1. Many would have started getting notices in the FORM GST ASMT-10 seeking explanation for the discrepancies observed by the concerned officer on making scrutiny of returns. Normally department is seeking explanation with respect to discrepancies between the amounts shown in GSTR – 3B and the amounts shown in GSTR – 1. What should be done about such notices ?

2. Section 61 of the Central Goods & Services Tax (‘CGST’) Act, 2017 provides for scrutiny of returns. Said provisions are reproduced below:

“Sec. 61. Scrutiny of returns. — (1) The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.

(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.

(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74.

3. As per the above provisions, officer may scrutinize the return furnished to verify the correctness of the return. The word “return” has been defined u/s 2(97) of the CGST Act, 2017 to mean any return prescribed or otherwise required to be furnished by or under the said Act or the rules made thereunder. Is GSTR – 3B a return ?

4. Rule 61(5) of the CGST Rules, 2017 provide as under:

“Rule 61(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38 has been extended and the circumstances so warrant, the Commissioner may, by notification, [specify the manner and conditions subject to which the] return shall be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.”

5. From reading of above sub-rule we can conclude that GSTR – 3B is indeed a return as defined u/s 2(97) of the CGST Act, 2017. Hence proper officer has power to scrutinize such return and related particulars furnished by the registered person. Details of outward supply furnished in FORM GSTR – 1 is indeed related to GSTR – 3B and hence officer has the power to scrutinize such return in GSTR – 3B along with GSTR – 1 for any discrepancy.

6. Once such discrepancy is noticed, proper officer has to seek an explanation with regard thereto. As per Sec. 61(2) of the CGST Act, 2017, if the explanation furnished is found acceptable to the officer, he shall inform the same to the registered person and no further action is required.

7. However if no satisfactory explanation is furnished or corrective action is not taken after acceptance of the discrepancy, officer shall initiate action u/s 65 (audit by tax authorities) or section 66 (special audit) or section 67 (inspection, search or seizure), or proceed to determine the tax and other dues under section 73 or section 74 (i.e. issuance of SCN and order).

HOW WILL OFFICER COMMUNICATE DISCREPANCY ?

8. Rule 99(1) of the CGST Rules, 2017 provides that notice for any discrepancy observed in accordance with provisions of Sec. 61 of the CGST Act, 2017 shall be communicated in FORM GST ASMT-10 (refer annexure for the form). On perusal of said form one can observe that the officer is simply required to mention the discrepancy observed and allow time to the registered person to furnish explanation against such notice. Further as per said sub-rule quantifying the tax amount is not mandatory. Same needs to be done wherever possible.

WHAT IS THE TIME LIMIT TO FURNISH AN EXPLANATION ?

9. Section 61(3) of the CGST Act, 2017 provides that the officer can initiate action u/s 65 (audit by tax authorities) or section 66 (special audit) or section 67 (inspection, search or seizure), or proceed to determine the tax and other dues under section 73 or section 74 (i.e. issuance of SCN and order) only if no satisfactory explanation is furnished within a period of 30 days of being informed or such further period as permitted by the officer. Hence law clearly provides for the minimum time limit of 30 days to submit an explanation. Further such period will start from the date of being communicated and not from the date of issuance of notice. Hence the period will start from date of receipt of notice.

10 .Rule 99(1) on the other hand provides that officer has to seek an explanation for the discrepancy within such time not exceeding 30 days from date of service of notice or such further period as permitted by such office. Whether the word “serve” would mean the date of “issue” of notice or the date of “receipt” of notice ?

11. Punjab & Haryana High Court in the case of V.R.A. Cotton Mills (P.) Ltd. [2013] 359 ITR 495/33 has taken a view that the expression “serve” and “issue” are interchangeable. Said ruling was in the context of Sec. 143(2) of the Income Tax Act, 1961. Recently Gujarat High Court in the case of Principal Commissioner of Income-tax v. Nexus Software Ltd [2017] 81 taxmann.com 153 (Gujarat) dissented with Punjab & Haryana High Court and held that only if the notices are issued before reasonable time of the prescribed period of limitation and it has been dispatched /sent for delivery within the reasonable time, in that case, there can be presumption under Section 27 of the General Clauses Act that it has been “served”. Otherwise the word “serve” and “issue” will not have the same meaning.

12. Applying the above Gujarat High Court ruling to Rule 99(1) read with Sec. 61(3) of the CGST Act, 2017 the words “date of service” would mean date of receipt and not date of issuance of notice.

13. It may also be noted that Sec. 61(3) of the CGST Act, 2017 permits stipulated action only after 30 days whereas Rule 99(1) provides that officer may give a period shorter than 30 days for furnishing an explanation. Hence rule stipulating period lesser than 30 days runs contrary to Act. Attention is thus invited of the Government to make appropriate correction in the rule to avoid the conflict.

14. Practically however it is suggested to submit a reply within the time permitted in the notice to avoid any unintended consequences.

HOW TO FURNISH THE REPLY ?

15. Rule 99(2) provides that the reply against the notice must be furnished in FORM GST ASMT – 11. Copy of said form is in the annexure. Hence it is important to note that reply must be furnished in the said form.

WHAT WILL OFFICER DO IF THE REPLY IS ACCEPTABLE ?

16. Rule 99(3) provides that officer shall inform the registered person that his reply is acceptable in FORM GST ASMT – 12. Copy of same can also be found in the annexure.

17. We can thus conclude by suggesting that the above referred procedures must be duly followed to avoid any undue action when discrepancies are communicated by the Government.

Annexures attached.

Form GST ASMT-10
[See rule 99(1)]

Reference No. :          Date:

To ___________

GSTIN :

Name :

Address :

Tax period -        F.Y. –

Notice for intimating discrepancies in the return after scrutiny

This is to inform that during scrutiny of the return for the tax period referred to above, the following discrepancies have been noticed :

<< text >>

You are hereby directed to explain the reasons for the aforesaid discrepancies by __________________ (date). If no explanation is received by the aforesaid date, it will be presumed that you have nothing to say in the matter and proceedings in accordance with law may be initiated against you without making any further reference to you in this regard.

Signature
Name
Designation
Form GST ASMT-11
[See rule 99(2)]

Reply to the notice issued under section 61 intimating discrepancies in the return

1. GSTIN
2. Name
3. Details of the notice Reference No. Date
4. Tax Period
5. Reply to the discrepancies
Sr. No. Discrepancy Reply

6. Amount admitted and paid, if any –

Act Tax Interest Others Total

7. Verification –

I __________________________________________ hereby solemnly affirm and declare that the information given hereinabove is true and correct to the best of my knowledge and belief and nothing has been concealed therefrom.

Signature of Authorised Signatory
Name
Designation/Status –
Date –
Form GST ASMT-12
[See rule 99(3)]

Reference No.:       Date:

To

GSTIN

Name

Address

Tax period – F.Y. –
ARN – Date –

Order of acceptance of reply against the notice issued under section 61

This has reference to your reply dated _______________ in response to the notice issued vide reference no. ________ dated ___________. Your reply has been found to be satisfactory and no further action is required to be taken in the matter.

Signature
Name
Designation

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