Hiregange & AssociatesChartered Accountants

Assessment, Scrutiny& Revenue Audit

- CA Venkat Prasad. P

16/07/20199

Today Coverage

2

Different types of AssessmentSelf-assessmentProvisional assessmentReturns scrutinyBest Judgement assessmentDepartment AuditSpecial AuditQ&A

Assessment – Different types

3

Self Assessment – Section 59

Provisional Assessment – Sec. 60

Scrutiny Assessment – Sec. 61

Assessment of Non-filers – Sec.62

Assessment of Unregistered Persons – Sec. 63

Summary Assessment – Sec. 64

Section 2(11) defines Assessment = Determination of tax liability and includes Self-assessment, Re-assessment,Provisional assessment, Summary assessment and Best judgement assessment

Self Assessment – Sec 59 of CGST Act, 2017

4

Applicable to all registered persons Assessment to be made by the registered person himself

By furnishing of return u/s. 39 – GSTR-3B now Assessment is for each tax period – Monthly/Quarterly

Issues in Self Assessment••

–––

•–––

•••

Filed GSTR-1 and not filed GSTR-3B? Self-assessment completed?Course of action for mistakes in self-assessment (Eg: IGST paid on Ocean freight, paid to suppliersinstead of RCM) – Circular No. 26/2017 dated 29.12.2017

Amendments/rectifications in subsequent monthsRefund, if adjustment is not possibleRelevance of ITC LTD Vs C.C.E KOLKATA-IV 2019 (368) E.L.T. 216 (SC)

Common errorsLiability over/under reportingExcess/short claim of ITCWrong type of tax paid (IGST instead of CGST + SGST)

Payments made through DRC-03 (+ while filing of Annual Return) is Self-assessment?Unpaid amounts in self-assessment – direct recovery u/s. 75(12)Use of ITC for making the past liabilities reported in current month?

5

Provisional Assessment– Sec 60 ofCGST Act, 2017•

6

Taxable person unable to determine value / rate in Form GST-ASMT -01

Request the Proper Officer in writing for paying tax on a provisional basis

PO in GST ASMT-04 allows payment on provision rate/value basis < 90 days + Bond in GSTASMT-05

Proper Officer passes final Assessment Order in GSTASMT-07 < 6m from Prov. Assessment order

Final Tax > Provisional taxBalance tax + Interest to be

paid

Provisional Tax > Final TaxRefund of excess paid along with

interest @6%

Issues/ Common Errors –ProvisionalAssessment ••

–––

•••••

––

•

Asst/Deputy commissioner – designated as POWhen Provisional assessment is preferable

Price variation clause (PVC) in the agreementsDisputes on the contract priceBuyers disputing rate/Taxable value

PO can reject request for Prov. Assessment?ITC can be used for payment of Provisional assessed tax? – Section 41(2) v. Section 49(4)How can the same be disclose in the invoices and returns?What if the officer does not pass on the order within the time limit of 90 days or 6m?What would be impact on the ITC of the buyer especially where there is change in the rate of taxationpursuant to final assessment

Revised upwards? E.g. 12% to 18%Revised downwards? E.g. 18% to 12%

If not agreed to the final assessment of PO – appeal can be filed?7

Scrutiny of returns – Sec 61 of CGST Act, 2017

8

Proper Officer scrutinizes the returns & related particulars to verify thecorrectness

Inform discrepancies in From ASMT-10

Seeks explanation in ASMT-11 ≤ 30 days

Taxable person offers satisfactoryexplanation ≤30 days*

No further action•

•

Proper Officer mayInitiate appropriate action including thoseu/s 65 or 66 or 67, orProceed to determine tax u/s 73 or 74

•

•

Taxable person offers NO satisfactoryexplanation ≤ 30 days, orAfter accepting discrepancies, fails to takecorrective measures in time

*30 days of being informed by Proper Officer or suchfurther period as may be permitted by him

Issues/ Common Errors –Scrutiny •••

•

Superintendent of Central tax – PO for returns scrutinyTime limit for Scrutiny of returns?Can the Scrutiny be made based on the GSTR 2A report available with him? – As the section says,the scrutiny can be carried on the basis of details and other particulars furnished by the assessee.Department Audit already completed, again returns scrutiny for the same period?

9

Assessment of non-fillers of return – Sec 62 of CGST Act, 2017

10

Registered taxable person fails to furnish return u/s 39 or 45

Proper Officer serves Notice in GSTR -3A u/s 46

Failure continues > 15 days after service of Notice

••

Proper Officer performs best judgment assessment:To assess the tax liability of the said personTaking into account all the relevant material available with or gathered by him

Taxable person furnishes a valid returnwithin 30 days of service of Order

Order deemed withdrawn but interest u/s 50 and late fee u/s 47 will apply

Tax liability determined in the Orderpassed by Proper Officer to be final

Else

Assessment Order in Form ASMT-13 ≤ 5 years from due date for annual return

Assessment of un-registered person –Sec 63 of CGST Act, 2017

11

Taxable person liable to obtain registration fails to do so, or a taxable person’s registration is cancelled, although liable to pay tax

Proper Officer proceeds to assess the tax liability to the best of his judgment, forthe relevant tax periods to which tax dues relate

Proper Officer to issue notice in Form ASMT-14 and offer the taxable person,reasonable opportunity of being heard

Proper Officer to pass Assessment Order in Form ASMT-15to recover tax not paid

* Assessment Order to be passed within 5 years from due date of filing the annual return forwhich such tax dues relate

Best Judgement Assessment – Basis andMethods•

•––

–

•

The GST Law has not provided any guidance, norms, do’s & do not’s for officers for best judgmentassessment. Lack of guidelines has led the GST officers to arrive at the liability arbitrarily.Important points to be kept in mind while making BJA (Evolved from Income tax/Sales tax)

