Introduction to GST
The Goods and Services Tax (GST) was introduced to streamline the taxation system. Eliminating indirect taxes benefits Indian businesses to expand their operations. The unified GST is now the only tax that Indian companies must pay for supply within India. E-commerce operators registered under GST can also charge and claim tax credit benefits.
Let’s dive into GST assessment procedures and how taxpayers can ensure compliance.
Types of GST Assessments
GST assessment refers to the process used to determine tax liabilities. Registered taxpayers are liable to pay to the government the GST tax they collect for the supply of goods and services. Ensuring accurate tax payment is crucial for GST compliance. If the tax authorities suspect that a business collects GST tax and does not remit the tax to the government properly, they can take legal action, resulting in penalties, fines, and even jail terms. Multiple types of GST assessment procedures are available.
Self Assessment by Tax Payer
A taxpayer conducts self-assessment and reports tax returns to the tax authorities. To ensure the accuracy of self-assessment, you must maintain records of all inward and outward transactions. For example, when you supply goods, create a GST invoice, issue it to the supplier, collect the right amount of GST, and record the entire transaction. Do this process for every transaction during the tax period.
When it is time to submit tax returns, calculate the total GST liability and pay your GST tax accordingly. This self-assessment must be carried out thoroughly for every tax period. As long as you are a GST-registered taxpayer, submit your monthly, quarterly, and annual income tax returns without fail.
By Tax Authorities
Only self-assessment is carried out by the taxpayer. Other types of assessments detailed below can only be executed by tax authorities.
Provisional assessment
If you cannot determine the tax rate or value, you can request the officer to complete a provisional assessment. It is useful when you don’t know whether certain receipts should be included in the tax assessment. This service is also helpful if you need help with how to classify goods or services and apply the right GST rate.
Once you request a provisional assessment through Form GST ASMT-01, the Proper Officer will notify you of the provisional tax value you must pay. Through Form GST ASMT-02, they will ask for the required information, and you can submit the same using Form GST ASMT-03. While this may not be the same as the final tax amount, they will determine the rate or value based on available information. A written order, Form GST ASMT-04, will be sent to you within 90 days of making the request. Taxpayers, in return, must issue a bond with security for the pending difference between the final assessment and provisional tax when they submit Form GST ASMT-05.
The Proper Officer will request more information for the final tax assessment through Form GST ASMT-06. The final assessment order will be sent through Form GST ASMT-07, containing details about the amount paid and refundable amount, if any. The Proper Officer is required to pass the final assessment order within 6 months of sending the provisional order.
Summary Assessment
A fast-track assessment is termed a summary assessment. When the tax authorities have evidence that the taxpayer has incurred or is likely to incur a tax liability, the Proper Officer can issue a summary assessment order through Form GST ASMT-16. However, they must obtain permission from the Joint/Additional Commissioner first.
Scrutiny of Returns
The Proper Officer may trigger scrutiny of returns assessment when they want to verify the correctness of returns submitted by the taxpayer. They will ask for your explanation in Form GST ASMT-10 if they find any discrepancies or anomalies in the returns submitted. You will have 30 days to respond through Form GST ASMT-11. If the proper officer is satisfied with the explanation, they will not take any action.
In case you don’t respond within 30 days or your explanation is not satisfactory, the proper officer can take any of the following actions:
- Initiate departmental audit according to Section 65
- Conduct a special audit as per Section 66
- Trigger inspection, search, and seizure based on Section 67
- Determine tax based on Sections 73 and 74
Assessment of non-filers of tax returns
This type of assessment is triggered for the following reasons:
- Taxpayer fails to submit tax returns for the tax period
- Composition scheme businesses fail to submit tax returns
- No final return is submitted after registration cancellation
In all these cases, the proper officer uses the “best of his judgment” to issue an assessment order. The proper officer can issue an assessment order through Form GST ASMT-13 within 5 years from the date of non-filing of returns. For example, if you didn’t submit an FY 2017-18 return, the proper officer can issue an assessment order until 31.12.2023.
Once you receive this order, you must submit your return within 30 days and pay the tax liabilities, including tax, fees, and penalties.
Assessment of unregistered persons
The proper officer can issue an assessment order when a taxable person who is liable to pay the tax fails to register and submit income tax returns. Even after GST cancellation, a taxpayer is liable to pay the pending tax. If they fail to do so, the proper office can issue Form GST ASMT-14 with information about the necessity of assessment. The recipient is expected to respond to this order through Form GST ASMT-15. This assessment order must be issued within 5 years of failing to submit tax returns.
