Understanding Goods and Services Tax Assessments in India

The Goods and Services Tax (GST) system in India has unified numerous indirect taxes, aiming to boost the global competitiveness of Indian businesses. Effective tax calculation and timely payments are facilitated by various assessment mechanisms outlined in the GST law, including self-assessment.

What Constitutes Assessment under GST?

Under GST legislation, an assessment refers to the official process of determining a taxpayer's actual tax liability. The GST framework encompasses several distinct assessment categories.

Different Categories of Assessment under GST

The different types of assessments recognized by the GST law include:

• Self-assessment
• Provisional assessment
• Scrutiny assessment
• Best judgment assessment
• Assessment for non-filers of returns
• Assessment for unregistered individuals
• Summary assessment

It is important to note that only self-assessment is conducted by the taxpayer themselves, while all other forms of assessment are performed by tax authorities.

Self-Assessment Procedure

Every individual registered under GST is responsible for independently calculating their tax dues and submitting a return for each designated tax period. This approach to self-assessment aligns with the operational principles of previous excise, VAT, and service tax regulations, continuing to encourage taxpayer self-compliance.

Provisional Assessment Explained

A taxpayer may apply for a provisional assessment if they encounter difficulties in accurately determining the value of goods or services or the applicable tax rate.

Challenges in establishing value might arise from:

• Complexities in calculating transaction value.
• Uncertainty about whether certain receipts should be included.

Difficulties in ascertaining the rate of tax could stem from:

• Issues in classifying specific goods or services.
• Unsureness regarding the applicability of any particular tax notification.

Key Aspects of Provisional Assessment

• Requests for provisional assessments must be submitted in written form.
• The appropriate officer has the authority to permit tax payment on a provisional basis, according to a specified rate or value.
• An order for provisional assessment will be issued within 90 days from the date the request is received.
• The taxable entity must furnish a bond, along with security, guaranteeing to pay any difference between the provisionally assessed tax and the final assessed tax.
• Provisional assessments are always succeeded by final assessments. The designated officer may request additional information before finalizing the assessment.

Deadline for Final Assessments

The final assessment must be completed within six months following the provisional assessment. This period can be extended by an additional six months by the Joint or Additional Commissioner. The Commissioner, however, has the discretion to extend it for up to four further years as deemed necessary.

Interest on Additional Tax and Refunds

If a taxpayer owes additional tax under a provisional assessment that was not paid by the due date, interest will be charged. This interest will be calculated from the original due date of the tax on the goods or services (not from the provisional assessment date) until the actual payment date, regardless of whether payment occurs before or after the final assessment. The maximum interest rate applicable is 18%. Conversely, if the final assessed tax is less than the provisional assessment, the taxpayer will receive a refund, along with interest, which will not exceed a maximum rate of 6%.

Scrutiny of Tax Returns

During a scrutiny process, the designated officer may examine a tax return to verify its accuracy and completeness. Should any discrepancies be identified, the officer may then request clarification from the taxpayer.

When an Explanation is Found Satisfactory

If the officer deems the taxpayer's explanation acceptable, the taxpayer will be notified, and no further action will be initiated.

When an Explanation is Deemed Unsatisfactory

If the taxpayer fails to provide a satisfactory explanation within 30 days, or if they do not correct the identified discrepancies within a reasonable timeframe (which is yet to be precisely defined), the proper officer may proceed with further actions. These actions could include:

• Conducting an audit of the taxpayer as per Section 65.
• Initiating a Special Audit procedure under Section 66.
• Inspecting and searching the taxpayer's business premises.
• Activating demand and recovery provisions.

Best Judgement Assessment

In a best judgement assessment, an assessing officer determines tax liability based on their informed reasoning and the available information, ensuring an impartial evaluation. Under GST, this assessment type applies in two main scenarios:

• When a taxable individual has failed to submit their tax return.
• When an individual has not registered under GST despite being legally required to do so.

For more detailed information on best judgement assessment under GST, you can refer to relevant resources here.

Many of these assessment provisions within the GST framework mirror existing indirect tax laws, indicating continuity in the tax assessment system. Further details on best judgement assessment, scrutiny of returns, and summary assessment are available here.