Assessment & Audit under GST

Introduction

• Assessment means determination of tax liability under GST Act and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgement assessment.
• Audit means the examination of records, return and other documents maintained or furnished by the registered person under the Act or rules prescribed to verify turnover declared, tax paid, refund claimed, ITC availed, etc.
• Proper Officer means the Commissioner, or the officer assigned by such commissioner.

Assessments

• Self-Assessment
  • Assessing the tax payable for a tax period and filing the return.
• Provisional Assessment
  • Where the taxable person is unable to determine value or applicable tax rate of goods or services or both to be supplied by him, he may furnish an application along with supporting documents either through GST Portal or notified centres.
  • Proper Officer may issue a notice requiring the applicant to furnish additional information or documents. Applicant shall file reply and appear before office if required.
  • Officer shall pass order within a period upto maximum 90 days allowing payment of tax on provisional basis and the amount for which bond is to be executed and security to be furnished.
  • Bond -> pay differential tax if required on finalisation. Security -> In the form of bank guarantee upto 25% amount covered in bond.
  • Final Assessment order must be passed by the Officer within 6 months from the date of communication of order of provisional assessment. [Extendable to further period upto 6months by Addl/Joint Commissioner and 4 years by Commissioner]
  • Tax liability > Provisional order = Interest applicable from original due date.
  • Tax liability < Provisional order = No interest if paid within 60 days from order date.
  • Applicant to file application and officer shall release the security after ensuring tax paid as per final order within 7 days of application receipt date.
• Scrutiny of Return (Section 61)
  • Verify the correctness of return filed.
  • Issue notice in case of any discrepancies. Taxpayer to respond within 30 days from receipt of notice, however extendable by Officer.
  • Response = Accept and pay tax / Prepare submission to provide explanation for non-acceptance.
  • Explanation found satisfactory by Officer -> No action against taxpayer.
  • If found non satisfactory, any of the below actions can be taken –
    • Conduct audit under Section 65
    • Direct special audit by CA or CMA
    • Undertake Inspection, Search and Seizure procedures
    • Initial proceeding for determination of tax and other dues under Section 73 & 74.
• Assessment of Non-filers of Returns
  • Best-judgement assessment -> Taxpayer not filed return or not responded to notice asking to file return within 15 days from date of receipt, Proper Officer shall assess to the best of his judgement and ascertain tax liability.
  • Time limit = 5 years from the due date of annual return filing for a financial year.
  • If return filed by taxpayer, such order shall be withdrawn however interest is liable for payment.
  • Alert messages sent to taxpayers for filing return. After 5 days from due date, notice sent u/s 46 to file return within 15 days.
  • If return not filed, best judgement assessment to be done and order passes considering GSTR 1, GSTR 2A, e-way bills, etc.
  • Defaulter files return-> Assessment withdrawn however interest liability exists. Not filed -> Proceedings u/s 78 and recovery u/s 79 shall be initiated.
  • GSTIN cancellation if return not filed for period exceeding 6 months.
• Assessment of Unregistered Persons
  • Best-judgement assessment -> Person fails to obtain registration or registration for cancelled, but liable to pay tax.
  • Notice to be served requesting to provide response within 15 days.
  • Order not to be passed without giving OBH to such person.
  • Time limit = 5 years from the due date of annual return filing for a financial year.
• Summary Assessment in certain special cases
  • Initiated to protect the interest of revenue with prior permission of Addl/Joint Commissioner – taxpayer incurred liability to pay tax and delay in passing an assessment order may adversely affect the revenue.
  • Such assessment order shall be withdrawn on an application filed by taxpayer within 30 days from date of receipt of order or on his own motion if found erroneous.
  • If taxable person is not ascertainable and liability pertains to supply of goods, person in charge of such goods shall be deemed to be taxable person liable to pay tax and other amounts due.

Audits

• Audit by Tax Authorities
  • Audit undertaken by Commissioner or his authorised officer at the principal place of business or office. For one or many FYs.
  • Notice should be issued at least 15 days before proposed audit date.
  • Time limit = 3 months from commencement date, extendable to 6 months in total.
  • Go through documents/records. Verify turnover/deductions and exemption claimed, tax rates adopted, ITC availed and utilised, refund claimed.
  • Taxpayer to facilitate verification, provide information as required and render assistance for timely audit completion.
  • Proper officer may inform taxpayer of discrepancies noticed and taxpayer shall respond if required.
  • Audit findings to be finalised and informed to taxpayer within 30 days of audit conclusion.
  • If audit results in short/nil tax payment or erroneous refund claim or wrong availment/ utilisation of ITC, action to be initiated under Sections 73 or 74 by Proper Officer.

• Special Audit

• If at any stage during inquiry or investigation or proceedings before him, any officer not below the rank of Asst Commissioner with prior approval of Commissioner, shall direct the taxpayer to get the accounts audited by CA or CMA nominated by Commissioner.
• Duly signed audit report to be submitted within 90 days, extendable by another 90 days, on request by taxpayer or CA / CMA or for genuine material reasons.
• Audit related expenses to be borne by Commissioner.
• OBH to be given to taxpayer regarding any material gathered to be used in proceedings.
• Audit findings to be finalised and informed to taxpayer.
• If audit results in short/nil tax payment or erroneous refund claim or wrong availment/utilisation of ITC, action to be initiated under Sections 73 or 74 by Proper Officer.