Updated on: May 25th, 2023
22 min read
The CBIC has recently rolled out an automated return scrutiny module for GST returns through the ACES-GST backend application for central tax officers. This module will enable officers to scrutinise the GST returns of GST-registered taxpayers, identified based on data analytics and risk parameters.
Recently, the Indian Finance Minister, Smt. Nirmala Sitharaman directed the CBIC to implement automated return scrutiny for GST returns. The automated return scrutiny module is integrated into the ACES-GST backend application and leverages data analytics to identify discrepancies and risks in the GST returns. The module automatically sends out alerts to officers in cases of non-compliance.
The objective of automated return scrutiny is to enhance tax compliance and reduce manual intervention. It is a non-intrusive verification process that enables central tax officers to scrutinise GST returns. The module also streamlines communication and action between tax officers and taxpayers and creates a more efficient and transparent system.
Through this module, any discrepancies due to risks associated with a GST return will be flagged and an automated scrutiny notice will be sent out to the taxpayer in Form ASMT-10.. These discrepancies are also displayed to the tax officers, who are then provided with a workflow to interact with the taxpayer through the GST common portal. Previously, Form ASMT-10 used to be sent out on the GST portal after tax officers manually picked up GST returns for scrutiny. Now, the GST portal will automatically send out Form ASMT-10 to non-compliant taxpayers detected by the system and then send out alerts to the GST officers.
Once intimated in Form ASMT-10, taxpayers may reply using Form ASMT-11 on the GST portal. If the tax officer finds the action taken and response by the taxpayer to be satisfactory, the officer will acknowledge the same in Form ASMT-12. If not, the officer will issue a show cause notice or initiate an audit or investigation.
The automated return scrutiny module has already been rolled out, beginning with the scrutiny of GST returns for the financial year 2019-20. The requisite data for this purpose has been made available on the tax officers’ dashboards.
The CBIC released an indicative list of parameters based on which GST returns may be picked up for scrutiny vide SOP/GST instructions.
Here are the situations that could cause taxpayers to be subjected to scrutiny-
|Information that will be compared||In the following tables||Condition||The data in the following tables||Indicating|
|Tax liability in respect of outward supplies||Under Table 4 (other than 4B), 5, 6, 7A(1), 7B(1), 11A and 11B of the GSTR-1 (net of amendments in Table 9, 10 and 11(II))||Is found to be more than||The liability declared under Tables 3.1(a) and 3.1(b) of the GSTR-3B||Short payment of tax|
|Tax liability in respect of RCM supplies||Under Table 3.1(d) of the GSTR-3B||Is found to be less than||The liability declared under Tables 4(A)(2) and 4(A)(3) of the GSTR-3B||ITC availed in excess of the liability discharged on account RCM supplies|
|Tax liability in respect of RCM supplies||Under Table 3.1(d) of the GSTR-3B||Is found to be less than||The ITC available under Tables 3 and 5 of the GSTR-2A (net effect of amendments in Table 4 and Table 6, respectively)||Short payment of tax|
|Tax liability offset in cash pertaining to the RCM supplies||The tax/cess paid in cash as per Column 8 of Table 6.1 of the GSTR-3B||Is found to be less than||The liability declared under Table 3.1(d) of the GSTR-3B||Short payment of tax|
|ITC availed in respect of inward supplies from an Input Service Distributor (ISD)||Under Table 4(A)(4) of the GSTR-3B||Is found to be more than|
The ITC available under Table 7 of the GSTR-2A (net of amendments in Table 8)
|Excess/unlawful ITC claimed|
|ITC availed under ‘All other ITC’||Under Table 4(A)(5) of the GSTR-3B||Is found to be more than||The eligible ITC available under Tables 3 and 5 of the GSTR-2A (net of amendments in Table 4 and 6, respectively)||Excess/unlawful ITC claimed|
|The taxable value on account of outward taxable supplies (other than zero-rated, nil rated and exempted)||Under Table 3.1(a) of the GSTR-3B||Is found to be less than||The net amount liable for TDS and TCS credit under Column 6 of Table 9 of the GSTR-2A||Indicating short payment of tax|
|The liability on account of outward supplies||Under Tables 3.1(a) and 3.1(b) of the GSTR-3B||Is found to be less than||The tax liability as declared in the e-way bills||Indicating short payment of tax|
|ITC availed in regard to the import of goods||Under Table 4(A)(1) of Form GSTR-3B||Is found to be more than||The ITC available under Table 10 and Table 11 of the GSTR-2A or the details available on the ICEGATE portal||Excess/unlawful ITC claimed|
Automated return scrutiny will make taxpayers more prone to receiving scrutiny and demand notices from the GSTN as every minute error or discrepancy will now be detected by the system. Earlier, it was up to the discretion of the tax officer to send out a notice. Now, with automated scrutiny and automated notices to taxpayers, all taxpayers that have mismatches in their GST returns that exceed the tolerance limits imposed by the GSTN could receive a scrutiny notice.
Further, it will add an additional burden on taxpayers to prove that there has been no intention to evade tax. Taxpayers must now give utmost importance to regular reconciliations of data sets to avoid discrepancies before the periodic returns are filed. Taxpayers will also need to have the documentation and evidence at hand pertaining to the current year as well as the past four years and a proper audit trail maintained to respond to these notices. Failure to maintain the same would result in hardships in proving that the taxpayer did not intend to evade tax and may result in the taxpayer having to pay unnecessary interest and penalties. Hence it is crucial that taxpayers take action before filing returns to avoid coming under the radar of the automated scrutiny system.
The taxpayers receiving the notice in Form ASMT-10 must submit a reply, whether or not they agree to the demand. They should reply in form ASMT-11 within thirty days of being informed in ASMT-10 or as long as the officer allows.
No manual intervention is encouraged under the automated return scrutiny module, as this follows faceless communication between officers and taxpayers. Hence, all documents or statements must be submitted as softcopies on the relevant portal. The taxpayers may accept the difference and pay tax, interest or dues while replying in ASMT-11 within the above time limit. They can make tax payments using DRC-03. The officer will verify and may issue the order to drop proceedings in form ASMT-12 if the reply is found satisfactory. In this case, the taxpayer need not take any further action.
On failure of reply or the reply sent is found unsatisfactory by the officer, they may initiate proceedings by sending a show cause notice under Sections 73/74, as the case may be or may also consider audit/investigations after seeking necessary permissions. In the latter case, the taxpayers may have to cooperate with the officer through the proceedings while fully disclosing information pertaining to such financial year.
For more information, read our page on GST scrutiny.
With the system of automated return scrutiny in force, tax filers must be more cautious of the procedures and sanity checks followed while filing regular GST returns.
Ensure that the following checklist is followed at all times while filing GST returns-
Please note that this checklist is not exhaustive and may have more depending on the industry in which the business operates.
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