Do you remember those days when filing GST returns within the timelines was considered an achievement in itself? Return due dates were being extended time and again due to technical glitches on the portal. The Return module was not updated on the portal as per the CGST Act – GSTR 2, GSTR 3 related processes were not in place due to which summary return in the form of GSTR 3B was notified as a makeshift arrangement.
Well, don’t be relieved that we are past those days, because it’s time to justify the numbers we had mentioned in those returns, provide multiple reconciliations and explain the differences, if any, to the GST officers.
Section 61 of the CGST Act read with Rule 99 of the CGST Rules authorizes the GST officers to scrutinize the returns filed by taxpayers for verifying their correctness and then seek an explanation from taxpayers regarding discrepancies noticed.
Since the online module for scrutiny of returns is not yet available, as an interim measure, the Government of India has issued a Standard Operating Procedure (‘SOP’) on 22.03.2022 vide Instruction no. 02/2022-GST, in order to ensure uniformity in the methods of scrutinizing the returns by the GST officers and implementing the aforementioned provisions.
We have enlisted the below key points mentioned in the SOP which are significant from taxpayer’s perspective.
1. Selection of returns for scrutiny
- Directorate General of Analytics and Risk Management (‘DGARM’) has been assigned the task to select GSTINs (registered with Central tax authorities) whose returns will be scrutinized for a particular financial year. These GSTINs will be selected based on specific risk parameters.
- DGARM will then communicate the selected GSTINs to the concerned officers along with relevant data and likely revenue implications pertaining to returns to be scrutinized.
2. Scrutiny of returns by the proper officer
- For scrutiny of returns as per section 61 of the CGST Act ‘ the Superintendent of Central Tax has been notified as to the proper officer.
- Accordingly, scrutiny of returns needs to be conducted by the Superintendent in charge of the jurisdiction of the taxpayer.
- Proper officers will verify the correctness of the return furnished by comparing it with information available to them through various forums like DGARM, GSTN, E-way bill portal, ICEGATE portal, etc.
3. Indicative List of Parameters for Scrutiny
The officer will scrutinize all the returns filed by the taxpayer in that financial year. While scrutinizing, the officer has been provided with a list of parameters which need to be verified.
3.1 Related to outward supply
- Sales reported in GSTR 1 vis-à-vis GSTR 3B.
- Sales reported in GSTR 3B vis-à-vis amount on which TDS/TCS is deducted/collected respectively – Supply as per GSTR 3B should not be less than net amount liable for TDS/TCS.
- Tax liability as per GST returns vis-a-vis tax liability as per E-way bills generated – Liability as per GSTR 3B should not be less than liability as declared in E-way bills.
3.2 Related to inward supply
- Reverse charge liability declared in GSTR 3B vis-à-vis corresponding reverse charge credit availed – RCM ITC availed should not be less than the amount on which tax liability has been discharged.
- Reverse charge liability declared in GSTR 3B vis-à-vis liability reflected in GSTR 2A – Amount on which RCM liability has been discharged should not be less than the amount attracting reverse charge as per GSTR 2A.
- ITC availed in respect of inward supplies from ISD vis-à-vis credit reflected in GSTR 2A.
- ITC availed under the head ‘All other ITC’ vis-à-vis credit reflected in GSTR 2A.
- ITC which is pertaining to suppliers whose registration has been canceled retrospectively.
- ITC which is pertaining to suppliers who have not filed GSTR 3B of relevant period.
- GSTR 3B is furnished by taxpayer after the time limit prescribed under section 16(4) of the CGST Act – Any ITC of previous financial year availed in such return is inadmissible
- ITC w.r.t. import of goods vis-à-vis corresponding details reflecting in GTRS 2A/ICEGATE portal.
- ITC reversed as per Rule 42 and Rule 43 of the CGST Rules.
3.3 Other parameters
- Interest liability on account of delayed payment of tax is discharged as per section 50 of the CGST Act – Comparison of interest payable vis-à-vis the amount paid
- Late fee on account of delayed filing of returns is paid in accordance with section 47 of the CGST Act – Comparison of late fee payable vis-à-vis the amount paid
- Liability paid in cash vis-à-vis liability arising on account of reverse charge transactions
While this list might seem exhausting! It is not exhaustive. GST officers can check any other parameters as they may seem fit basis the information available with them.
