Goods and Service Tax (GST) will bring in “One nation one tax” to unite indirect taxes under one umbrella and facilitate Indian businesses to become globally competitive. The Indian GST is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc.
Like the present indirect tax system, GST also provides for self-assessment to facilitate easy compliance and payment of taxes. The GST Model Law also explains the notices and the demand and recovery provisions when the taxes are unpaid/short paid and returns are not filed.
Please click on the blue headings for more detailed analysis on each topic.
Audit under GST is the examination of records maintained by the taxable person to verify the correctness of information declared, taxes paid and to assess the compliance with the provisions of GST.
Audit can be done by the taxpayer himself or by the tax authorities.
Every registered taxable person turnover during a financial year exceeds the prescribed limit [as per the draft rules turnover limit is above Rs 1 crore] must get his accounts audited by a CA or a CMA.
Audit by tax authorities
Tax authorities can conduct audit of the taxpayer if authorised by the Commissioner of CGST/SGST.
Special audit can be initiated based on the opinion of the tax authorities that the value has not been correctly declared or the wrong credit has been availed. It will be initiated if during any stage of investigation, the proper officer considers the nature and complexity of the case and interest of revenue and has an opinion that it is required.
Assessment means determination of tax liability under GST. It covers-
- Provisional assessment
- Scrutiny assessment
- Summary assessment
- Best judgment assessment
- Assessment of non-filers of returns
- Assessment of unregistered persons
Under GST, every registered taxable person shall assess the taxes payable by them on their own, and furnish a return for each tax period.
An assessee can request the officer for provisional assessment if he is
unable to determine value or rate of tax. The proper officer can allow the assessee to pay tax on a provisional basis at a rate or a value specified by him.
Scrutiny of returns
The proper officer can scrutinize the return to verify its correctness. It is a pre-adjudication process. The officer will ask for explanations on any discrepancies noticed in the returns.
Assessment of non-filers
If the registered taxable person does not file his return even after getting a notice, the proper officer will assess the tax liability to the best of his judgement using the available relevant material.
Assessment of unregistered persons
This is concerning a taxable person who fails to obtain registration even
though he is liable to do so. The officer will assess the tax liability of such persons to the best of his judgement. The taxable person will receive a show cause notice and an opportunity of being heard.
Summary assessment in certain special cases
This is done when the assessing officer comes across sufficient grounds to believe any delay in showing a tax liability can harm the interest of the revenue. To protect the interest of the revenue, he can pass the summary assessment with the prior permission of additional/joint commissioner.
Demand and recovery
Since GST is absolutely new and it is payable on self-assessment basis, it is possible that the taxable person may have made some errors. He might not have paid the tax correctly or may not have paid the tax at all. He might have got wrong refund of tax or input tax credit. In these cases, demand and recovery provisions become applicable.
The proper officer will issue a show cause notice along with a demand for payment of tax (also penalty for fraud cases).
Demands can arise in the following cases-
- Demands for unpaid/short paid tax or wrong refund (without any fraud)
- Demands for unpaid/short paid tax or wrong refund (for fraud cases)
- Tax collected but not deposited with the Central or a State Government
- CGST/SGST paid when IGST was payable and vice versa.
Recovery of tax
If demand is not paid, the IT department can start recovery proceedings.
It is issued by tax authorities to corporations and individuals who request for clarification of certain tax matters. Advance tax ruling is applied for before starting the proposed activity. This helps to reduce costly litigation.
As per GST Model Law, advance ruling is a written decision given by the tax authority to an applicant on questions relating to the supply of goods/services.