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76444bos61715 cp17
76444bos61715 cp17
ASSESSMENT AND
AUDIT
The section numbers referred to in the Chapter pertain to the CGST Act, 2017 unless
otherwise specified. Examples/Illustrations/Questions and Answers, as the case may
be, given in the Chapter are based on the position of GST law existing as on
30.04.2023.
LEARNING OUTCOMES
After reading this chapter, you shall be equipped to:
understand and explain the different types of assessment
which a registered or unregistered person may be subjected
to.
describe the concept of self-assessment and provisional
assessment.
identify and appreciate the different types of audit which may
be conducted against the registered person.
gain knowledge pertaining to circumstances under which
special audit can be conducted.
1. INTRODUCTION
What is the need for
assessment & audit?
Provisions of assessment and audit under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
Assessment means determination of tax liability under this Act and includes
self-assessment, re-assessment, provisional assessment, summary
assessment and best judgment assessment. [Section 2(11)]
Audit means the examination of records, returns and other documents
maintained or furnished by the registered person under this Act or the rules
made thereunder or under any other law for the time being in force to verify
the correctness of turnover declared, taxes paid, refund claimed and input tax
credit availed, and to assess his compliance with the provisions of this Act or
the rules made thereunder. [Section 2(13)]
Chartered Accountant means a chartered accountant as defined in clause
(b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949;
[Section 2(23)]
Cost Accountant means a cost accountant as defined in clause (b) of sub-
section (1) of section 2 of the Cost and Works Accountants Act, 1959; [Section
2(35]
Prescribed means prescribed by rules made under this Act on the
recommendations of the Council. [Section 2(87)]
Proper Officer in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board; [Section 2(91)]
The proper officer may, on receipt of the application, issue a notice in the
prescribed form requiring the registered person to furnish additional
information or documents in support of his request and the applicant shall
file a reply to the notice in, and may appear in person before the said officer
if he so desires.
The proper officer shall issue an order, within a period not later than ninety
days from the date of receipt of such request, allowing payment of the tax on
a provisional basis indicating -
(a) the value or the rate or both on the basis of which the assessment is to
be allowed on a provisional basis, and
(b) the amount* for which the bond is to be executed and security to be
furnished. The value of security cannot exceed 25% of the amount*
covered under the bond.
Where the tax liability as per the final assessment is higher than
the provisional assessment, i.e. the tax becomes due consequent to
the order of final assessment: The registered person in addition to the
differential tax shall be liable to pay interest on the tax due but not paid,
at the rate specified under section 50(1) from the date the tax was due
to be paid originally till the date of actual payment.
In simple words, in case any tax amount becomes payable subsequent
to finalization of the provisional assessment, then interest at the
specified rate will also be payable by the taxable person from the first
day after the due date of payment of the tax till the date of actual
payment, whether such amount is paid before or after the issuance of
order for final assessment.
Where the tax liability as per the final assessment is less than in
provisional assessment i.e. tax becomes refundable consequent to the
order of final assessment, the registered person shall be paid interest
at the rate specified under section 56 for any period exceeding 60 days
from the date of receipt of application moved in accordance with the
provisions of Section 54(1), till the date of refund of such tax.
Illustration 1
ABC Limited is a supplier of medical equipment to various hospitals. While
supplying the equipment ABC Limited is not sure about the rate of IGST
applicable on such supplies, i.e. 18% or 28%. You are required to advise ABC
Ltd. in this situation.
Answer
In such an event, ABC Limited can move an application for provisional
assessment for seeking permission to discharge the tax liability provisionally
@ 18% upon the submission of bond and security and subject to finalization
of the assessment.
Upon finalization of the assessment, ABC Limited would be liable to pay the
differential tax liability along with applicable interest if it is found that the
applicable rate was 28% whereas ABC Limited paid the tax @ 18% pursuant
to the order passed initially on its application for seeking provisional
assessment.
accept the discrepancy as mentioned in the notice and pay the tax,
interest and any other amount arising from such discrepancy and
inform the same; or
furnish an explanation for the discrepancy to the proper officer
regarding non-acceptance of discrepancy.
Action by Proper Officer
Where the explanation furnished by the registered person or the information
submitted is found to be acceptable, the proper officer shall inform him
accordingly and no further action shall be taken in this regard.
