Introduction

Self Assessment Scheme under the GST law is not new and in the earstwhile regime also the self assessment was available. In section 70 of the Service tax law a person liable to pay service tax could himself assess the tax due on service provided by him. As per Rule 6 of the Central excise Rules, the assesse could himself assesss the duty payable on any excisable goods.

Self Assessment of Tax under GST u/s 59

Every registered person shall self assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39.

Self Assessment under GST

 Order of Discharge of Self Assessment Tax:

As per section 49(8), every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely:—

(a) self-assessed tax, and other dues related to returns of previous tax periods;
(b) self-assessed tax, and other dues related to the return of the current tax period;
(c) any other amount payable under this Act or the rules made thereunder including the demand determined under section 73 or section 74;

Whether unregistered person can opt for Self assessment

In service tax, it was not registered person but person liable to pay tax who could opt for self assessment. However under GST only registered person can opt for self assessment. If unregistered person was liable to get registered or his registration has been cancelled, he may approach the proper and then proper officer can only frame best judgment assessment for the relevant period u/s 63.

There may be cases where unregistered period is subject to liability without being registered person because he is director of company or partner of firm from whom dues can not be recovered due to operation of section 89 or 90 and such like other provisions of Chapter XVI of Central GST Act. In such circumstances, unregistered person shall obtain temporary number and discharge his tax liability. But the discharge of liability is not end of the matter for unregistered person and may not enjoy the benefit of self assessment u/s 59, without being proceeded u/s 73/74.

However irrespective of person being registered or unregistered person but liable to be registered, the order of discharge of self assessed tax shall be in ascending order i.e. the earlier liabilities shall be met in precedence to subsequent liabilities.

Whether right to be self assessed is lost after filing of return u/s 39

Section 59 though requires to furnish return u/s 39 but does not place a bar on being self assessed after filing of return in GSTR-3B for a relevant period. At the time of filing of return u/s 44 i.e. annual return also, a registered person can self assess himself. Para (e ) of Press Release dated 4-06-2019 provided for payment of additional outward liability at the time of filing annual return. Section 73(5) and Section 74(5) also permits voluntary payment of tax on the basis of own ascertainment. Hence self assessment is not limited by the mere filing of return u/s 39 and is also not mandate of section 59. Mere requisition to self assess the tax and file return u/s 39 should not treated as expression of self assessment only through return u/s 39.

Whether section 59 is complete code for self assessment

Though section 59 requires self assessment of tax payable but section 59 in itself is not complete code for self assessment. Like self assessment of output tax is dealt in section 41(2), while self assessment of input tax credit is dealt in section 49(2) read with section 41(1). Hence self assessment of output tax, self assessment of output tax and self assessment of input tax are seperately dealt in the gst law.

Section 49(2): Self Assessed ITC

The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with 16 section 41 or section 43A, to be maintained in such manner as may be prescribed

Section 41

41(1) Every registered person shall, subject to such conditions and restric- tions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.

Self Assessed Output tax: Section 41(2)

(2) The credit referred to in sub-section (1) shall be utilised only for payment of self-assessed output tax as per the return referred to in the said sub-section.

 Manner of Payment of output tax not declared in return

 As per section 41(2) self assessed ITC can only be utilized for the payment of self assessed output tax in the return u/s 41(1). Section 41(1) talks about “return” and does not say whether it is monthly return u/s 39 or annual return u/s 44. However self assessed ITC u/s 41(1) travels to electronic credit ledger only through return u/s 39 and hence return referred in section 41(1) is the return u/s 39 and not any any other return and hence tax self assessed in annual return or self assessed at any other point of time and sought to be discharged should be met through cash ledger only. Hence the instruction in GSTR 9/9C requiring payment of additional tax only through  cash ledger very much appear to be in connosance with the scheme of the law

Interest for non payment of self assessed tax [S.50]

Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent, as may be notified by the Government on the recommendations of the Council:

Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger

Hence as per proviso to section 50 made effective from 01-09-2020 by NN 63/2020-Central tax dated 25-08-2020 postulates that benefit of interest on net tax liability in belated return met through cash ledger only can be availled only of following conditions are satisfied:

Tax is payable in respect of supplies made during a tax period

AND

Supplies are declared in the return for the “said” period.

Hence this benefit shall be foregone if,

Proceedings u/s 73, 74 in respect of impugned period of return have already commenced before filing of return for that period      OR

Supplies made in a tax period were not declared in the same period but are carried forward from earlier period.

However the benefit of proviso shall not be foregone in respect of tax liabilities not arising from supplies made during earlier period e.g. reversal of ITC or excess ITC claimed.

Recovery of Self Assessed Tax and Interest [S. 75(12)]

Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.

