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Top 5 Assessments under GST

Assessment under GST means the determination of tax liability under GST. 

Self Assessment under GST

Under GST, every registered taxable person shall assess the taxes payable by them on their own, and furnish a return for each tax period. This is called self-assessment.

Provisional Assessment under GST

A registered dealer can request the officer for provisional assessment if he is unable to determine the value of goods or rate of tax. The proper officer can allow the assessee to pay tax on a provisional basis at a rate or a value specified by him.

Scrutiny Assessment under GST

A GST officer can scrutinize the return to verify its correctness. The officer will ask for explanations on any discrepancies noticed in the returns.

Summary Assessment under GST

Summary Assessment is done when the assessing officer comes across sufficient grounds to believe any delay in showing a tax liability can harm the interest of the revenue. To protect the interest of the revenue, he can pass the summary assessment with the prior permission of the additional/joint commissioner.

Best Judgement Assessment under GST

  • Assessment of non-filers of returns: If a registered taxable person does not file his return even after getting notice, the proper officer will assess the tax liability to the best of his judgment using the available relevant material.
  • Assessment of unregistered persons: This assessment is done when a taxable person fails to obtain registration even though he is liable to do so.

The officer will assess the tax liability of such persons to the best of his judgment. The taxable person will receive a show cause notice and an opportunity of being heard.

What are the statutory provisions for GST audit and annual return?

Sec 2(13): Audit

“audit” means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed, and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder;

Statutory provisions for GST audit and annual return

Section 44(1)

Section 44(1) of the Act states that “Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

Section 35(5)

Section 35(5) of the Act states that “every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.”

Rule 80 (3) of the CGST Rules

Rule 80 (3) of the CGST Rules provides “every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

On reading the above provisions, the applicability of GST Annual Return and Audit can be summarized as under:

  • Annual Return– Every registered person, except an ISD, the person paying TDS/TCS, casual taxable person & non-resident taxable person.
  •  GST Audit     – Every registered person with an aggregate turnover of Rs.2 crores.

Turnover and aggregate turnover

It is to be noted that Section 35(5) uses the word “turnover” whereas in Rule 80 (3) the words used are “aggregate turnover”.  CGST Act contains a definition for ‘aggregate turnover’ which is computed on all India basis. There is no definition for ‘turnover’ in the CGST Act as it defines the only turnover in a State. As wordings in section and rule are not identical, an issue may arise as to whether GST audit is required for all the GST registrations once the aggregate turnover at all India level exceeds INR 2 Crores or the turnover threshold is to be seen at registration level. If there is a registration with turnover less than INR 2 Crores, whether such registration is required to comply with GST Audit requirement is an issue requiring clarification from the authorities.

Annual Return – Additional reporting requirements

Annual Return as per Section 44 of CGST Act is to be filed on or before 31st December 2018 for the FY 2017-18. CBIC has recently notified the form for annual returns – GSTR-9 applicable to normal taxpayers and GSTR-9A applicable to taxpayers operating under composition scheme.

These forms seek details of outward supplies, inward supplies, taxes paid and credits availed besides information on demands and refunds. HSN-wise summary of outward supplies for the FY 2017-18 has to be provided in a consolidated manner.

Though these forms essentially seek to consolidate the figures/information submitted through monthly returns filed by the assessee, yet there are certain additional reporting requirements for which the assessee will have to work overtime to compile the required information. Additional data/information required in annual return which is not captured in monthly returns are:

  • HSN wise summary of inward supplies (purchases)
  • Segregation of inward supplies received from different categories of taxpayers like composition taxpayers
  • Inputs / Capital Goods / Input Services – Segregation of inward supplies
  • Particulars of the transactions for the previous FY declared in returns of April to September of current FY.

Basics of GST

Key Notes

  • CGST – Central GST, to be collected by the Centre and applicable on supplies within the State
  • Jurisdictional issues in GST
  • Impact of GST in the increase in FDI
  • All about GST Council
  • Brief Note on Taxation Laws (Amendment) Bill, 2017
  • 101st Amendment of the Constitution
    • Article 246
    • Article 269 A
    • Article 366(12A)
    • Artice 286

Interstate transactions include exports, SEZ, etc.