This SOP directs officers to rely on information available with them in normal course and not fetch any information/documents from the taxpayer at scrutiny level.
4. Communication between taxpayer and proper officer
- Notice in Form GST ASMT-10 – After checking and comparing the data available with the officer, notice in Form GST ASMT-10 is issued vide which the discrepancies noticed needs to be informed to the taxpayer.
- As far as possible, the officer needs to quantify the tax, interest and any other amount payable in relation to discrepancies identified. Further, it needs to be ensured that the notice provides discrepancies as specific as possible and not vague/general.
- If discrepancy noticed by the officer is acceptable to the taxpayer, he may pay the tax, interest or any other amount payable through FORM DRC-03 and inform the same to the tax officer.
- Reply in Form GST ASMT-11 – Alternatively, if the discrepancy is not acceptable to the taxpayer, he may furnish his explanations in Form GST ASMT-11 within 30 days of receipt of notice or such extended time limit as permitted by the officer.
- Form GST ASMT-12 – If explanation provided by the taxpayer is acceptable to the officer, he shall conclude the proceedings by informing the taxpayer in Form GST ASMT-12.
- If no explanation is provided by taxpayer or if the explanation is not satisfactory the following actions can be taken by the officer –
- SCN can be issued under section 73 of the CGST Act (non-fraud cases).
- SCN can be issued under section 74 of the CGST Act (fraud cases).
- Initiate audit proceedings as per section 65 or 66 of the CGST Act.
- Initiate inspection, search, or seizure as per section 67 of CGST Act.
All communications done by the GST department to the taxpayer should have Document Identification Number (‘DIN’) or else the communication can be termed to be invalid.
5. Timeline for scrutiny
- SOP mentions that scrutiny of return needs to be done in a time-bound manner so that necessary actions can be taken expeditiously.
- Various timelines such as days within which selected GSTINs need to be communicated to the officer, days within which scrutiny schedule needs to be finalized, timeline for issuing GST ASMT-10, GST ASMT-12, issuing notice under section 73 or 74 of the CGST Act, etc. have been mentioned in the SOP.
- These timelines have been provided to ensure timely disposal of proceedings.
6. Reporting and Monitoring
- The SOP further mentions that proper officer is required to maintain a scrutiny register in the prescribed format with respect to all GSTINs allotted. Further, a scrutiny progress report also needs to be prepared by the officer on a monthly basis which will then be consolidated and presented before the Board.
Please note –
These guidelines have been issued for the Central GST authorities. States authorities may choose to adopt the above-mentioned checks and parameters or choose to notify different parameters and mechanisms.
Primary agenda of taxpayers with the onset of GST was to ensure that returns are filed within the timeline. Since the portal kept updating and taxpayers were logged out of the portal while keying in the data, ensuring proper filing of returns was a task in itself. While some taxpayers rectified the errors while filing annual return, for many the errors might still be pending to be rectified.
Though the taxpayer had no intention of incorrectly reporting or evading tax in any manner, the same might seem a deliberate action to the officers who might then levy penalty which can be as high as 100% of the tax not paid unintentionally.
Further, comparing the credit availed with GSTR 2A is also expected to open up Pandora’s box of litigation as the validity of GSTR 2A prior to 01.01.2022 is already being questioned before various forums. The fight is that there was no underlying provision in the Act on the basis of which rule for comparing ITC with GSTR 2A was notified. Further, it may be noted that GSTR 2A was made available to the taxpayers only from September 2018.
While the Government’s initiative in trying to ensure consistency in the manner in which returns will be scrutinized and notifying timelines for disposal of proceedings is appreciated. It needs to be seen how well these proceedings are implemented and how receptive are the officers to the explanation provided.
In order to get good marks, it needs to be ensured that explanations are provided in as much detail as possible and along with necessary supporting documents. If the submissions are not satisfactory adjudicating proceedings might be initiated.