Introduction to Assessments under GST
The process of determination of GST tax liability that the taxpayer needs to pay on a periodical basis is known as assessment. GST laws in India are based on a self-assessment which means that the taxpayer will himself assess the tax and pay to the government at prescribed intervals. Does this mean that there will not be any assessment or check by the GST authorities under the GST Act? For this, let us analyze Section 59 to 64 of the CGST Act, 2017 which deals with Assessment and related provisions.
- SELF-ASSESSMENT (Section 59)
As the name itself suggests, self-assessment means a taxpayer shall compute his tax liability and pay the same to the government as per the provisions of the CGST Act. Persons registered under GST shall file periodical GST returns and pay tax based on accounts and records maintained by him on Self-Assessment basis.
The assessment made by the registered person would be treated as final. However, the Government at all times has the rights to re-assess or perform an assessment by itself and determine if there is no tax evasion of GST.
When Self-assessment is carried out with proper due diligence; accounts and records are maintained as per provision of law; returns are filed timely; and no malafide practise is being adopted which can effect tax revenue adversely, then the taxpayer may not face any assessment.
All other kind of Assessments are trigged when there is reason to believe that Self-Assessment is not done properly. If Self-Assessment is being carried out properly then all other types of assessments are mere dead letters of the law.
- PROVISIONAL ASSESSMENT (Section 60)
When tax payer is not able to determine value or rate of any goods or services and there is interpretation or applicability issue, then in such case, the tax payer may ask the GST officer in writing for allowing payment of tax on provisional basis.
The Proper officer within 90 days of receipt shall allow tax to be paid on provisional basis and start the assessment for the matter as specified by the taxpayer. Provisional assessment is a better mechanism where the correct tax liability could not be determined at the time of supply.
It is safer option for taxpayers when there are multiple interpretations of notification, confusion regarding classification of goods or services, confusion regarding HSN code or involves any other uncertainty in computing tax liability. The liability of taxpayer regarding short fall in payment of tax or any other liability is shifted from the taxpayer and clear decision is given by the tax authorities.
- SCRUTINY ASSESSMENT (Section 61)
When a flaw is trigged or there is reason to believe that self-Assessment is not done properly scrutiny assessment comes into picture. Timely payment of taxes and keeping of accounts and records in order will help you prevent scrutiny assessments from tax authorities and possible penalties.
Scrutiny of relevant documents such as Ledger accounts, periodical returns, books of account, other records etc. can be done by the GST officer if he has reason to believe that there is any tax evasion, short payment of taxes or any other error or flaw in the self-assessment is being made by the taxpayer.
Illustrative cases which may becoming cause for scrutiny assessment is as given below:
- Whether the Outward supply has escaped; or
- Outward supply has under assessed; or
- Ineligible Credit has been availed or utilised; or
- Correct rate of tax has been used for self-assessment; or
- Ineligible exemption has been taken; or
- In case of late filing of return, is interest u/s 50 has been paid; or
- Non timely submission of returns; or
- Comments in Form 9C by the GST auditors
- BEST JUDGEMENT ASSESSMENT
The Best judgement assessment means evaluation or estimation of tax liability of the taxpayer by the GST officer. The GST officer will not act dishonestly or capriciously; he will give his best judgement and works without any bias or preconceive notion
In the best judgement assessment, an assessing officer assesses based on his reasoning and using the information available with him. Under GST, Best judgement assessment can be done in two situations as explained below-
- When a taxable person has not filed a return (Section 62)
If the registered taxable person does not file return, he will be sent a notice under this section. If the taxpayer does not file return even after receiving notice, the proper officer will assess the tax liability to the best of his judgement.
The assessment order will be issued within 5 years from the due date of the annual return. If the taxable person files a valid return within 30 days from the assessment order, then the best judgement assessment order will be withdrawn.
- When a person has not registered for GST even though he is liable to (Section 63)
In case a taxable person who falls to obtain registration even though he is liable to do so is a tax evasion and the officer will assess the tax liability for relevant tax periods to the best of his judgment. The officer can issue an assessment order within 5 years from the due date of the annual return for the year when the tax was not paid.
If it is found that he did not register when he was liable to, then demand and recovery for unpaid tax will commence and the penalty for not registering will also apply. This shows that even unregistered persons can be assessed and surveillance is being maintained upon unregistered entities to keep a check on their eligibility for not registering.
- SUMMARY ASSESSMENT (Section 64)
This is done when the assessing officer has sufficient grounds to believe that any delay in assessing a tax liability in the normal course of assessment can harm the interest of the revenue and evasion of taxes has taken place. To protect the interest of the revenue, he can pass the summary assessment with prior approval of the Additional / Joint Commission and based on available evidence with him.
It is a fast track assessment based on the available evidences and returns filed by the taxpayer. It is completed on a priority basis without the presence of the taxpayer as the delay in assessments may lead to loss of revenue. Summary assessment is usually done in cases of defaulting or absconding taxpayers.
As evident from the above, Self-Assessment is the basis of tax collection under GST laws which is quite beneficial as this saves the honest taxpayers from undue harassment by the tax authorities and legal hassles. If transparent, law-abiding, and fair set of practice is being followed by the taxpayer, he would be able to eliminate the assessments by the tax authorities.
However, having said that GST officer enjoys various discretionary powers while conducting assessments under GST which helps the government to punish the dishonest and tax evaders. The proper officer shall abide by the cardinal principles of our justice system and follow the principles of natural justice while these assessments are carried out.
As the time limit for assessment is not over and the annual returns have been filed recently by most of the taxpayers in Jan 2020, which the department is yet to assess, it would be quite interesting to see how things happen in the real world. Given the present COVID-19 pandemic we expect GST officers to remain muted up to March 2020.
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Team PGA Taxation, Chandigarh