Provisional assessment under GST is a process that allows taxpayers to estimate their tax liability for a particular period, even if they do not have all the necessary information to determine their exact liability. The taxpayer is required to make a self-assessment of their tax liability and pay the estimated tax amount, which will be adjusted when the final assessment is made. Provisional assessment under GST is used in cases where the taxpayer is unable to determine their exact tax liability for a particular period, such as when they are starting a new business or when they are changing their business operations.
Let us take some time to get ourselves braced up for provisional assessment in GST.
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.
The different types of assessment under GST are as under:
- Section 59 – Self-assessment of taxes payable
- Section 60 – Provisional assessment
- Section 61 – Scrutiny of tax returns filed by registered taxable persons
- Section 62 – Assessment of registered taxable person who has failed to file the tax returns
- Section 63 – Assessment of unregistered persons
- Section 64 – Summary assessment in certain special cases
1. What is provisional assessment under GST?
The major determinants of tax liability are:
- Tax Rate
- The value of goods/services
In some exceptional scenarios, it might not be possible to determine the value of goods/services. In such scenarios, The Asst. Commissioner/Dy. Commissioner of Central Tax provisionally determines the amount of tax payable by the supplier and is subject to final determination. This is called as provisional assessment under GST.
2. What is the liability of the assessee in the event of ‘Provisional Assessment’?
In the event of provisional assessment, the assessee is liable to pay the liability as determined under the Provisional assessment by the Asst. Commissioner/Dy. Commissioner.
3. What are the consequences of provisional assessment on the final assessment?
On the final assessment, if the value of the final assessment is greater than the provisional assessment, the assessee 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 GST refund along with interest at the prescribed rate.
4. What is the procedure to be followed to get provisionally assessed?
Where the assesse feels he is unable to determine the value of the goods/services or the tax rate applicable thereto, he shall along with the required set of documents, shall submit FORM GST ASMT-01electronically on the common portal directly or through a facilitation Centre notified by the 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 in receipt of the 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 a 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 the 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 the 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 than six months.
Commissioner has the power to further grant an extension not exceeding four years.
9. When shall the security be released?
On finalization of the assessment and issuance of an 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 the application releasing the security.
10. Why is Provisional Assessment Important?
Provisional assessment is important for several reasons:
- Ensures compliance: Provisional assessment allows taxpayers to estimate their tax liability and make timely payments, even if they do not have complete information. This helps to ensure that taxpayers are in compliance with GST laws and regulations.
- Provides flexibility: Provisional assessment provides taxpayers with flexibility, as they can estimate their tax liability based on the information available to them and make adjustments when their final liability is determined.
- Avoids penalties: By making timely payments through provisional assessment, taxpayers can avoid penalties for late payments or non-compliance with GST laws and regulations.
- Increases transparency: Provisional assessment increases transparency in the tax system, as taxpayers are required to make a self-assessment of their tax liability and make payments based on their estimates.
In conclusion, provisional assessment is an important tool for taxpayers under the GST regime, as it allows them to estimate their tax liability and make timely payments even if they do not have complete information. By making use of provisional assessments, taxpayers can ensure compliance with GST laws and regulations, increase transparency, and avoid penalties for non-compliance.
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