Assessment under GST: An Overview

Goods and Services Tax (GST) has revolutionized the way tax is collected in India. One of the key features of GST is its self-assessment system. This means that taxpayers are required to self-assess their tax liability and file their returns accordingly. However, the government has the power to verify the correctness of the returns filed by taxpayers. This is done through the process of assessment under GST.

Assessment under GST is a crucial process that helps ensure that taxpayers are complying with the GST laws and regulations. In this blog, we will discuss what assessment under GST is, its types, relevant sections, and its importance.

What is Assessment under GST?

Assessment under GST is a process by which the tax authorities examine the returns filed by taxpayers to verify the correctness of their tax liability. The purpose of assessment is to ensure that taxpayers have accurately calculated and paid their taxes. Assessment is an important tool to detect any errors or discrepancies in the returns filed by taxpayers.

Types of Assessment under GST

There are six types of assessment under GST:

Self-Assessment: This is the first level of assessment, which is done by the taxpayers themselves. In self-assessment, the taxpayer calculates and pays their own tax liability, and files the returns accordingly. This is done on a monthly, quarterly or annual basis, depending on the turnover of the taxpayer. The relevant section under GST for self-assessment is Section 59.
Provisional Assessment: Provision assessment can be resorted to only in two possible scenarios 1st is when the registered person is unable to determine the value of supply and 2nd is when registered person is unable to determine the rate of tax. Apart from the above two scenarios, provisional assessment cannot be applied by the taxable person for any other purpose. Within the 90 days from the receipt of such request the proper office shall pass an order, allowing payment of tax on a provisional basis at such rate or on such value as may be specified by him. The final assessment order should be passed within six months from the date of communication of provisional assessment order. The relevant section under GST for provisional assessment is Section 60.
Scrutiny Assessment: Scrutiny assessment is done by the tax authorities to verify the correctness of the returns filed by taxpayers. This is applicable for only registered persons and not to unregistered persons. Notice under section 61 can be issued only if return has been filed by the registered persons. The tax authorities can issue a notice to the taxpayer, asking them to provide additional information or documents to support their returns. The tax authorities can also conduct an audit of the taxpayer’s records. Based on the information obtained, the tax authorities can issue an assessment order, which specifies the final amount of tax to be paid by the taxpayer. The relevant section under GST for scrutiny assessment is Section 61.
Best Judgment Assessment: Best judgment assessment is done when the taxpayer fails to furnish the return under Section 39 or Section 45, even after the service of a notice under Section 46, the proper office may assess the tax liability of the said person to the best of his judgement taking into account all the material which is available or he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. The relevant section under GST for best judgment assessment is Section 62.
Assessment of Unregistered Persons: When a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub section (2) of Section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgement for the relevant tax periods. He will issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. No such assessment order shall be passed without giving the person an opportunity of being heard. The relevant section under GST for the assessment of unregistered persons is Section 63.
Summary Assessment: Summary assessment is done in certain special cases, such as when the tax authorities believe that the taxpayer is trying to evade tax or when there is a threat to revenue. There should be evidence available with the proper officer that tax is payable and remains unpaid. Prior permission is required from the Additional Commissioner and Joint Commissioner. It is believed that any delay in assessment would harm the revenue’s interest. If the taxpayer to whom the liability pertains is not ascertainable, then such liability is fastened to the person in charge of such goods. Generally summary assessment is resorted to in cases of absconding and defaulting taxpayers. There is no time limit prescribed for passing of order. The section does not mention that the said person should be given an opportunity of being heard. The relevant section under GST for summary assessment is Section 64.

Procedure for Assessment under GST

The procedure for assessment under GST is as follows:

Issue of Notice: The tax authorities can issue a notice to the taxpayer, asking them to provide additional information or documents to support their returns. The notice must specify the reason for the assessment, the period under assessment, and the nature of the information or documents required.
Conduct of Audit: The tax authorities can conduct an audit of the taxpayer’s records to verify the correctness of their returns. The audit can be done on-site or off-site, and the taxpayer must provide all necessary information and documents to the auditors.
Issue of Assessment Order: Based on the information obtained through the notice and audit, the tax authorities can issue an assessment order. The assessment order specifies the final amount of tax to be paid by the taxpayer. The assessment order can also include interest, penalties, and fines, if applicable.
Rectification of Errors: If the taxpayer disagrees with the assessment order, they can request rectification of errors. The request must be made within 30 days of the receipt of the assessment order. The tax authorities will then review the request and issue a revised assessment order if necessary.
Appeal: If the taxpayer is still dissatisfied with the assessment order after rectification, they can file an appeal with the appropriate appellate authority. The appeal must be filed within three months of the receipt of the assessment order. The appellate authority will then review the case and issue a final order. Read more about Grounds of GST Appeal here.

Importance of Assessment under GST

Assessment under GST is important for the following reasons:

Ensures Compliance: Assessment ensures that taxpayers are complying with the GST laws and regulations. GST Compliance is crucial for a smooth business work-flow. This helps prevent tax evasion and ensures that the government collects tax revenue correctly.
Detects Errors and Discrepancies: Assessment helps detect any errors or discrepancies in the returns filed by taxpayers. This helps prevent the loss of tax revenue due to mistakes or intentional evasion.
Improves Taxpayer Education: Assessment helps educate taxpayers on the correct procedures for calculating and paying their taxes. This helps improve GST compliance and reduces the number of errors or discrepancies in the returns filed.

Common Mistakes to Avoid

It is crucial to understand some of the common mistakes that taxpayers make when filing their returns. These mistakes can result in incorrect assessment and ultimately lead to penalties and interest. Here are some of the common mistakes to avoid when filing GST returns:

Incorrect classification of goods and services: GST rates vary depending on the classification of goods and services. Taxpayers need to ensure that they classify their goods and services correctly to avoid incorrect assessments.
Incorrect calculation of tax liability: Taxpayers must ensure that they accurately calculate their tax liability based on the GST rates applicable to their goods or services. Incorrect calculation can result in incorrect assessment and penalties.
Delayed filing of returns: GST returns must be filed on time to avoid penalties and interest. Taxpayers must ensure that they file their returns by the due date to avoid any additional charges.
Failure to report input tax credit: Taxpayers are allowed to claim the input tax credit on their purchases to reduce their tax liability. Failure to report input tax credit can result in incorrect assessment and penalties.
Incorrect reporting of turnover: Taxpayers must ensure that they report their turnover accurately to avoid incorrect assessment.

It is also important for taxpayers to keep proper records of their transactions and maintain compliance with the GST laws and regulations. This will help them to ensure that their assessments are accurate and avoid any legal or financial complications in the future.

Conclusion

Assessment under GST is a crucial process that helps ensure that taxpayers are complying with the GST laws and regulations. It is essential for taxpayers to accurately calculate and pay their taxes to avoid penalties and interest. The different types of assessments under GST – self-assessment, provisional assessment, scrutiny assessment, best judgment assessment, assessment of unregistered persons, and summary assessment – help the tax authorities verify the correctness of the returns filed by taxpayers. The assessment also helps prevent tax evasion and ensures that the government collects tax revenue correctly.

In conclusion, assessment under GST is an important process that helps maintain the integrity of the GST system.