Scrutiny of GST Returns
It has been nearly 5 years since the implementation of GST laws. After creating robust processes and rules for GST law implementation and encountering a few bumps along the way, the government has lately been highly active in GST scrutiny and audits. CBIC’s GST Policy Division issued Notification No. 02/2022- GST on March 22, 2022, about Standard Operating Procedures for Scrutiny of GST Returns for Fiscal Years 2017-18 and 2018-19.
The process of scrutinizing returns would reveal how GST regulations are applied at the ground level by GST authorities. Officers should be ready to accept legitimate explanations in the case of any discrepancies identified by them since assessees have experienced several problems in transitioning to the new Law. Otherwise, it would result in a torrent of lawsuits, particularly in situations of ITC mismatches available in GSTR 2A/2B and reported in GSTR-3B owing to factors beyond assesses’ control.
Provisions relevant to scrutiny under the CGST Act, as well as a synopsis of newly issued SOP on scrutiny, are outlined below:
Definition of Scrutiny
GST Laws do not define the term “scrutiny.” ‘Scrutiny,’ as per the Cambridge Dictionary means “The thorough and detailed analysis of something to understand more about something.”
GST Clauses Related to Scrutiny
The provisions for return scrutiny are included in Section 61 of the CGST Act and Rule 99 of the CGST Rules. Section 61(1). This section states that “the competent official may scrutinize the return and associated particulars supplied by the registered person to check the correctness of the return and discrepancies, if any, in such way as may be specified and request his explanation thereof.”
Returns Selected for Scrutiny
The DGRAM (Directorate General of Analytics and Risk Management) has been tasked with selecting the GSTINs registered with Central Tax Authorities whose returns are to be inspected and communicating the same to the nodal officer of the Commissionerate concerned for further action.
Appropriate Officer for Scrutiny
According to Circular No. 3/3/2017– GST, ‘Superintendent of Central Tax’ can conduct scrutiny of GST returns.
The returns and associated particulars given by the registered individual must be scrutinized by the competent authorities to ensure their accuracy.
For scrutiny, the information accessible with the competent official on the system and the details made available through different sources such as DGRAM, ADVAIT, GSTN, and the E-WAY Bill site will be relied on.
Step-by-step Process for Performing Scrutiny under GST
- Notification of a discrepancy to the registered person
When a return is selected for scrutiny, the competent officer shall scrutinize it as per section 61 regarding the information at his disposal. In the event of a discrepancy, he should send a notification to the person in FORM GST ASMT-10 advising him of the discrepancy and requesting an explanation within such a period. This time shall not exceed 30 days from the date of serving of the notification or such extended period as he may grant, as well as quantifying the amount of tax, interest, and any other sum owed in respect to such disparity, when practicable.
As per Rule 99 of the CGST Rules, the proper officer may notify the registered person of any discrepancies discovered during the examination of Form GST ASMT-10 and request his explanation. The competent official must examine all returns for the corresponding fiscal year under consideration, and a single compiled notice in Form GST ASMT-10 may be delivered to the taxpayer for that fiscal year.
All communications with taxpayers for inspection must be done using the DIN as specified in Circular No. 122/41/2019-GSTs.
- Explanation by Taxpayer
The taxpayer may accept the discrepancies mentioned in the Notice issued in Form GST ASMT- 10 and pay the tax through FORM GST DRC-03. Or he can file an explanation in Form GST ASMT-11 within 30 days of being informed, or within such a period as the proper officer may allow.
- Follow-Up by the Proper Office
If the relevant official finds the explanation satisfactory, he will close the matter and no further action will be taken. The registered individual will be notified in FORM GST ASMT-12.
If no sufficient explanation is provided within 30 days of being notified by the competent authority, or for such extended term as he may allow. Or if the registered person fails to provide a satisfactory explanation or fails to take corrective action after recognizing the discrepancy, appropriate action can be taken against him by the relevant authorities, including those contemplated under the following sections of the CGST Act:
- Section 65
Initiation of Audit by tax authorities
- Section 66
Initiation of Special Audit by CA or CWA nominated by the Commissioner
- Section 67
Undertake procedures of inspection, search, and seizure
- Section 73 & 74
Proceed to determine tax (Monetary limits as specified in Circular No. 31/05/2018– GST)
