Provisional assessment provides a method for determining the tax liability in case the correct tax liability cannot be determined at the time of supply. The payment of provisional tax is allowed only against a bond and security. The provisional assessment has to be finalized within six months unless extended.
Let us take some time to get ourselves braced up for provisional assessment in GST. The first and foremost step in the chain of Assessments is a “Provisional Assessment”. In this article, we will understand assessments in detail.
What is an assessment?
Assessment means the determination of tax liability and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment.
1. What is provisional assessment?
The major determinants of tax liability are:
- Tax Rate
- The value
In some exceptional scenarios, it might not be possible to determine the value of goods/services. In such scenarios, The Asst. Commissioner/Dy. The Commissioner of Central Tax provisionally determines the amount of tax payable by the supplier and is subject to final determination. This is Provisional Assessment
2. What is the liability of the assesse in the event of ‘Provisional Assessment’?
In the event of provisional assessment, the assesse is liable to pay the liability as determined under the Provisional assessment by the Asst. Commissioner/Dy. Commissioner.
3. What are the consequences on final assessment?
On the final assessment, if the value of the final assessment is greater than the provisional assessment, the assesse needs to pay the differential amount along with interest. In case, if the liability as per the provisional assessment is more than the final assessment then the assesse will be granted a refund along with interest at the prescribed rate.
4. What is the procedure to be followed to get provisionally assessed?
Where in the assesse feels he is unable to determine the value of the goods/services or the tax rate applicable thereto, he shall along with required set of documents, shall submit FORM GST ASMT-01electronically on common portal directly or through a facilitation Centre notified by commissioner.
The Asst. Commissioner/Dy. Commissioner shall scrutinize the application received. In case, additional information or documents in support is required to decide the case, notice in FORM GST ASMT-02 will be issued to the supplier requesting for submission of the same.
The supplier has to file a reply to the notice in FORM GST ASMT – 03, and if he desires can also appear in person before the Asst. Commissioner/Dy. Commissioner of Central Tax to explain his case.
The Asst. Commissioner/Dy. Commissioner of Central Tax will then issue an order in FORM GST ASMT-04 within a period not later than ninety days from the date of receipt of the request, allowing the payment of tax on a provisional basis.
5. What shall the order issued in FORM GST ASMT-04 include?
The order will indicate the value or the rate or both on the basis of which the assessment is to be allowed on a provisional basis and the amount (this amount shall include the amount of integrated tax, central tax, State tax or Union territory tax and cess payable in respect of the transaction) for which the bond is to be executed along with the security to be furnished.
6. Assesse’s role on receipt of order in FORM GST ASMT-04
An Assessee is required to execute a bond in FORM GST ASMT-05 along with a security in the form of bank guarantee for an amount as mentioned in FORM GST ASMT-04.
On execution of the bond, the procedure of Provisional assessment is completed and the supplier can supply the goods or services or both and pay the tax at the rate or on the value that has been indicated in the order in FORM GST ASMT-04.
7. What is the time period for the finalization of provisional assessment in GST?
A provisional assessment shall be finalized within a period not exceeding six months from the date of issuance of order in FORM GST ASMT-04. The Asst. Commissioner/Dy. Commissioner of Central Tax will issue a notice in FORM GST ASMT-06, calling for information and records required for finalization of assessment and shall issue a final assessment order, specifying the amount payable by the registered person or the amount refundable, if any, in FORM GST ASMT-07.
8. Can the tenure of finalization of the provisional assessment be extended?
The Joint Commissioner or Additional Commissioner can extend the tenure for finalization of a provisional assessment provided that the reason for such extension is sufficient and such reasons are recorded in writing. However, the extension shall not be more six months.
Commissioner has a power to further grant such extension not exceeding four years.
9. When shall the security be released?
On finalization of the assessment and issuance of order in FORM GST ASMT-07, the Assesse shall make an application in FORM GST ASMT-08. On receipt of the application the Asstt. Commissioner/Dy Commissioner shall issue an order in FORM GST ASMT-09 within seven working days from the receipt of application releasing the security.
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