Also Read: Types Of Assessment Under GST
Methods and Procedures for GST Assessments
Every GST-registered taxpayer must complete a self-assessment and submit their income tax returns monthly, quarterly, and annually based on their registration type. However, the authorities have the right to issue assessment orders and conduct audits if they are unsatisfied with the return details provided. The GST assessment procedure is as follows:
- Issue of notice – Tax authorities begin the assessment process by issuing a tax notice asking for additional information. This notice contains the reason for initiating the assessment order and the period within which the taxpayer must respond with the required documentation, which is also included in the notice.
- Audit – Based on the taxpayer’s information, the tax authorities conduct audits of the records to ensure correctness. The officers can determine whether the audit must be conducted on-site or off-site. During the audit, you must submit all documentation requested by the officers.
- Issue of assessment order – The tax authorities issue an assessment order based on the audit results. This order contains the due tax amount, including interest, fines, penalties, and late fees, as applicable.
- Error rectification – If you have concerns about the assessment order, you can request clarification to rectify errors. This process must be completed within 30 days of receiving the assessment order. The tax officers will once again review the request to issue a revised assessment order.
- Appeal – After receiving the assessment order, you must pay the tax mentioned in the order. You can appeal with the appellate authorities if you have a grievance associated with the assessment order. This must be done within 3 months of receiving the assessment order.
Key Parameters and Criteria for Assessments
The tax authorities consider multiple parameters and criteria for conducting tax assessments. The primary purpose of this action is to determine the tax liability accurately to ensure GST compliance. Knowing what the authorities will scrutinize will help you prepare and keep the information ready when authorities ask for it.
- Details on the nature and value of taxable supplies
- Invoices and supporting documents for ITC claiming
- Total value of taxable supplies during the tax period
- Details of tax-exempt supplies
- Documentation related to reverse charge mechanisms
- Accurate information about the place of supply
- Periodic returns including GSTR-1, GSTR-3B, and GSTR-9
- Invoice matching and reconciliation
Depending on your case, the authorities may request additional information and documentation. During assessment, a taxpayer is required to provide all the details that are requested. Maintaining accurate records and ensuring an audit trail is key to completing assessments and audits successfully.
Conclusion
GST assessment procedures are crucial to ensure GST compliance. As the GST rules and regulations are constantly updated, you must be aware of the latest changes in GST rates to avoid penalties and interest. Non-compliance results in tax penalties, late charges, and fines. When tax authorities suspect tax evasion, they can prosecute taxpayers, and it can result in jail time. Ensuring the accuracy of self-assessment will help you avoid unnecessary audits, which can be time-consuming, expensive, and disruptive to business processes. Automating business transactions with GST billing software will help you maintain accurate records and avoid errors.
Worried about becoming a target of GST assessments? Create accurate invoices and file error-free GST returns for stress-free GST compliance with CaptainBiz. Explore our platform for easy invoicing and seamless GST return filing.
Also Read: Know Everything About GST Billing Software
FAQs
What is the significance of GST assessment?
GST assessment is the process of evaluating a taxpayer’s compliance with GST regulations. This includes verifying the correctness of tax payments, input tax credits, and adherence to filing requirements.
Who conducts GST assessments?
Tax authorities conduct tax assessments according to the GST regime. They are appointed by the Central Board of Indirect Taxes and Customs (CDIC) and the state governments’ commercial tax departments.
What triggers GST assessment?
Authorities issue a GST assessment order if they find discrepancies and irregularities in tax filings. The GSTN system conducts risk profiling and determines taxpayer risks, which in turn will trigger assessments.
What documents do I need for GST assessment?
If the authorities issue an assessment order, be ready with all documents related to GST registration, tax invoices, debit and credit notes, bank statements, purchase and sales registers, and other relevant records.
How is GST liability determined after assessment?
The authorities review details of taxable supplies, input tax credits, exemptions, etc, according to CGST, SGST, and IGST Act to determine GST liability.
What happens if authorities find discrepancies during GST assessment?
The authorities often issue show-cause notices to the taxpayer, asking for clarification about discrepancies. You can submit reasons for discrepancies along with errors. However, if the authorities are not satisfied, penalties may be levied based on the severity of the situation.
Can I appeal against the GST assessment order?
Yes, you can appeal to the appellate authority within the period against the GST assessment order.
How often will the GST assessment be conducted?
You must conduct a self-assessment every time before filing GST return forms. The GSTN system triggers assessment based on your risk profile and specific patterns related to GST authorization.
What happens if the assessment shows GST non-compliance?
As per the GST Act, non-compliance is an offense that can result in penalties, interest charges, fees, and fines. If the situation is severe, it can even result in suspension or cancellation of GST registration. For more severe cases, prosecution action may also be taken.
How to prepare for GST assessment?
GST-registered taxpayers must always be ready for GST assessment with accurate records of all types of taxable and tax-exempt supply transactions. This includes timely issuance of invoices, debit/credit notes, reconciliation of ITC, etc. Using automation software will help you create GST-compliant invoices and reconcile bank accounts automatically.