BJA is not a wild assessment. It must not be arbitrary & caprice (taking fancy numbers)It must be founded upon some rational basis, relevant material and logic so that nexusbetween such basis or material and the figure of assessment arrived at can be objectivelyseen though some amount of guess work or estimation is to be allowedIf the estimation is not based on any evidences, such factual presumptions are alwaysrebuttable

Recent decision in case of OMSAI PROFESSIONAL DETECTIVE AND SECURITY SERVICES PVTLTD, 2020-TIOL-81-AAR-GST

12

Issues/ Common Errors –Sec 62/ 63

•

••

•

•

As these sections are overriding sec 73/74. Whether officer shall levy the penalty within theassessment order only?Issuance of Form GSTR 3A, without issuance of notice under section 46 – How to deal with it.If returns filed after 30 days? - Bridge Hygiene Services Pvt. Ltd vs State Tax Officer 2019 (30) G.S.T.L. 391 (Ker.) refused to condone the delay > 30 daysTax is paid within 30 days, but interest was not paid – Will it amount to valid return? – Will theassessment order be deemed to be withdrawn as a consequence of the same?Unregistered – how portal would be enabled?

13

Summary Assessment in certain cases – Sec 64 of CGST Act,2017

14

Evidence showing tax liability comes to the notice of Proper Officer

Proper Officer proceeds to assess the tax liability

Having sufficient grounds to believe that any delay in doing sowill adversely affect the interest of revenue

Proper Officer to pass Assessment Order in Form ASMT-16 to recover tax not paid

Permission of Additional/ Joint Commissioner to assess the tax

Additional/ Joint Commissioner considersthat such Order is erroneous, he maywithdraw such Order and follow theprocedure laid down in Section 73 or 74.

Taxable person makes applicationwithin 30 days of receipt of Order,

that it is erroneous

Issues/ Common Errors – Sec 64

••••••

Asst/Deputy commissioner of Central Tax – PO u/s. 64It is Fast track assessmentTransaction specific or period specific?Time limit to make assessmentApplication made & PO has not withdrawn the orderNot applied ≤ 30 days – impact

15

Definition of Audit – Section 2(13) of CGST Act,2017

Section 2(13) of the CGST Act, 2017:

“Audit” means the examination of records, returns and other documents maintained orfurnished by the registered person under this Act or the rules made thereunder or under anyother law for the time being in force to verify the correctness of turnover declared, taxes paid,refund claimed and input tax credit availed, and to assess his compliance with the provisionsof this Act or the rules made thereunder;

•

•

•

The proper officer can:

Perform / require special audit only on registered persons;

Resort to the demands and recovery provisions u/s 73 / 74 of the CGST Act, 2017where he detects any tax not paid / short paid / erroneously refunded, or input taxcredit wrongly availed or utilized.

Audits under the GST Act.

17

Audit

By CA/CMA

Turnover-based Auditunder Section 35(5) r/

w. Sec 44 – FormGSTR-9C

By the department

General audit or specific auditu/s 65 of the CGST Act, 2017 –

Under taken by the properofficer

Special audit u/s 66 of the CGST Act, 2017;Undertaken by CA/ CWA nominated by the

commissioner

Audit by tax authorities – Section 65 of CGST Act, 2017

18

The Commissioner or any officer that he authorises through a general order (or a specificorder), may undertake a general audit

To be carried out for a financial year, or for multiple financial years The authorized officer shall issue a notice in Form GST ADT-01, at least 15 workings days

prior to commencement The officer is required to complete the audit within 3 months: May be extended by a further

period of 6 months by the Commissioner Officer shall inform the auditee about the findings and the reasons, within 30 days of

conclusion of audit The auditee may file his reply to the discrepancies noted by the officer Officer shall duly consider such reply before finalization of findings which shall be

communicated to the auditee through Form GST ADT-02 along with rights & obligatiosn

Issues/ Common Errors - Audit•••

•••

––

•••••

Powers of Revenue department to conduct the auditPowers of C&AG to conduct the AuditEither Central or State Tax officer will confine himself for that State only. Refer Notification No. 2/2017-Central Tax dated 19.06.2017 defined the jurisdiction of Central officers.However, CBIC can authorize any Central Tax officer to do any particular job in terms of section 5State officer of one State will not have jurisdiction against assessee located in another stateThe audit to complete ≤ 3 months from the date of commencement of Audit & It is defined to mean-

The date on which records and documents as required are submittedThe date of actual institution

How to assess commencement date?What is not completed within above time limits?ITC adjustment for additional liability found in Audits?Same period audit twice by same/different authorities?Audit of ISD unit? 19

Special Audit – Section 66 of CGST Act, 2017

20

Assistant Commissioner, with the prior Approval of thecommissioner

Can Invoke - in case of scrutiny, inquiry, investigation or any otherproceedings has already been initiated – Directing the assessee(Form ADT – 03) to get the BOA Audited by CA./CMA

Owing to the Nature/ Complexity of the case and in the interestof revenue, is of the opinion that, the Turnover incorrectlydeclared or ITC availed is not within the normal limits

CA to submit report with in 90 days in FORM GST ADT-04 ,which may be further extended to 90days

Satisfied – No Further ActionNot satisfied –Initiate Sec 73/ 74

Special Audit under GST

•••

Special audit pre-supposes initiation of the proceedings like scrutiny, inquiry etc.,Additional requirement even GSTR-9C is filedExpenses of Special audit would be reimbursed from Tax payer?

21

The End

22

- venkataprasad@hiregange.com

THANK YOUTHANK YOU