Self-Assessed Tax

Under GST, every registered taxpayer is required to assess their own tax liability and file returns accordingly. This process is known as self-assessment and is the basis of the GST compliance system.

• Taxpayers calculate the tax liability on their own based on outward and inward supplies.
• Returns such as GSTR-3B and GSTR-1 are filed as a part of self-assessment.
• The amount declared in the return is considered as the self-assessed tax payable.

Example:

ABC Traders files GSTR-3B for July and declares an output tax of ₹40,000. After adjusting ₹25,000 of ITC, they pay ₹15,000 in cash. This entire process reflects self-assessment under GST.

Provisional Assessment (Section 60)

When a registered person is unable to determine the value of goods/services or the tax rate applicable, they may request the proper officer for provisional assessment.

• The taxpayer must furnish a request in writing to the jurisdictional GST officer.
• The officer may allow the taxpayer to pay tax on a provisional basis.
• The final assessment shall be completed within six months from the date of provisional order, extendable for reasons recorded in writing.
• Security/bond may be required to be submitted by the taxpayer.

Example:

A manufacturer is unsure whether his product is taxed at 12% or 18%. He applies for provisional assessment and pays tax at a provisional rate of 12% until a final determination is made by the department.

Summary Assessment in Certain Special Cases (Section 64)

This type of assessment is done by the proper officer in special cases, where delay in assessment may adversely affect revenue. Summary assessment is done to protect government interest.

• It is done without issuing a show cause notice (SCN) under normal procedure.
• It is allowed only with prior permission from the Additional Commissioner or Joint Commissioner.
• The taxpayer may later appeal against such an order.

Example:

XYZ Ltd. is found to have evaded a huge amount of tax. The officer issues a summary assessment order immediately to recover the tax due, as waiting for normal procedure may result in revenue loss.

Scrutiny of Returns and Related Audit

Scrutiny of Returns

The proper officer may scrutinize the returns filed by the registered person to verify the correctness of details furnished.

• Discrepancies, if any, will be intimated to the taxpayer.
• The taxpayer must provide an explanation or correct the discrepancies.
• Failure to do so may result in further action like audit, inspection, or assessment under Section 73 or 74.

Departmental Audit

As per Section 65 of the CGST Act, a departmental audit may be conducted by authorized officers to ensure compliance.

• The audit shall be conducted at the place of business or at the office of the tax authorities.
• Prior notice of 15 days must be given.
• The audit must be completed within 3 months (extendable to 6 months).

Example:

The GST department notices mismatch between GSTR-1 and GSTR-3B filed by MNO Enterprises. The officer issues a notice for return scrutiny. MNO clarifies the issue and makes corrections in the next return.

Audit by Tax Authorities (Section 65)

Audit under Section 65 refers to the examination of records, returns, and other documents maintained or furnished by a registered person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed, and ITC availed.

• Conducted by the Commissioner or an authorized officer.
• Audit can be done at the registered person's place of business or in the tax department's office.
• Prior notice of at least 15 working days is mandatory before starting the audit.
• Audit must be completed within 3 months from the date of commencement (extendable to 6 months by the Commissioner).

Example:

The GST officer selects XYZ Pvt. Ltd. for departmental audit. A notice is issued and audit begins at XYZ's premises after 15 days. During audit, discrepancies are found in ITC claimed, and a notice for explanation is sent.

Special Audit (Section 66)

When during any scrutiny, inquiry, or investigation, the officer believes that the value has not been correctly declared or the credit availed is not within normal limits, he may direct for a special audit by a Chartered Accountant or Cost Accountant.

• Ordered by the Assistant Commissioner with prior approval of the Commissioner.
• Audit is conducted by a CA or CMA nominated by the Commissioner.
• The report must be submitted within 90 days (extendable by 90 more days).
• Cost of the audit is borne by the department.

Example:

The Assistant Commissioner finds suspicious undervaluation of supply in M/s Alpha Tech’s returns. He orders a special audit by a CMA. The audit reveals misclassification and underpayment of GST, and further proceedings are initiated.

Audit by the Taxpayer (GSTR-9C)

As per earlier GST provisions, taxpayers whose aggregate turnover exceeded a specified limit were required to get their accounts audited by a Chartered Accountant or Cost Accountant and submit a reconciliation statement in Form GSTR-9C.

• This was applicable when turnover exceeded ₹2 crore.
• Form GSTR-9C contained reconciliation between audited financial statements and the annual return (GSTR-9).
• This provision was applicable till FY 2020–21. From FY 2021–22 onwards, filing of GSTR-9C by CA/CMA is no longer mandatory and can be self-certified.

Example:

M/s Beta Traders had a turnover of ₹3.5 crore in FY 2020–21. They were required to file GSTR-9 and get their accounts audited by a Chartered Accountant, who also filed GSTR-9C.

Penalty for Certain Offences (Section 122)

Section 122 of the CGST Act lays down penalties for specified offences committed by a taxable person. These offences can attract a fixed monetary penalty or a penalty equal to the tax evaded.

Improper use of ITC

• Claiming ITC without actual receipt of goods/services.
• Using ITC for purposes other than intended business.
• Penalty: ₹10,000 or equivalent to the amount of ITC wrongly availed, whichever is higher.

Failure to issue invoices

• Not issuing an invoice for taxable supply or issuing an incorrect one.
• This leads to suppression of turnover and tax evasion.
• Penalty: ₹10,000 or amount of tax evaded, whichever is higher.

Wrongful availment of refund

• Claiming GST refund without actual eligibility or using fake documents.
• Penalty: ₹10,000 or the amount of refund wrongly claimed, whichever is higher.

Supplying goods/services without registration

• Carrying out taxable supplies without obtaining GST registration when required under law.
• Penalty: ₹10,000 or tax evaded amount, whichever is higher.

Example:

M/s ABC & Co. claimed ₹2,50,000 as ITC without receiving the goods. The GST officer detects this and imposes a penalty of ₹2,50,000 under Section 122.

Prosecution for Certain Offences (Section 132)

Section 132 provides for prosecution in cases involving serious tax offences such as fraud, suppression of supply, falsification of documents, or obstruction of officials.

• Applicable when tax evaded exceeds certain thresholds (e.g., ₹5 crore or more).
• Includes offences like:
  • Supplying goods/services without invoice to evade tax
  • Issuing invoices without supply
  • Falsifying financial records
  • Obstructing GST officers
• Prosecution may lead to imprisonment up to 5 years and fine.

Example:

Mr. X creates fake invoices and avails ITC of ₹7 crore fraudulently. He is liable for prosecution and can face imprisonment up to 5 years under Section 132.

Compounding of Offences (Section 138)

Compounding allows the accused to avoid litigation by paying a compounding fee. It is a way to settle offences without undergoing a full legal process.

• Available only once for the same offence.
• Not available for repeat offenders or those prosecuted under other major Acts (like IPC).
• Minimum compounding amount: ₹10,000
• Maximum compounding amount: Up to 150% of the tax involved.
• Compounding is allowed by the Commissioner on application by the offender.

Example:

M/s Shine Ltd. was found guilty of evading ₹2 lakh GST. The firm applies for compounding and pays ₹2.5 lakh as compounding fee. No further prosecution takes place.