Understanding Assessment Under GST: Ensuring Tax Compliance and Accuracy

In the Goods and Services Tax (GST) regime, assessment under GST plays a crucial role in verifying the accuracy of tax liabilities declared and ensuring compliance with the law.

It involves the determination of tax liability by the taxpayer themselves or by the tax authorities. DisyTax brings you a detailed article explaining the various types of GST assessment, the processes involved, and the rights and responsibilities of taxpayers during this process.

Assessment under GST refers to the process of determining the tax liability of a registered person. This determination can be made by the taxpayer themselves (self-assessment) or by the GST authorities through various types of assessments. The primary objective of assessment is to ensure that the correct amount of tax has been paid by the right person at the right time. It is a vital mechanism for maintaining the integrity of the GST system and ensuring fair tax collection.

The GST Act outlines several types of assessment to address different scenarios and ensure comprehensive tax compliance:

1. Self-Assessment
2. Provisional Assessment
3. Scrutiny of GST Returns
4. Assessment of Unregistered Persons
5. Best Judgement Assessment
6. Summary Assessment

Let’s explore each of these in detail:

Self-assessment is the most common type of assessment under GST. Every registered taxpayer is required to assess their own tax liability for each tax period and pay the tax accordingly while filing their returns.

Process: Taxpayers calculate their output tax liability based on their sales and deduct the eligible Input Tax Credit (ITC) to arrive at their net tax payable. This self-calculated tax is then paid along with the filing of GST returns (like GSTR-3B).

Responsibility: The onus of accurately calculating and paying the correct tax lies entirely with the registered taxpayer.

Importance: Self-assessment forms the foundation of the GST system, emphasizing voluntary compliance and responsibility from taxpayers.

Provisional assessment may be opted for by a registered person if they are unable to determine the value of goods or the rate of tax applicable to them.

Circumstances: This type of assessment is allowed only upon a request made by the taxpayer to the tax authorities.

Process: The tax officer, after considering the nature of the business and the reasons for seeking provisional assessment, may allow the taxpayer to pay tax on a provisional basis at a rate or value estimated by the officer. The taxpayer is required to execute a bond with a security or furnish a security for the payment of the difference between the provisionally assessed tax and the final assessed tax. The amount of the bond can be up to 25% of the estimated tax liability. The tax officer will then pass a final assessment order within a specified period, determining the actual tax liability. The taxpayer will then have to pay the difference (if any) along with interest.

The tax authorities may undertake scrutiny of returns to verify the correctness of the returns filed by registered persons.

Process: If the tax officer finds any discrepancies in the returns after scrutiny, they may issue a notice to the taxpayer seeking clarification or explanation for the inconsistencies. The taxpayer is required to provide a satisfactory explanation within a specified time. If the explanation is found to be acceptable, no further action is taken. However, if the explanation is not satisfactory, or if the taxpayer fails to respond, the tax officer may initiate further action, such as a detailed audit or inspection, or proceed with a best judgement assessment. The scrutiny assessment should ideally be completed within 3 months from the date of the notice, which can be extended by the Commissioner for a further period not exceeding 3 months.

If a person who is liable to be registered under the GST Act fails to obtain registration, or if their registration has been cancelled but they are still liable to pay tax, the tax authorities may proceed to assess the tax liability of such a person.

Process: The tax officer may collect relevant information and determine the tax and other dues payable by the unregistered person.

Implications: This assessment aims to bring unregistered individuals or entities into the tax net and ensure that tax evasion is prevented.

Best judgement assessment is conducted by the tax officer when a registered person fails to file their returns or fails to comply with the notices issued for scrutiny of returns.

Circumstances: This assessment is invoked when the taxpayer does not cooperate with the tax authorities or fails to provide necessary information. Specifically, this applies when a registered person fails to furnish the return under Section 39 or Section 45 (cancellation of registration) or fails to comply with a notice issued under Section 46 (return defaulters).

Process: Before proceeding with a best judgement assessment, the tax officer will issue a notice to the taxpayer providing an opportunity to be heard. After considering the available material, the tax officer will make an assessment of the tax liability to the best of their judgement, based on the available information and records. This may include information obtained from other sources. If the taxpayer files the valid return within 30 days of the service of the best judgement assessment order, the order may be withdrawn by the tax officer.

