WFYI logo

Understanding Various Assessment Types Under GST in India

This article provides an in-depth explanation of best judgement and summary assessments under India's GST framework. It details how tax liability is determined for non-filers and unregistered persons, including conditions for withdrawal of such assessments and the recent amnesty scheme for non-compliant taxpayers. The piece also outlines the process for summary assessments, emphasizing their role in protecting government revenue and the provisions for their revocation, while noting similarities to previous indirect tax systems.

📖 3 min read read🏷️ GST Assessment

This article elaborates on various assessment types under the Goods and Services Tax (GST) framework, building upon previous discussions concerning self-assessment, provisional assessment, and scrutiny assessment.

Understanding Best Judgement Assessment in GST

A best judgement assessment involves an assessing officer determining tax liability based on their rationale and all available data, ensuring an unbiased evaluation. Under GST, this type of assessment is invoked in two primary scenarios:

  • When a taxable individual or entity fails to submit a tax return.
  • When an individual or entity required to register for GST has not done so.

Assessment Process for Non-Filers

Should a registered taxable person neglect to file their return, even after receiving a notice under Section 62, the designated officer will proceed to determine their tax liability through a best judgement assessment. This determination relies on all accessible information. It's important to note that an opportunity to be heard might not be provided, which differs from prior service tax regulations. The assessment order must be issued within five years from the annual return's original due date.

Validity of Return Submission

If the taxable person submits a valid return within 30 days of receiving a best judgement assessment order, the assessment order will be revoked. A valid return necessitates the payment of all due taxes, although any applicable late fees, penalties, and interest related to the original non-compliance will still be incurred.

Amnesty Program for Defaulting Taxpayers

In a move to assist non-filers, CGST notification 06/2023, issued on March 31, 2023, introduced an amnesty scheme. This scheme permits taxpayers who missed the 30-day window for filing returns (if the assessment order was issued by February 28, 2023) to submit their outstanding returns between April 1, 2023, and June 30, 2023. This provision allows for the withdrawal of a best judgement assessment order, even if an appeal has been initiated or concluded, provided the taxpayer files all pending returns and settles all due taxes, late fees, and interest as mandated by law.

Assessing Unregistered Taxpayers

This assessment applies to individuals or entities who are legally required to register for GST but have failed to do so. The officer will determine the tax liability for the pertinent tax periods using their best judgement. An assessment order can be issued within five years from the annual return's due date for the period when the tax was unpaid.

Before any order is finalized, the taxable person will be issued a show cause notice and granted an opportunity to present their case.

Should it be confirmed that an individual or entity failed to register despite being obligated, measures for demanding and recovering unpaid tax will be initiated, alongside the application of the penalty for non-registration. This ensures that even unregistered persons are subject to assessment to verify their compliance with registration requirements, mirroring practices found in systems like Maharashtra VAT.

Overview of Summary Assessment

A summary assessment is conducted when an assessing officer has compelling reasons to believe that any postponement in evaluating a tax liability could negatively impact government revenue. To safeguard fiscal interests, the officer can issue a summary assessment order based on existing evidence of tax liability, provided prior approval from an Additional or Joint Commissioner is obtained. This streamlined assessment is a rapid evaluation based on the taxpayer's filed returns, prioritized to prevent revenue loss, often without the taxpayer's immediate involvement. It is typically employed for taxpayers who are defaulting or have absconded.

Revocation of Summary Assessment

A taxpayer can request the cancellation of a summary assessment order within 30 days of its receipt. If they can demonstrate to the Additional or Joint Commissioner that the order was improperly issued, it will be rescinded. Furthermore, the Additional or Joint Commissioner can independently revoke an order if they deem it to have been wrongly passed. Following such a revocation, the demand and recovery provisions outlined in Sections 73 and 74 will become applicable. Notably, summary assessments are often utilized in scenarios where the specific taxable person involved in a goods supply cannot be identified; in such instances, the individual responsible for the goods is considered the taxable person, subject to assessment and liability for tax and other due amounts. This specific provision does not extend to services. Many GST assessment provisions align with existing indirect tax systems.

Frequently Asked Questions

What is GST, and why was it introduced in India?
GST, or Goods and Services Tax, is a comprehensive indirect tax introduced in India to replace multiple cascading taxes levied by central and state governments. Its primary objective was to streamline the tax structure, reduce complexity, and create a common national market.
What are the different types of GST in India?
In India, there are four main types of GST: Central GST (CGST) levied by the Centre, State GST (SGST) levied by states, Integrated GST (IGST) for inter-state transactions and imports, and Union Territory GST (UTGST) for Union Territories without their own legislature.
Who is required to register under GST?
Businesses and individuals generally need to register under GST if their aggregate turnover exceeds a specified threshold (e.g., ₹20 lakhs for goods, or ₹10 lakhs for some special category states). Mandatory registration also applies to inter-state suppliers, e-commerce operators, and those liable to pay tax under the reverse charge mechanism, regardless of turnover.
What is Input Tax Credit (ITC) under GST?
Input Tax Credit (ITC) allows businesses to claim credit for the GST paid on purchases of goods and services that are used for business purposes. This mechanism prevents the cascading effect of taxes, where tax is paid on tax, ultimately reducing the final tax burden on consumers.
How do GST returns work in India?
GST returns in India involve filing various forms (like GSTR-1 for outward supplies and GSTR-3B for summary returns) at regular intervals, typically monthly or quarterly, depending on the taxpayer's turnover and scheme. These returns declare sales, purchases, input tax credit, and tax payments to the government.