GST Scrutiny Notice: Forms, Timeline and Procedures

Every GST registered taxpayer must file at least one or more designated GST returns on time. On filing, if there happens to be any inconsistencies or errors in the information declared, the tax officers will conduct the scrutiny of these GST returns. With the implementation of automated return scrutiny module, taxpayers must be more cautious of ensuring consistency between returns.

In this article, know more about the scrutiny process and options available for a taxpayer to respond to a scrutiny notice.  

What is a Scrutiny Assessment under GST?

A GST officer will thoroughly check the GST return of a particular taxpayer based on certain risk parameters, to verify its correctness. If he finds any errors, he will issue a scrutiny notice to the registered taxpayer demanding an explanation. However, a personal hearing is not possible in this type of assessment.  

The taxpayer should admit the differential tax demanded with interest if any and pay it before replying to the notice together with justification. If the reply satisfies the officer, the taxpayer is intimated and the proceedings are dropped without any further action in form ASMT-12 (an order of acceptance of reply). Otherwise, further action can be taken by the GST officer in the following circumstances:

• The taxpayer does not pay tax or provide an explanation
• The taxpayer does not reply or rectify the discrepancy within 30 days of the issue of notice
• The reply submitted is not satisfactory to the tax officer

The tax officer can also take the following actions in cases such as:

• Conduct a tax audit under section 65
• Conduct a special audit under section 66
• Survey/inspection under section 67
• Initiate demand and recovery provisions
• Send notice of outstanding demand/shortfall in case there is wilful/no wilful intention of doing fraud under section 73/74 accordingly.

The CBIC has issued two SOP CGST Instruction no. 2/2022 and 2/2023 in 2022 and 2023 on manual scrutiny for years FY 2017-18 and 18-19 and online scrutiny for years FY 2019-20 onwards. It has detailed process of scrutiny starting from selection of returns to conduct of scrutiny and issue of notice in ASMT-10 to actions for failure to respond to notice.

Objectives of the Scrutiny Assessment

The main objective behind a scrutiny assessment is to verify the correctness of details submitted in GST returns like eligible Input Tax Credit (ITC) v/s actual claimed, tax payable v/s tax paid, claimed ineligible exemptions or ineligible ITC, etc. There are risk parameters pre-defined for a tax officer to decide whether scrutiny notice needs to be issued.

If these indicate a high risk of default or fraud, then the tax officer can proceed to this assessment. The tax officer can also take this decision on his own. But, an order (except ASMT-12) cannot be passed as the next step under scrutiny assessment since it is not a legal or judicial proceeding. Read the section on the consequences of scrutiny assessment to know more.  

Automated Return Scrutiny Module

The GST Network has launched the automated return scrutiny module in May 2023 from FY 2019-20 onwards. The Automated Return Scrutiny Module is integrated with the ACES-GST backend application. It is made accessible by tax officers to conduct GST scrutiny easily, transparently and faster. 

The taxpayers can see a rise in the number of tax notices and the cost of non-compliance. Teams must put additional measures in place, if not earlier, to ensure GST-compliant invoicing, robust reconciliations, accurate return preparation, timely filing and quick response to GST notices in form ASMT-10 under automated GST scrutiny. 

GST Scrutiny Notice in ASMT-10: Forms, Timelines, Mode, and Contents

Form: A scrutiny notice is issued in Form ASMT-10 intimating discrepancies in GST return along with tax, interest and penalty if any. A reply should be submitted in Form ASMT-11. 
Mode: Tax officer can send the notice via SMS or email to the taxpayer. 
Timelines: There is no time limit defined for receiving a scrutiny notice. However, a taxpayer should respond to such notice within 30 days from the date of issue, or request for an extension, not more than 15 days. 
Contents: Contents of ASMT-10 are as follows:

1. Basic details: GSTIN, name, address and tax period.
2. Discrepancy Observed: Details of discrepancy if any and asking for an explanation.
3. Particulars of the tax officer: DIN, name, signature and designation of the tax official issuing notice.

The following flowchart will explain the process of scrutiny at a glance:

Viewing a scrutiny notice on the GST portal: Below are the steps to view any notice on the GST portal: 

Step 1: Login to the GST portal and select ‘View Additional Notices/Orders’ under the ‘Services’ tab.

Step 2: On clicking ‘View Additional Notices’, the screen below will be displayed.

Step 3: A taxpayer can view all the notices issued by the tax official by clicking on ‘View’.

The following are the status updates on the GST portal regarding the scrutiny of a GST return:

1. Pending for action by the tax officer
2. Closed
3. Pending for reply by the taxpayer
4. Reply furnished; pending for order by the tax officer
5. Reply not furnished, pending for order
6. An order issued for dropping proceedings 
7. Recommended for action under section 73
8. Recommended for action under section 74
9. Recommended for audit under section 65
10. Recommended for special audit under section 66
11. Recommended for survey/inspection under section 67
12. Pending for order by the tax officer

How to respond to a Scrutiny Notice using ASMT-11?

Before submitting a reply to the tax officer, the taxpayer should check for the correctness of the particulars in the notice.   If any differential tax liability needs to be paid and the taxpayer agrees to the liability raised in the notice, he must pay it and thereafter reply to the notice in ASMT-11. Either of the two possibilities could arise: 

• Agrees/admits the tax due as per the notice and had already paid it -Will declare the payment particulars while replying in ASMT-11, or
• Agrees/admits the tax due as per the notice, but yet to pay it – Will pay by either of the following options and thereafter reply in ASMT-11:
  • Pay tax in Form DRC-03
  • Furnish supply invoice/debit note/amended invoice/amended debit note in GSTR-1
  • Pays tax or reverse ITC while filing GSTR-3B

Below are the steps to reply to a scrutiny notice:

Step 1: Select the ‘Replies’ tab on the case details page to view all the replies filed with the tax department. To add a reply, click ‘Notice’.    

Step 2: The look of the reply page is as follows:  

Step 3: Enter your reply and payment details if any. 
Step 4: Click ‘ADD’ to add more details.
Step 5: Choose a file to upload with the reply if any.
Step 6: Select the verification check-box and the authorised signatory. 
Step 7: Enter the place and click on ‘Preview’.

Step 8: Check if all the information provided is correct and click on ‘File’.     
Step 9: The submit application page will be displayed
Step 10: Submit using DSC or EVC. A message indicating a successful reply will be displayed. The replies tab will get updated and will show the status as ‘Reply furnished, pending with tax officer’.  

Procedure after replying to a Scrutiny Notice

After submitting a reply, if the tax officer is satisfied with the reply, he will drop the proceeding by issuing an order intimating the same to the taxpayer. But, if the tax officer is unsatisfied, he will issue an order, demanding tax, penalty and interest, as the case may be.   A taxpayer can view all the orders issued by the tax officer by following these steps:

Step 1: Click on the ‘Orders’ tab on the case details page.    

Step 2: Click on the attachments link to view the order.  

Consequences of not responding to a Scrutiny Notice

If the taxpayer does not respond to the scrutiny notice, then the tax officer will take action under section 73 (non-fraudulent) and 74 (fraudulent). He can issue a show-cause notice in form DRC-1 demanding the tax dues, together with interest and penalty. The amount of penalty will vary depending upon the grounds of the discrepancy found. Alternatively, the officer can recommend audits under section 65, 66 or 67.