4. Assessment & Hearing

GST Assessment

Goods and Services Tax (GST) has transformed tax collection in India. A standout feature of GST is its self-assessment system, which requires taxpayers to evaluate their tax liabilities and file returns accordingly. However, the government retains the authority to verify the accuracy of these returns through a formal assessment process.

Assessment under GST plays a vital role in ensuring that taxpayers adhere to GST laws and regulations. In this blog, we will explore what assessment under GST entails, the various types, relevant sections, and its significance.

Assessment under GST involves a thorough review by tax authorities of the returns submitted by taxpayers. This process aims to verify that the reported tax liabilities are correct and that taxes have been calculated and paid accurately. Assessment serves as a crucial mechanism to identify any mistakes or inconsistencies in the submitted returns.

Types of Assessment under GST

There are six types of assessment under GST:

• Self-Assessment: Self-assessment is the initial step in the tax evaluation process that taxpayers carry out themselves. In this approach, individuals determine their tax liabilities, make payments, and submit their returns as required. This process can occur monthly, quarterly, or annually, depending on the taxpayer's revenue. The relevant regulatory framework under GST for this self-assessment process is outlined in Section 59.
• Provisional Assessment: Provisional assessment can only be utilized in two specific situations. The first is when the registered individual cannot ascertain the value of the supply, and the second is when they are unable to determine the applicable tax rate. Outside of these scenarios, taxable persons cannot invoke provisional assessment for any other reasons. Upon receiving such a request, the appropriate office has 90 days to issue an order that allows for tax payment on a provisional basis, specifying the applicable rate or value. Furthermore, a final assessment order must be issued within six months from the date the provisional assessment order is communicated. For reference, the relevant section under GST concerning provisional assessment is Section 60.
• Scrutiny Assessment: Scrutiny assessments are carried out by tax authorities to ensure that taxpayers have accurately filed their returns. This process is relevant only for those who are registered; individuals who are not registered do not fall under this purview. A notice under Section 61 can only be sent if a return has been submitted by a registered taxpayer. The tax authorities have the right to issue a notice requesting additional information or documents to substantiate the claims made in the returns. They may also decide to conduct an audit of the taxpayer’s records. After reviewing the gathered information, the authorities can issue an assessment order that outlines the final tax amount due from the taxpayer. The pertinent section related to scrutiny assessments under GST is Section 61.
• Best Judgment Assessment: When a taxpayer does not submit their return under Section 39 or Section 45, even after receiving a notice under Section 46, the relevant office has the authority to assess the tax liability based on the best judgment of the situation. This assessment will take into account all available information and evidence collected. The assessment order must be issued within five years from the date specified in Section 44 for the submission of the annual return related to the unpaid tax for that financial year. It’s important to note that Section 62 of the GST legislation governs the best judgment assessment process.
• Assessment of Unregistered Persons: If a person who is required to register for tax purposes fails to do so, or if their registration has been cancelled under subsection (2) of Section 29 while still being liable for tax, the proper officer is authorized to assess their tax liability based on the best judgment for the appropriate tax periods. An assessment order will be issued within five years from the date mentioned in section 44 regarding the submission of the annual return for the relevant financial year. Importantly, no assessment order will be made without first providing the individual an opportunity to present their case. The applicable section of the GST for assessing individuals who are not registered is Section 63.
• Summary Assessment: Summary assessments are conducted in specific circumstances, particularly when tax authorities suspect that a taxpayer may be attempting to evade taxes or when there's a risk to revenue. The responsible officer must have evidence that taxes are due and unpaid. Prior approval from the Additional Commissioner and Joint Commissioner is necessary for proceeding with such assessments. It's understood that delays in the assessment process could negatively impact revenue collection. If the taxpayer responsible for the liability cannot be identified, that liability will be assigned to the individual in charge of the goods. Typically, summary assessments are used in cases involving taxpayers who have absconded or defaulted. There’s no specific timeline for issuing an order in these cases, and the regulations do not indicate that the individual should be given a chance to present their case. The relevant regulation pertaining to summary assessment within GST is Section 64.