In case no satisfactory explanation is furnished by registered person or where
the registered person, after accepting the discrepancies, fails to take the
corrective measure in his return for the month in which the discrepancy is
accepted, the proper officer may take recourse to any of the following
provisions, namely:
(a) proceed to conduct audit under section 65 of the Act;
(b) direct the conduct of a special audit under section 66 which is to be
conducted by a Chartered Accountant or a Cost Accountant nominated
for this purpose by the Commissioner; or
(c) undertake procedures of inspection, search and seizure under section
67 of the Act; or
(d) initiate proceeding for determination of tax and other dues under
Section 73 or 74 of the Act.
a notice under section 46 has been issued by proper officer to the defaulting
taxable person requiring him to furnish the return within a period of 15 days
and taxable person fails to file return within the given time;
the proper officer may proceed to assess the tax liability of said person (i.e.
Return Defaulter) to the best of his judgement taking into account all the
relevant material which is available or which he has gathered.
Time Limit for Assessment Order
The order of best judgment assessment shall be issued by proper officer in
the prescribed form and a summary thereof shall be uploaded electronically
in the prescribed form.
The Assessment Order shall be issued by Proper Officer within a period of 5
years from the date specified under section 44 for furnishing of the annual
return for the financial year to which the tax not paid relates (When the due
date is extended, the extended due date becomes the said date for
calculation of 5 years period).
1. Let’s assume that the due date of filing of Annual Return for F/Y
2022-23 is 31.12.2023. If a person defaults in filing of return for any
tax period falling in F/Y 2022-23, period of 5 years shall be reckoned
from the due date of filing of Annual Return for F/Y 2022-23 i.e. 31.12.2023.
Accordingly, the best judgment assessment can be made by Proper Officer
on or before 31.12.2028.
Withdrawal of Assessment Order
Where the registered person furnishes a valid return for the default period
within 60 days of the service of the assessment order passed on best
judgment basis, the said assessment order shall be deemed to have been
withdrawn but the liability for payment of interest under sub-section (1) of
section 50 or for payment of late fee under section 47 shall continue.
However, where the registered person fails to furnish a valid return
within 60 days of the service of the assessment order, he may furnish the
same within a further period of 60 days on payment of an additional late
fee of ` 100 for each day of delay beyond 60 days of the service of the
said assessment order and in case he furnishes valid return within such
extended period, the said assessment order shall be deemed to have been
withdrawn, but the liability to pay interest under section 50(1) or to pay
late fee under section 47 shall continue.
(ii) Once the due date for furnishing return under section 39 is over, a
system generated mail/ message would be sent to all the defaulters
immediately after the due date to the effect that the said registered
person has not furnished his return for the said tax period; the said mail/
message is to be sent to the authorized signatory as well as the
proprietor/ partner/ director/ karta, etc.
(iii) After 5 days of due date of furnishing the return, notice under section
46 shall be issued electronically to the defaulters requiring then to
furnish return within 15 days.
(iv) If the return is not filed within 15 days of the said notice, the proper
officer may proceed to assess the tax liability of the said defaulter under
section 62, to the best of his judgment taking into account all the
relevant material which is available or which he has gathered and would
issue assessment order. The proper officer would upload the summary
of such order in the prescribed form.
(v) For the purpose of assessment of tax liability under section 62, the
proper officer may take into account the following:
Details of outward supplies available in GSTR-1
(vii) If the said return remains unfurnished within the statutory period of 60
days from the service of assessment order under section 62, the proper
officer may initiate proceedings under section 78 and recovery under
section 79 of the CGST Act.
Based on facts available, in some cases, the Commissioner may resort to
provisional attachment to protect revenue under section 83 of the CGST Act
before issuance of assessment order under section 62. Further, proper officer
would initiate action under section 29(2) of the CGST Act for cancellation of
registration in cases where the return has not been furnished for the period
specified in section 29
[Circular No. 129/48/2019 GST dated 24.12.2019]
but who was liable to pay tax, the proper officer may proceed to assess
the tax liability of said unregistered person to the best of his judgement
for the relevant tax periods.
Issue of Notice
Before making the assessment, proper officer shall issue a notice to a taxable
person containing the grounds on which the assessment is proposed to be
made on best judgment basis and shall also serve a summary thereof
electronically in the prescribed form. The taxable person shall be given 15
days’ time to furnish his reply, if any. Thereafter, an order shall be passed
and summary thereof shall be uploaded electronically in the prescribed form.
However, no such assessment order shall be passed without giving the person
an opportunity of being heard.
Time Limit for Assessment Order
The assessment order shall be issued by proper officer within a period of 5
years from the due date for furnishing the annual return for the financial year
to which non-payment of tax relates.
2. Let’s assume that the due date of filing of Annual Return for F/Y
2022-23 is 31.12.2023. If the liability of a person to take registration
arises at any time in the F/Y 2022-23 for the reason that his turnover
crosses the prescribed threshold limit, period of 5 years shall be reckoned
from the due date of filing of Annual Return for F/Y 2022-23 i.e. 31.12.2023.
