnishing the annual return for the financial year to which tax not paid is related.
From the above, it is important to note that;
1. The section can be invoked only in case of registered person who have not furnished return under section 39 or section 45, as the case may be. Accordingly, it can be viewed that non-filing of GSTR-1, GSTR-2 or GSTR-9 cannot attract provisions of section 62.
2. Non-compliance to notice issued in Form GSTR-3A under section 46 paves path for operation of section 62. Hence, issuance of notice for non-filing of return under section 46 is a must, without which provisions of section 62 cannot be invoked. In other words, non-issuance of notice under section 46 closes the doors for invoking section 62.
3. Once notice is issued under section 46, the same has to be complied with within 15 days, failing which the Officer may proceed to assess the tax liability to the best of his judgment in terms of Rule 100 of the CGST Rules and issue an order of such assessment in Form GST ASMT-13 along with a summary thereof uploaded in Form GST DRC-07.
4. Assessment under this section can be completed without giving notice of hearing to the registered person, however the same should be made only on the basis of the material available or material gathered by the officer concerned.
In case, where the registered person furnishes a valid return within 30 days from the date of service of order in Form GST ASMT-13, the said assessment order shall be deemed to have been withdrawn, but liability for payment of interest in terms of Section 50 and late fee in terms of Section 47 shall remain. It is important to note that where valid returns are not furnished within 30 days from the date of service of order, such order shall become final and even if returns are filed subsequently, cannot be withdrawn. The only remedy available to assessee in that case shall be preferring an appeal against the said order.
Assessment of un-registered persons [Section 63 read with Rule 100]
Section 63 of CGST Act provides for the provisions relating to assessment of un-registered persons. This section shall apply in case of persons who are liable to obtain registration but who have not obtained such registration. Further, this section shall also apply to the cases where registration of a person has been cancelled on certain grounds in terms of section 29(2) of the CGST Act.
Section 29(2) of the Act covers five situations where registration may be cancelled by proper officer:
1. A person who contravenes the provisions of this Act or Rules made thereunder; or
2. A composition person who fails to furnish returns for 3 consecutive tax periods; or
3. A person other than composition person who fails to furnish returns for 6 consecutive months or
4. A person who has sought voluntary registration but has failed to commence business within 6 months; or
5. Where registration has been obtained by way of fraud, willful misstatement or suppression of facts.
For the purposes of assessment under section 63, a notice shall be issued in Form GST ASMT-14 in terms of Rule 100(2) of the CGST Rules. The notice shall also contain the grounds/ reasons on which the assessment is proposed to be made on best judgment basis. Summary of the notice issued shall also be served electronically in Form DRC-01.
Reply to the notice received in Form ASMT-14 shall be required to be furnished by the taxable person within 15 days and thereafter assessment order in Form GST ASMT-15 shall be passed by the Officer along with a summary thereof in Form DRC-07 uploaded on the common portal.
The order of assessment in Form ASMT-15 shall be issued by the officer within a period of 5 years from the date specified for filing the annual return for the financial year to which the tax dues are related. Further, the order of assessment shall not be issued without affording the taxable person an opportunity of being heard.
Summary assessment in certain special cases [Section 64 read with Rule 100]
The terms ‘summary assessment’ is generally used to mean ‘fast-track assessment’ based on the returns furnished by the assessee. It allows the tax officer to make adjustments basis the error or factors based on the information available with such officer and there is no need to call for the information from the assessee. However, under GST such assessment means those assessments which are completed ex-parte and on priority basis where there is a reason to believe that tax revenue could be lost, if there is any delay into such assessments.
Section 64 of the CGST Act contains the provisions relating to summary assessment in special cases. In order to invoke the provisions of this section, the officer should be in possession of an evidence showing that there is a tax liability of person and the officer believes that any delay in assessing such tax liability would result in an adverse effect on the interest of the revenue.
Further, in order to proceed to assess the tax liability, the officer proposing the assessment under this section shall be required to obtain prior approval of Additional Commissioner or Joint Commissioner to initiate such assessment.
From the above, it can be seen that summary assessment can be resorted to by the tax officer where;
1. Such officer has evidence that there exists a tax liability of the person. Such evidence should not be mere suspicion and should be more than that, as such evidence could be called for examination in further proceedings.
2. The officer must be having sufficient grounds to believe that in case assessment is delayed, such delay would have adverse impact on the interest of the revenue.
3. The officer must, before proceeding for the assessment, have obtained approval from the Additional Commissioner or Joint Commissioner
In case where the tax liability is in respect of supply of goods and the person to whom such tax liability pertains is not ascertainable, the person in-charge of such goods shall be deemed to be the taxable person liable to be assessed and accordingly shall be liable to pay tax and any other amount under the Act. This provision will require transporters to take due care and ensure that all the provisions relating to the goods being transported by them have been duly complied with, so that they, being in-charge of such goods during transportation, are not held liable under these provisions. However, such deeming provisions have not been provided in case of tax liability in respect of supply of services.
The order of assessment in this section shall be issued in Form GST ASMT-16 along with a summary thereof uploaded on the common portal in Form DRC-07.
This section also allows the person on whom section 64 has been invoked and assessment order is served, to file an application in accordance with Rule 100(4) in Form GST ASMT-17. Such application shall be filed within a period of 30 days from the date of receipt of order in Form GST ASMT-16 to the Additional Commissioner/ Joint Commissioner who shall then examine the said application. The Additional Commissioner or Joint Commissioner on their own, without an application being made by the taxable person, may also examine the order. Where Additional/Joint Commissioner consider that such order is erroneous, he may withdraw the order issued and proceed to invoking section 73 or section 74.
This section appears to be overlapping with the provisions contained under section 62 and section 63. However, following difference may be notes in respect of the same;
1. Persons who have obtained registration, but failed to file return shall be assessed in terms of provisions of section 62 i.e. provisions relating to assessment of non-filers of returns;
2. Person who are liable to obtain registration but failed to do so or cases where registration has been cancelled under section 29(2) of the CGST Act, shall be assessed in terms of the provisions of section 63 i.e. provisions relating to assessment of un-registered persons
Assessment under any law is very important to ensure that there is no leakage to the tax revenue for the Government. However, certain assessment provisions contained under GST Law are such that give discretionary powers to the assessing officer to issue notices, compute tax liability and make orders for assessment. These provisions should be used in the spirit of law so as to regulate the taxpayers and should not become a mode of harassing honest taxpayers which would result in un-warranted litigation in the appellate levels including courts of law.
Views expressed in this article are personal views of the author and are for guidance purposes only. It is advised that the same should not be treated as legal advice and should not be acted upon in business scenarios. It is further advised that appropriate legal/professional advice is taken prior to acting upon the above while undertaking business transactions.