Procedure for Assessment under GST

The procedure for assessment under GST is as follows:

• Issue of Notice: The tax authorities have the ability to send a notice to the taxpayer, requesting more information or documents to back up their returns. This notice should clearly indicate the reason for the assessment, the time period involved, and the specific information or documents that are needed.
• Conduct of Audit: The tax authorities have the right to review a taxpayer's records to ensure the accuracy of their filed returns. This audit may take place either at the taxpayer’s location or remotely. It's essential for the taxpayer to supply all required information and documentation to the auditors during this process.
• Issue of Assessment Order: Following the notice and audit findings, the tax authorities have the authority to issue an assessment order. This order will detail the final tax amount that the taxpayer is required to pay. Additionally, it may include any applicable interest, penalties, or fines.
• Rectification of Errors: If a taxpayer finds themselves in disagreement with the assessment order, they have the option to ask for an error correction. This request needs to be submitted within 30 days of receiving the assessment order. Following this, the tax authorities will examine the request and, if warranted, will issue a revised assessment order.
• Appeal: If a taxpayer still feels unsatisfied with the assessment order after the rectification process, they have the option to appeal to the relevant appellate authority. This appeal should be submitted within three months of receiving the assessment order. The appellate authority will then examine the case and deliver a final decision.

Importance of Assessment under GST

Assessment under GST is important for the following reasons:

• Ensures Compliance: Tax assessment plays a vital role in ensuring that taxpayers adhere to GST laws and regulations. Maintaining GST compliance is essential for streamlined business operations. It also acts as a safeguard against tax evasion, ensuring that the government accurately collects the necessary tax revenue.
• Detects Errors and Discrepancies: Assessment plays a crucial role in identifying any errors or inconsistencies in the tax returns submitted by taxpayers. This proactive measure is essential in safeguarding tax revenue against mistakes or efforts at evasion.
• Improves Taxpayer Education: Assessment is essential for guiding taxpayers on how to accurately calculate and pay their taxes. By doing so, it enhances GST compliance and minimizes errors or discrepancies in filed returns.

Common Mistakes to Avoid

It’s important to recognize the frequent errors taxpayers encounter when submitting their returns. These blunders can lead to inaccurate assessments, which may ultimately result in penalties and interest charges. Here’s a list of common pitfalls to steer clear of when filing your GST returns.:

Incorrect classification of goods and services: 

GST rates differ based on how goods and services are categorized. It’s crucial for taxpayers to accurately classify their offerings to prevent any potential miscalculations in assessments.

• Incorrect calculation of tax liability: Taxpayers need to make sure they calculate their tax responsibilities correctly, using the appropriate GST rates for their products or services. Errors in this calculation could lead to inaccurate assessments and potential penalties.
• Delayed filing of returns: It’s important to file your GST returns promptly to steer clear of any penalties and interest. Make sure to submit your returns by the due date to avoid incurring extra charges.
• Failure to report input tax credit: Taxpayers can take advantage of the input tax credit on their purchases to lower their tax burden. Not reporting the input tax credit accurately may lead to a miscalculation of taxes owed and could incur penalties.
• Incorrect reporting of turnover: Taxpayers must ensure that they report their turnover accurately to avoid incorrect assessment.

It's crucial for taxpayers to maintain accurate records of their transactions and adhere to GST laws and regulations. Doing so will help ensure that their assessments are correct and prevent any legal or financial issues down the road.

The Role of Hearings

A personal hearing is a fundamental right provided to the taxpayer, based on the principles of natural justice. It is not merely a formality but an opportunity to present evidence, clarify misunderstandings, and defend one's position before an adverse order (like penalties or demands for additional tax) is passed. 

• When it happens: Personal hearings are generally provided when a show-cause notice (SCN) is issued, such as under Sections 73 or 74 related to demand and recovery proceedings, or when a penalty or adverse decision is being considered.
• The procedure: The taxpayer or their designated representative, such as a Certified Accountant or attorney, is permitted to appear before the tax authorities. They have the opportunity to present relevant documents, arguments, and evidence to support their case. Additionally, the law permits up to three adjournments for valid reasons.
• The outcome: The taxpayer, or a representative they have chosen, like a Certified Accountant or an attorney, is allowed to appear before the tax authorities. This gives them the chance to present important documents, make arguments, and provide evidence to back up their case. Furthermore, the law allows for up to three postponements for legitimate reasons.

Conclusion

Assessment under GST plays a vital role in ensuring that taxpayers adhere to the relevant laws and regulations. It’s important for taxpayers to calculate and remit their taxes accurately to steer clear of any potential penalties or interest. The various types of assessments available under GST—such as self-assessment, provisional assessment, scrutiny assessment, best judgment assessment, assessment of unregistered individuals, and summary assessment—serve to help tax authorities confirm the accuracy of the tax returns submitted by taxpayers. This process not only aids in preventing tax evasion but also ensures that the government accurately collects the revenue it is entitled to.