Accordingly, best judgment assessment can be made by proper officer on or
before 31.12.2028.
the proper officer has evidence that a taxable person has incurred a
liability to pay tax under the Act, and
the proper officer has sufficient grounds to believe that delay in passing
an assessment order may adversely affect the interest of revenue.
The summary assessment order and a summary thereof shall be uploaded
electronically in the prescribed form.
Withdrawal of Assessment Order
The Summary Assessment Order may be withdrawn by Additional
Commissioner/Joint Commissioner, –
(a) on an application filed by taxable person for withdrawal of the summary
assessment order within 30 days from the date of receipt of order; or
(b) on his own motion, where he finds such order to be erroneous and may
instead follow the procedures laid down in section 73 or section 74 to
determine the tax liability of such taxable person.
Deemed taxable person in case of supply of goods
Where the taxable person to whom the liability pertains is not ascertainable
and such liability pertains to supply of goods, the person in charge of such
goods shall be deemed to be the taxable person liable to be assessed and
liable to pay tax and any other amount due under this section.
3. When tax evaded goods are under transportation or are stored
in a warehouse, and the taxable person in respect of such goods
cannot be ascertained, the person in charge of such goods shall be
deemed to be the taxable person and will be assessed to tax.
Audit may be carried out at the place of business of the registered person or
in their office. The period of audit could be for a financial year or part thereof
or multiples thereof.
Thus, the Commissioner or any officer authorized by him, by way of a general
or special order, may undertake audit of any registered person even for a part
of financial year or for multiple financial years.
Where it is decided to undertake the audit of a registered person, the proper
officer shall issue a notice not less than 15 working days prior to the conduct
of audit.
What is meant by commencement of audit?
The term ‘commencement of audit’ is important because audit has to be
completed within a given time frame in reference to this date of
commencement. Commencement of audit means the later of the following:
During the course of audit, the authorised officer may require the registered
person,—
LET US RECAPITULATE
The discussion under this chapter are summarised by way of diagrams to help
students remember and retain the key provisions in a better and effective manner:
Different ways to assess the tax liability by a registered person
A registered person may assess his tax liability in two different ways
depending upon the circumstances warranting such an assessment.
For this –
• Taxable person shall furnish an application along with the
documents in support of his request.
• The proper officer after calling for additional information and
documents, if required, issue an order indicating therein-
o value or the rate or both on the basis of which the assessment is
to be allowed on a provisional basis;
o amount for which the bond is to be executed and security to be
furnished
Assessment
under GST*
*
This is not an exhaustive list of assessments under the GST law. In addition to the types
of assessments listed herein above, determination of the liability of a taxpayer can be made
under Sections 73 or 74 of the CGST Act (discussed in detail separately).
Audit
4. Explain the difference between Audit by Tax Authorities under section 65 and
Special Audit under section 66 of the CGST Act, 2017.
5. Explain the recourse that may be taken by the officer in case proper explanation
is not furnished for the discrepancy detected in the return filed, while
conducting scrutiny of returns under section 61 of the CGST Act, 2017.
6. Write a brief note on Summary Assessment in certain special cases as per
section 64 of the CGST Act, 2017.
7. Kulbhushan & Sons has entered into a contract to supply a consignment of
certain taxable goods. However, since it is unable to determine the value of the
goods to be supplied by it, it applies for payment of tax on such goods on a
provisional basis along with the required documents in support of its request.
On 12thJanuary, the Assistant Commissioner of Central Tax issues an order
allowing payment of tax on provisional basis indicating the value on the basis
of which the assessment is allowed on provisional basis and the amount for
which the bond is to be executed and security is to be furnished.
Kulbhushan & Sons complies with the same and supplies the goods on
25thJanuary thereafter paying the tax on provisional basis in respect of said
consignment on 19thFebruary.
Consequent to the final assessment order passed by the Assistant
Commissioner of Central Tax on 21stMarch, a tax of ` 1,80,000 becomes due on
the consignment.
Kulbhushan & Sons pays the tax due on 9thApril. Determine the interest
payable, if any, by Kulbhushan & Sons in the above case.
Assuming all the other facts remaining the same, if consequent to the final
assessment order passed on 21stMarch, a tax of ` 4,20,000 becomes refundable
on the consignment, refund of which is applied by Kulbhushan & Sons on
9thApril and tax was refunded to it on 5thJune, determine the interest receivable,
if any, by Kulbhushan & Sons in the given case.
ANSWERS/HINTS
1. No. In certain cases, like when goods are under transportation or are stored
in a warehouse, and the registered person in respect of such goods cannot
be ascertained, the person in charge of such goods shall be deemed to be
the registered person and will be assessed to tax.
