The provisions regarding the provisional assessment under GST is given under section 60 of the CGST Act and the corresponding rule is given under Rule 98 of the CGST Rules 2017.
Let us begin the discussion with the note that why the provisional assessment is needed at all .The Sec.60 of the CGST Act 2017 has provided the provisions regarding it. To summarize the provisions we can describe it as under:
- Where the taxable person unable to determine the value of the supply or the rate applicable then he may make an application with reasons to the proper officer regarding the provisional payment of tax.
- The proper officer within a period of 90 days of receipt of the application allows such payment.
- The taxable person has to execute a bond and security (not exceeding the 25% of the amount covered under the bond).
- The proper officer within a period of six months from the date of the provisional order shall pass the final assessment order after calling necessary information and records from the taxable person. Such period can be extended up to further six months by the joint commissioner or additional commissioner and four years by the commissioner.
- The registered person is liable to pay interest as mentioned in sub section (1) of the section 50 (i.e. not exceeding 18%) from the first date after the due date u/s 39(7) till the date of the payment on the due tax liability . Further if the refund is due after the final assessment then it will be paid in accordance with the provisions of sec .54 of the CGST Act , and also along with interest, if any, as per section 56 (not exceeding @6%).
- The taxable person may file an application to the proper officer regarding the release of the security after the final assessment order has been passed and the proper officer shall release the security after ensuring payment of tax within seven working days from the date of receipt of application.
The provisional assessment is really beneficial to the tax payer or not is a question of fact. It can be said that it is a statutory duty of the tax payer to discharge all the liabilities of tax liability as per the provisions of the act. But if in a particular case the tax payer is not in position of exactly know the actual liability which it owes to the department then he may opt for provisional assessment.
While going through the provisions we observe that even though the tax payer approaches to the department to get the information of the chargeability of its supply in time but he has to pay the interest to the department on the differential tax payable from the due date as mentioned in section 39 of the CGST Act to till the date of actual payment of the tax liability and which is something as big as 18%. On the contrary if he is entitled to get on the refund he will get only 6% which is even from the date of issue of the order of final assessment to till the payment of refund.
In my opinion it is not justice with the innocent tax payer who approaches on time to the department to know the correct amount of its liability and even though he is liable to pay the interest. Now think that if the proper officer passes the order on the last date of 6 months time limit how much interest the innocent tax payer is required to pay even he has committed no default. One must bear in the mind that this interest is payable even if he executed the bond and furnishes the security in favor of the department.
The provisional assessment should not be made so harsh that a genuine tax payer faces difficulty in observing the provisions of the act. The intention of the legislature can never be to punish the innocent tax payer.
The provisional assessment was also available under the previous laws but the GST came as reform to the previous laws and therefore we were expecting the reform under provisional assessment but the same is not been made by the government till date . The government must introduce the system with necessary riders so that genuine tax payer must not be in trouble . If the genuine tax payer do not know the exact classification or rate of the supply and approaches to the department for the resolution for the same and even 90 days time limit has been provided with the department to allow the provisional payment then where is the default of the genuine tax payer to pay interest to the government?
If the nature of the supply is as such that it is not possible to ascertain the correct classification or rate duty and if a it is a business compulsion to enter into the same then genuine tax payer has not left with other option but to opt for provisional assessment. The provisional assessment in one way gives liberty to the businessman to enter into the such type of transaction in one way even in the situation of ambiguity regarding taxability and on the other way cast the liability of heavy interest inspite of the fact of furnishing bond and security.
In the hope that soon the government will consider the facts and allow the genuine tax payer to breath in a more lighter environment of tax regime, I conclude the discussion with a positive note that things will be in order gradually.
This article is an endeavor to share some learnings obtained. The views expressed are of the author and are intended solely for informational purpose only. Though due care is taken while preparing the document, possibility of errors cannot be ruled out. Expert guidance, where required and reference to the original act, notification, circular, rules etc is highly recommended.
(About the author – The author is a member of ICAI and can be reached at Email: nikhilkumarca@gmail.com, Mobile: 09936424523, , Twitter : @CA_NikhilKumar , FB: canikhillko Office: Flat No. 102, First Floor , Vasundhra Complex, Ring Road, Sector-16, Indira Nagar, Lucknow-226016 , U.P., India )
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