Summary assessment can be carried out by a tax officer if they have evidence suggesting a tax liability of a taxpayer and any delay in assessment could adversely affect the revenue.

Circumstances: This is a measure taken in exceptional circumstances where there is an urgent need to protect government revenue. This requires prior permission from an Additional Commissioner or Joint Commissioner. Some common grounds for summary assessment include instances where the assessing officer has credible evidence of tax evasion or a potential threat to revenue if immediate action is not taken.

Process: The tax officer can pass a summary assessment order based on the available evidence, without necessarily following the regular assessment procedures. If the person against whom the summary assessment order is issued applies within 30 days from the date of receipt of the order and shows sufficient cause, the order may be withdrawn by the Additional Commissioner or Joint Commissioner.

During the assessment process, tax officers have certain powers vested in them under the GST Act to ensure proper investigation and determination of tax liability. These powers include the power to call for information, inspect premises, and conduct audits as deemed necessary.

While the specific steps may vary depending on the type of assessment, a general outline of the GST assessment process includes:

1. Identification of Taxpayer: The tax authorities identify taxpayers whose returns or activities require assessment based on risk parameters, data analysis, or specific information.
2. Issuance of Notice: A notice in the prescribed form is usually issued to the taxpayer, informing them about the assessment, the reasons for it, and the period involved.
3. Taxpayer’s Response: The taxpayer is given an opportunity to provide information, explanations, and relevant documents within a specified timeframe.
4. Examination of Records: Tax officers examine the taxpayer’s records, returns, and other information, which may include books of accounts, invoices, and bank statements.
5. Determination of Tax Liability: Based on the examination and the taxpayer’s response, the tax officer determines the final tax liability, which may include tax, interest, and penalties.
6. Issuance of Assessment Order: An assessment order is issued in writing, specifying the tax, interest, and penalty (if any) payable by the taxpayer, along with the reasons for the determination.

Maintaining accurate and comprehensive records is crucial for taxpayers to facilitate a smooth assessment process. Well-maintained records enable taxpayers to readily provide the necessary information to the tax authorities, justify their tax positions, and potentially avoid adverse assessment orders.

Taxpayers have certain rights and responsibilities during the GST assessment process:

Rights:

• Right to be Informed: Taxpayers have the right to receive proper notice about the assessment, specifying the grounds and the period involved.
• Right to Representation: Taxpayers can be represented by a legal practitioner, a chartered accountant, or a tax consultant.
• Right to Provide Information: Taxpayers have the right to present their case, provide relevant documents and explanations.
• Right to Fair Hearing: Taxpayers are entitled to a fair opportunity to be heard by the tax authorities.
• Right to Receive Assessment Order: Taxpayers have the right to receive a written assessment order with reasons for the determination of tax liability.

Responsibilities:

• Cooperation with Authorities: Taxpayers are responsible for cooperating with the tax authorities during the assessment process.
• Providing Accurate Information: It is the responsibility of the taxpayer to provide true and accurate information and documents.
• Responding to Notices: Taxpayers must respond to notices issued by the tax authorities within the stipulated time.
• Paying Tax Due: If any tax liability is determined through the assessment, the taxpayer is responsible for paying it within the specified time.

If a taxpayer is aggrieved by an assessment order passed by the tax authorities, they have the right to file an appeal before the appropriate appellate authority as per the provisions of the GST Act.

Navigating the GST assessment process can be challenging for businesses. DisyTax offers expert assistance to help you manage assessments effectively:

• Understanding Notices: We help you understand the notices received from the tax authorities and the implications.
• Preparing Responses: Our team assists you in preparing comprehensive and accurate responses to assessment notices.
• Document Management: We help you organize and present the necessary documents and records to the tax authorities.
• Representation Services: We can represent you before the tax authorities during assessment proceedings.
• Appeal Filing Support: If required, we can assist you in filing appeals against assessment orders.

Assessment under GST is a critical process for ensuring tax compliance and accuracy. By understanding the different types of assessments, the processes involved, and their rights and responsibilities, taxpayers can navigate this aspect of GST effectively. Maintaining proper records is paramount for a smooth assessment. DisyTax is committed to providing the necessary support and guidance to help businesses manage their GST assessments seamlessly.

For the most accurate and up-to-date information, always refer to the official GST portal: https://www.gst.gov.in/.