2. Yes, principal of natural justice is must to be followed before passing
assessment order against an unregistered person seeking to impose any
financial burden on him.
3. Assessment order passed by the proper officer may be withdrawn in following
cases:-
(i) Assessment of non-filers of returns-The best judgement order passed
by the proper officer under section 62 of the CGST Act shall
automatically stand withdrawn where a registered person files a valid
return within 60 days of the service of the best judgment assessment
order. However, the liability for payment of interest under section 50(1)
of the CGST Act, 2017or for payment of late fee under section 47 of the
CGST Act, 2017 shall continue.
However, where the registered person fails to furnish a valid return
within 60 days of the service of the assessment order, he may
furnish the same within a further period of 60 days on payment of
an additional late fee of ` 100 for each day of delay beyond 60 days
of the service of the said assessment order and in case he furnishes
valid return within such extended period, the said assessment order
shall be deemed to have been withdrawn, but the liability to pay
interest under section 50(1) or to pay late fee under section 47 shall
continue.
(ii) Summary assessment-As per section 64(2) of the CGST Act, 2017,a
taxable person against whom a summary assessment order has been
passed can apply for its withdrawal to the jurisdictional Additional/ Joint
Commissioner within 30 days of the date of receipt of the order.
If the said officer finds the order erroneous, he can withdraw it and
direct the proper officer to carry out determination of tax liability in
terms of section 73 or 74 of the CGST Act. The Additional/ Joint
Commissioner can follow a similar course of action on his own motion
if he finds the summary assessment order to be erroneous.
4. Audit by Tax authorities under section 65 of the CGST Act, 2017:-
1 The Commissioner or any officer authorized by him can undertake audit
of any registered person for such period, at such frequency and in such
manner as may be prescribed.
2 The audit shall be completed within a period of 3 months from the date
of commencement of audit. However, the Commissioner can extend this
period by a further period upto maximum 6 months.
Special Audit under section 66 of the CGST Act, 2017:-
(ii) direct the registered person to get his records including books of
account examined and audited by a Chartered Accountant or a Cost
Accountant nominated for this purpose by the Commissioner; or.
(iii) exercise the powers of inspection, search and seizure with respect to
the registered person, or
(iv) proceed to determine the tax and other dues of the registered person
under Sections 73 or 74 of the Act.
6. As per section 64 of the CGST Act, 2017, summary assessments can be
initiated to protect the interest of revenue with the previous permission of
Additional/Joint Commissioner when the proper officer has evidence that a
taxable person has incurred a liability to pay tax under the Act, and any delay
by him in passing an assessment order may adversely affect the interest of
revenue.
Additional/Joint Commissioner may withdraw summary assessment order on
an application filed by taxable person within 30 days from the date of receipt
of order or on his own motion, if he finds such order to be erroneous and
may instead follow the procedures laid down in section 73 or section 74 to
determine the tax liability of such taxable person.
Where the taxable person to whom the liability pertains is not ascertainable
and such liability pertains to supply of goods, the person in charge of such
goods shall be deemed to be the taxable person liable to be assessed and
liable to pay tax and any other amount due under this section.
7. Section 60(4) of the CGST Act, 2017 stipulates that where the tax liability as
per the final assessment is higher than under provisional assessment i.e. tax
becomes due consequent to order of final assessment, the registered person
shall be liable to pay interest on tax payable on supply of goods but not paid
on the due date, at the rate specified under section 50(1) [18% p.a.], from the
first day after the due date of payment of tax in respect of the goods supplied
under provisional assessment till the date of actual payment, whether such
amount is paid before or after the issuance of order for final assessment.
In the given case, due date for payment of tax on goods cleared on
25th January under provisional assessment is 20th February.
In view of the provisions of section 60(4), in the given case, Kulbhushan &
Sons is liable to pay following interest in respect of the consignment of goods
supplied:
= ` 1,80,000 × 18% × 48/365
= ` 4,261 (rounded off)
If, in the given case, it is assumed that consequent to the final assessment
order passed on 21 st March, a tax of ` 4,20,000 becomes refundable to
Kulbhushan & Sons, answer would be as follows:
Section 60(5) of the CGST Act, 2017 stipulates that where the tax liability as
per the final assessment is less than in provisional assessment i.e. tax becomes
refundable consequent to the order of final assessment, the registered person
shall be paid interest at the rate specified under section 56 [6% p.a.] from the
date immediately after the expiry of 60 days from the date of receipt of
application under section 54(1) till the date of refund of such tax.
However, since in the given case, refund has been made (05thJune) within 60
days from the date of receipt of application of refund (09thApril), interest is
not payable to Kulbhushan& Sons on tax refunded.