Types of Assessment under GST
Goods and Services Tax (GST) in India follows a well-structured process of tax administration, including different types of assessments to ensure accurate tax compliance by taxpayers. "Assessment" refers to the determination of tax liability under the GST regime. It plays a critical role in verifying the accuracy of taxes paid and claimed by businesses.
This article will provide a detailed breakdown of assessment under GST, focusing on key types such as self-assessment, provisional assessment, and scrutiny assessment.
Table of Contents
Meaning and Types of Assessments
The assessment under GST refers to the process of determining a taxpayer's tax liability under the GST laws. This ensures the correct amount of tax is collected from taxpayers, and discrepancies, if any, are rectified. Assessments are done to verify the correctness of self-declared returns, identify underreported taxes, or assess taxes for unregistered persons and non-filers. There are several types of assessment under GST, each designed to deal with different scenarios:
Self-Assessment
Provisional Assessment
Scrutiny Assessment
Best Judgment Assessment
Summary Assessment
These types of assessments ensure that the GST assessment procedure is robust, covering different taxpayer behaviors and providing mechanisms to rectify underpayments or wrong filings.
Self-Assessment
The most common and straightforward type of assessment in GST is self-assessment. Under this method, every registered taxpayer is required to self-assess their tax liability and file GST returns accordingly. This means the onus of calculating the amount of tax payable rests on the taxpayer. The taxpayer must file regular returns (monthly or quarterly) based on this self-assessment.
What is self-assessment in GST?
It is the process whereby the taxpayer independently calculates and reports their tax obligations through returns like GSTR-3B and GSTR-1.
How it Works: A taxpayer must calculate the tax due on the outward supplies and deduct the input tax credit available on the inward supplies. The result is the net tax payable, which must be paid to the government.
Importance: Self-assessment allows the taxpayer to independently compute their tax obligations without direct involvement from tax authorities, promoting a level of autonomy and responsibility.
Provisional Assessment
In certain situations, a taxpayer may be unsure about the correct rate of tax or the valuation of goods or services. In such cases, provisional assessment under GST comes into play. The taxpayer can request a provisional assessment from the tax authorities to avoid discrepancies in tax payments.
Procedure for Provisional Assessment
The provisional assessment process involves the following steps:
The taxpayer files an application requesting provisional assessment due to uncertainty in tax calculation.
The concerned GST officer examines the application and grants permission for provisional payment of tax, typically setting a bond and surety.
The officer may allow the taxpayer to pay taxes based on an estimated value or rate until the final assessment is completed.
Interest Payable for Provisional Assessment
If, upon final assessment, it is found that the taxpayer has paid a lesser amount during the provisional assessment, interest will be charged on the shortfall. Conversely, if excess tax is paid during provisional assessment, the taxpayer is eligible for a refund along with interest.
Refund under Provisional Assessment
When the final assessment results in an excess tax payment, the taxpayer is entitled to a refund of the excess amount. The refund is granted under Section 54 of the CGST Act, with interest, if applicable.
Time Limit for Final Assessments
The final assessment must be completed within six months from the date of provisional assessment, although this period can be extended by the Joint Commissioner or Additional Commissioner, if necessary.
Scrutiny Assessment
Scrutiny assessment under GST involves the examination of returns filed by the taxpayer to ensure correctness. The tax authorities scrutinize these returns for any discrepancies, errors, or mismatches. This type of assessment is conducted as part of the tax administration’s efforts to identify and rectify mistakes proactively.
Process: The proper officer reviews the returns and communicates any discrepancies to the taxpayer. The taxpayer is required to respond with an explanation or take corrective measures.
Objective: The goal of a scrutiny assessment is to detect early signs of underreporting or over-reporting of tax, which can later lead to formal assessments or audits if the issue is not resolved.
Best Judgment Assessment
When a taxpayer fails to file their returns or cooperate with the tax authorities, the officer may resort to a best judgment assessment under Section 62 and Section 63 of the GST Act. There are two primary types of best judgment assessments:
Assessment of Non-Filers of Returns
If a taxpayer fails to file their GST returns despite repeated notices, the tax officer may assess the tax liability based on available information. The taxpayer is still provided an opportunity to file their returns and pay the tax before the best judgment assessment is finalized.
Assessment of Unregistered Person
When a person is required to register under GST but fails to do so, a best judgment assessment is carried out by the tax authorities based on the available data, including external sources, to estimate the tax liability.
Summary Assessment
Summary assessment under Section 64 of the GST Act is conducted in cases where there is evidence that delay in assessment could lead to loss of revenue. The tax officer can proceed with a summary assessment on an urgent basis, with the prior approval of the Additional or Joint Commissioner.
Urgency and Scope: Summary assessments are typically reserved for cases where the taxpayer's records suggest serious discrepancies, and delaying the assessment could hamper tax collection.
Consequences and Penalties of Non-Compliance under GST
Failure to comply with assessment under GST can result in severe consequences, including penalties, interest, and even prosecution. Non-filers of returns may face additional fines, while incorrect filings may lead to scrutiny, audits, and assessments by tax authorities.
Penalties: Various penalties are imposed for underreporting of tax, failure to register, and late payment of taxes. Interest is also charged on unpaid amounts.
Prosecution: In cases of deliberate fraud, evasion, or significant non-compliance, prosecution and criminal charges can be brought against the taxpayer.
FAQ
Q1. What are the different types of assessments under GST?
GST assessments include self-assessment, provisional assessment, scrutiny assessment, summary assessment, and best judgment assessment.
Q2. What is self-assessment under GST?
Self-assessment allows taxpayers to assess their own tax liability and file GST returns based on their own calculations.
Q3. What is the provisional assessment under GST?
Provisional assessment is used when a taxpayer is unable to determine the value of goods/services or the applicable GST rate.
Q4. When is scrutiny assessment initiated?
Scrutiny assessment is initiated by tax authorities to verify the accuracy of the returns filed by the taxpayer.
Q5. What is a summary assessment under GST?
Summary assessment can be initiated by the tax authority in cases where there is evidence of tax liability and delay may affect the recovery process.
Q6. What is the best judgment assessment?
Best judgment assessment is carried out by the tax authorities when a taxpayer fails to file returns, allowing the authority to estimate the tax liability.
Q7. Can a taxpayer appeal against the provisional assessment?
Yes, a taxpayer can appeal a provisional assessment once the final assessment is issued.
Q8. What triggers a scrutiny assessment?
Discrepancies in filed returns or mismatches between input tax credits and outward supplies usually trigger a scrutiny assessment.
Q9. When can a summary assessment be applied?
Summary assessment is applied in urgent situations, often when there is evidence of tax evasion or loss to the revenue.
Q10. Is there a time limit for completing a provisional assessment?
Yes, the tax authorities are required to finalize a provisional assessment within six months from the date of the provisional order.
Q11. What happens if a taxpayer does not respond to scrutiny assessment queries?
If a taxpayer fails to respond, the assessing officer may proceed with the best judgment assessment.
Q12. Can a summary assessment be withdrawn?
Yes, a summary assessment can be withdrawn if the taxpayer proves that the liability determined was incorrect.
Q13. What is the process for appealing against a best judgment assessment?
A taxpayer can file an appeal with the relevant GST appellate authority within the prescribed time limits.
Q14. What documents are needed for a provisional assessment?
The taxpayer needs to submit details regarding the transaction, the reason for uncertainty, and an application for provisional assessment.
Q15. How does scrutiny assessment differ from audit?
Scrutiny assessment focuses on returns filed, while an audit involves a more comprehensive examination of the taxpayer's financial records.
