Assessment of Tax Liability in GST

Assessment of tax means determination of the tax liability of a person. The tax liability of a person is the amount of tax to be paid by a person during a tax period. The types of assessment of tax under GST remain similar to those in the current regime. Broadly, there are 2 types of assessments – assessment by the taxable person himself/herself, i.e., self-assessment, and assessment by the tax authorities.

Assessment by the tax authorities are of 4 types:

1. Provisional assessment
2. Scrutiny assessment
3. Best judgement assessment
4. Summary assessment

Let us understand these in detail.

Self-Assessment

Every registered taxable person must assess the tax payable by himself/herself and furnish the relevant return for each tax period. Based on the type of taxable person, the returns to be furnished have been specified. This is explained in detail in our blog Type of Returns under GST

For example: A registered regular dealer must furnish Form GSTR-3 on a monthly basis and Form GSTR-9 annually. This is the incidence where the tax payer is conducting self-assessment.

Assessment by the Tax Authorities

1. Provisional Assessment

If a taxable person is unable to determine the value of goods and/or services or determine the rate of tax applicable, the person can request an officer to allow payment of the tax on a provisional basis. The officer will pass an order allowing the person to pay the tax on a provisional basis. The rate of tax and the taxable value will be specified by the officer. The person has to execute a bond and surety or security, as the officer thinks is fit. The bond is binding on the person for payment of the difference between the amount of tax provisionally assessed and finally assessed.

Within 6 months from the date of the provisional assessment order, the officer must pass the final assessment order.

The person will be liable to pay interest on any additional tax payable under provisional assessment but not paid on the due date, i.e. 20^th of the month. Interest will be liable from the 21^st of the month till the date of actual payment, irrespective of whether the amount is paid before or after the final assessment order. If the person is eligible for a refund as per the final assessment order, interest will be paid on the refund amount.

For example: A registered person manufactures a new product for which the HSN code and tax rate are not available. In this case, the person seeks a provisional assessment of the tax payable by him.

2. Scrutiny Assessment

Under scrutiny assessment, an officer can examine the return and other information furnished by a person, to verify the correctness of the return.

If any discrepancy is noticed, the officer will inform the person and seek his explanation. If the explanation is satisfactory, no further action will be taken. In case no satisfactory explanation is given within 30 days of being informed or if the person does not make corrections in the return after accepting the discrepancies, the officer will initiate appropriate action.

For example: As part of the regular scrutiny assessment, an officer examines Form GSTR-3 filed by a registered person and has doubts regarding the transaction value and tax levied in certain transactions. In such a case, the officer will seek an explanation from the dealer.

3. Best Judgement Assessment

Under best judgement assessment, an officer will assess the tax liability of a person to the best of his/her judgement. The circumstances for this are:

a. Assessment of non-filers of returns– If a person fails to furnish a return, even after a notice is served to the person, an officer will assess the tax liability of the person to the best of his judgement. All relevant material which is available or which the officer has gathered will be taken into account. He will then issue an assessment order within 5 years from the due date of filing of the annual return for the year in which the tax return was not filed.
If the person furnishes the return within 30 days from the assessment order, the assessment order will be withdrawn.

For example: A regular dealer does not furnish Form GSTR-9 for a financial year, even after receiving a notice from the Tax department. In such a case, an officer will initiate best judgement assessment to assess the tax payable by the person.

b. Assessment of unregistered persons– If a taxable person fails to obtain registration even though he/she is liable to do so, an officer will assess the tax liability of the person to the best of his judgement for the relevant tax periods, and issue an assessment order within 5 years from the due date of filing of the annual return for the year in which the tax was not paid.

For example: During an inspection, an officer finds that a person has not registered under GST though his turnover exceeds the threshold limit. The officer will initiate a best judgement assessment and assess the tax liability of the person.

4.Summary Assessment

In certain special cases, an officer may, on finding any evidence showing tax liability of a person which comes to his notice, with the permission of the Additional/Joint Commissioner, assess the tax liability of the person to protect the interest of revenue, and issue an assessment order if he has sufficient grounds to believe that any delay in doing so will adversely affect the interest of revenue.

For example: On the basis of Form GSTR-3 filed by a registered regular dealer, an officer initiates summary assessment as he finds enough evidence to believe that a significant loss of revenue can be recovered from the person.

It is important for a taxable person to be aware of the different types of assessment under GST and adhere to the compliance requirements. Self-assessment is most important for every registered person. It is important to furnish accurate information and pay tax due on a timely basis, as per the due dates laid down. Self-assessment done appropriately ensures that assessment is not initiated by the tax authorities. In a case where an assessment is initiated by the tax authorities, a dealer must ensure to furnish the information asked for by the time given. Businesses must make use of the facilities of compliance and technology to remain compliant under GST.

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