The Goods and Services Tax (GST) system in India has unified numerous indirect taxes, enhancing global competitiveness for Indian businesses. To simplify tax calculations and payments, GST law includes various assessment provisions, such as self-assessment. As of May 11, 2023, an automated return scrutiny module has been introduced within the ACES-GST application. This system helps officers select returns for scrutiny and communicate with taxpayers, applicable from the financial year 2019-20.

What Does Assessment Under GST Mean?

Assessment under GST refers to the process of determining a taxpayer’s liability under the Goods and Services Tax regulations. Various assessment types exist within the GST framework.

Types of Assessment Under GST

Under GST, several forms of assessment are recognized. While taxpayers conduct self-assessment, all other assessment categories are performed by tax authorities.

• Self-assessment
• Provisional assessment
• Scrutiny assessment
• Best judgment assessment
• Assessment of non-filers of returns
• Assessment of unregistered persons
• Summary assessment

Self-Assessment

Every registered taxpayer is responsible for calculating their own tax obligations and submitting a return for each tax period. The GST framework continues to uphold self-assessment principles, similar to previous indirect tax laws like Excise, VAT, and Service Tax.

Provisional Assessment

A taxpayer can apply for a provisional assessment if they encounter difficulties in accurately determining the value of goods or services or the applicable tax rate.

Issues with value determination may include challenges in:

• Calculating the transaction value
• Deciding on the inclusion of certain receipts

Challenges in rate determination can arise from difficulties in:

• Classifying goods/services
• Identifying relevant notifications

Provisions of Provisional Assessment

• Requests for provisional assessments must be submitted in writing.
• The authorized officer may permit tax payment on a provisional basis, according to a specified rate or value.
• An order regarding the provisional assessment will be issued within 90 days of the request submission.
• The taxable person must provide a bond with security, guaranteeing payment of any difference between the provisionally assessed tax and the final assessed tax.
• Provisional assessments are always followed by final assessments, for which the officer may request additional information.

Time Limit for Final Assessments

The final assessment typically concludes within six months of the provisional assessment. This period can be extended by an additional six months by a Joint or Additional Commissioner, and further extended by up to four years by the Commissioner as deemed appropriate.

Interest on Additional Tax Payable and Refunds

If a taxpayer owes additional tax following a provisional assessment that was not paid by the due date, interest will be charged. This interest accrues from the original tax due date for the goods/services until the actual payment date, irrespective of whether payment occurs before or after the final assessment. The maximum interest rate is 18%. Conversely, if the final assessed tax is less than the provisional amount, the taxpayer will receive a refund along with interest, capped at 6%.

Scrutiny of Returns

During a scrutiny process, the designated officer may examine a filed return to confirm its accuracy. Should any discrepancies be identified, the officer can request an explanation from the taxpayer.

When Explanation is Satisfactory

If the officer deems the taxpayer’s explanation acceptable, the taxpayer will be notified, and no further action will be initiated.

When Explanation is Not Satisfactory

If the taxpayer fails to provide a satisfactory explanation within 30 days, or does not correct the discrepancies within a reasonable timeframe (yet to be specified), the proper officer may proceed with further actions.

Potential actions include:

• Conducting an audit of the taxpayer as per Section 65.
• Initiating a Special Audit procedure under Section 66.
• Inspecting and searching the taxpayer’s business premises.
• Implementing demand and recovery provisions.

Best Judgment Assessment

In a best judgment assessment, an assessing officer determines tax liability based on available information and their reasoned judgment, without bias. Under GST, this assessment type applies in two main scenarios:

• When a taxable person has not submitted their tax return.
• When an individual has not registered under GST despite being legally obligated to do so.

For a detailed understanding of best judgment assessment under GST, you can refer to our article here. Similar provisions regarding scrutiny exist in current excise, VAT, and service tax laws. Thus, most assessment provisions under GST align with the existing indirect tax system.

Please click here to read about best judgment assessment, scrutiny of returns, and summary assessment.