However Recovery of Interest without SCN is breach of natural Justice as held by Karnataka High Court in L.C. Infra Projects Pvt Ltd.,

“……………..the issuance of Show Cause Notice is sine qua non to proceed with the recovery of interest payable thereon under Section 50 of the Act and penalty leviable under the provisions of the Act or the Rules. Undisputedly, the interest payable under Section 50 of the Act has been determined by the third respondent-Authority without issuing Show Cause Notice, which is in breach of principles of natural justice. It is trite law that any order passed by the quasi-judicial authorities in contravention of the principles of natural justice, cannot be sustained ………………. The notion of the third respondent-Authority that Section 75(12) of the Act empowers the authorities to proceed with recovery without issuing Show Cause Notice is only misconceived. The said Section is applicable only to the self-assessment made by the assessee and not to quantification or determination made by the Authority………………”

Penalty for non payment of self assessed tax with in 30 days: Section 73(11)

Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax. Hence if the self assessed tax is not paid with in a period of 30 days from the due date of payment of tax which shall coincide with due date of filing of return u/s 39 due to the operation of section 39(7), then 10% penalty has to be paid at the time of payment of tax.

Here it may be pertinent to discuss the relief provided from the operation of section 73(11) by virtue of Circular 76/50/2018 as under:

Whether penalty in accordance with section 73 (11) of the CGST Act should be levied in cases where the return in FORM GSTR-3B has been filed after the due date of filing such return?

As per the provisions of section 73(11) of the CGST Act, penalty is payable in case self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

It may be noted that a show cause notice (SCN for short) is required to be issued to a person where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised for any reason under the provisions of section 73(1) of the CGST Act. The provisions of section 73(11) of the CGST Act can be invoked only when the provisions of section 73 are invoked.

The provisions of section 73 of the CGST Act are generally not invoked in case of delayed filing of the return in FORM GSTR-3B because tax along with applicable interest has already been paid but after the due date for payment of such tax. It is accordingly clarified that penalty under the provisions of section 73(11) of the CGST Act is not payable in such cases. It is further clarified that since the tax has been paid late in contravention of the provisions of the CGST Act, a general penalty under section 125 of the CGST Act may be imposed after following the due process of law.

10% /100% penalty u/s 122(2)

Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,—

(a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent of the tax due from such person, whichever is higher;
(b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher.

Hence if there is intention to defraud the revenue then instead of 10% penalty 100% penalty shall be imposed. Circular 76/11/2018 dated 31-12-2018 is applicable only to Section 73(11) and has not been specifically applied to Section 122(2), however having regard to language of the act, similar benefit should be imparted for section 122(2) also

Penalty for Non payment of amount collected as tax with in 3 months [S.122(1)(iv)]

(1) Where a taxable person who—

(iii) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
(iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.

Non payment of collected amount as representing tax [Section 76]

76. (1) Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not.

(2) Where any amount is required to be paid to the Government under sub-section (1), and which has not been so paid, the proper officer may serve on the person liable to pay such amount a notice requiring him to show cause as to why the said amount as specified in the notice, should not be paid by him to the Government and why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act.

The issue that needs consideration with reference to self assessed tax is whether section 122(1)(iii)/(iv) and/or section 76 can apply to self assessed tax because of late filing of return ?

Here both in section 122(1) as well as section 76 the words “collected ” and “amount as representing tax” are important:

What is the meaning of “Collected”

In R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited – (1977) 4 SCC 98, the Supreme Court was analysing what the expression “collected’ meant in the context of the Sales Tax Legislation of Gujarat. It observed as under :

“Section 37(1) uses the expressions, in relation to forfeiture, ‘any sum collected by the person – shall be forfeited’. What does ‘collected’ mean here? Words cannot be construed effectively without reference to their context. The setting colours the sense of the word. The spirit of the provision lends force to the construction that “collected” means “collected and kept as his” by the trader. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return if eventually it was not taxable, it is not collected. “Collected”, in an Australian Customs Tariff Act, was held by Griffth C.J., not ‘to include money deposited under an agreement that if it was not legally payable it will be returned’ (Words & Phrases p. 274). We therefore, semanticise ‘Collected’ not to cover amounts gathered tentatively to be given back if found non-exigible from the dealer.”

Hence only forfeiture of tax by the taxpayer can only invite the action by the department u/76 or 122(1)

Conclusion:

The provisions of section 76 and 122 are meant to deal with situation where taxes are wrongfully collected without authority of law and are retained by the registered person. These provisions are similar to provisions of section 73A of service tax law and section 11B of Central Excise Act. In the opinion of the author adequate safeguards need to be instilled so that these provisions are not used to harass the assessee in cases merely because some supplies were subsequently disclosed or only because return is belatedly filed.

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