Principles of GST

The scope of supply, levy & Collection

  • The subject could be anything – services, goods or goods as services
  • Supply – included, implied, excluded
  • Place – inter-state, intra-state
  • Time – Specified for goods, specified for services
  • Levy is based on Sec.9 of CGST and Sec.5 of IGST
  • GST Rates – Rate of duty is separate tax rate for precious metals
  • Reverse charge – 9(3) – Compulsory and 9(4) – Unregistered dealer purchases – is being exempted till Sep. 19
  • URD purchases
  • E-commerce operator  – services supplied through them

The concept of Supply – Sec. 7 GST

  • Supply of goods and services
  • Supply to be in the course or furtherance of business
  • Supply to be for a consideration

Section 7(1)(a) – All forms of supply of goods and/ or services, for a consideration, in the course or furtherances of business – such as sale, transfer, barter, exchange, license, rental, lease or disposal

Section 7(1)(b) – Importation of service, – for a consideration, – whether or not in the course or furtherance of business

Section 7(1)(c) – Supplies specified*

  • To be treated as supplies made without a consideration

*Schedule I:

  • Permanent transfer/disposal
  • Supplies between related persons/distinct persons in the course or furtherance of business
  • Supply of goods by the principal (or agent) to the agent (or principal)
  • Importation of service from a related person, etc.
  • Supply between business verticals
  • Supply between branches located in different states
  • A gift to employee valued more than Rs.50,000/- is taxable in a FY

Sec 7(2)

  • Activities note treated neither as the supply of goods/services
  • Activities by CG/SG/etc.

Levy – Goods and Services

Goods

  • means every kind of movable property
  • other than money
  • other than securities
  • includes actionable claims – debtor, lottery, money recovery from the bank
  • NO specific exclusion for intangible property (trademark, ip, etc)

Services

  • Anything other than goods is a service
  • Other than money
  • Other than securities
  • Includes activity of changing of money from one form to another for a consideration

Valuation of supply

  • Business – a type of the business
  • Place of business
  • Location of supplier
  • Person-taxable person
  • Centralized registration – No single registration is allowed
  • Goods or services
    • Rights-to-occupy land
    • Works contracts
    • Free-of-charge supplies
  • Types of GST Transaction
    • Supply or non-supply
    • Taxable or non-taxable
    • Exempt of zero-rated
    • Taxable but not in the business
  • Payment of tax

Schedule 2:

  • Job work is a service
  • To classify a good or service – refer Schedule 2

Composite Supply or Mixed Supply

  • What is Composite Supply
    • Composite Supply – Sec. 2(30)
    • 2 or more goods or services or a combination of goods and services
    • which are naturally bundled and supplied in conjunction with the trade of the business
    • with each other in the ordinary course of business
    • one of which is a principal supply
      Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply.
  • What is Mixed Supply?
    • Mixed Supply – Sec. 2(74)
    • Means two or more individual supplies of goods or services, or any combination thereof
    • made in conjunction with each other by a taxable person for a single price
    • where such supply does not constitute a composite supply
    • Illustration: A supply of a package consisting of canned foods, sweets, chocs, cakes, dry fruits and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent.

Works contract – Sec. 2 (119)

  • includes a contract for  building,  construction, fabrication, completion, erection, installation
  • fitting out, improvement, modification, repair, maintenance, renovation, alteration, commissioning
  • of any immovable property
  • wherein the transfer of property in goods is involved in the execution of such contract

Supply

  • Included supplies, implied supplies (Sch. I), excluded supplies
  • Chargeability to tax
  • Supply characterization

Types of supplies

  • Zero-rated: Exports, Supply to SEZ
  • Exempt: Non-taxable – how much is the exempted
  • Non-Taxable:

Intra-State Supply

  • One tax – IGST (higher rate)

Input credit & setoff

  • No differentiation between goods or services

Filing of returns

  • Uniform Cutoff date
  • Uniform formals for filing for CGST, SGST & IGST
  • Returns shall be processed and credits shall be validated simultaneously
  • Center and states have jurisdictions

GSTN Introduces New Validation Criteria for Tax Amount in Sales Invoice

GSTN introduced new validation criteria for calculating Tax amount of the product line items in sales invoices and other GSTR-1 documents.

According to this new validation format provided by the Goods & Services Tax Network (GSTN), you will have to calculate the tax amount of every line item to be rounded up to two digits only. 

New GSTN Tax Amount Validation Example:

If the taxable value of a product is Rs. 500.95 and the applicable tax rate is 18%, then the tax amount to be calculated as follows:

=18% of 500.95 = Rs.90.17 (Rounded off to two digits)

Hence, previously accepted values such as 45, 47.1, 52.428 will result in an error from the GSTN portal.

When you are filing your returns using offline Excel utility, do make sure that the tax amount of line items in your Excel files matches this new validation. GSTN portal may throw the following error message if the new validation criteria are not complied with. 

"Per GSTN's latest requirements, Tax amount should be 90.17 (i.e. 500.95 * 18%), rounded up to 2 digits".

For any questions and clarifications, contact our tax advisors for help in filing your GST returns.

Recovery of Tax under Goods and Services Tax (GST)

When demand is not paid by a person liable to pay, the process of recovery will be initiated by a proper officer as per the laws of Goods and Service Tax Act.

Section 79 of the CGST Act, 2017 specifies that a proper officer or any other specified officer can recover the amount payable by any person under this Act through different modes of recovery. For example,

  • Deduction from Amount Payable from any money owing to such person which may be under the control of the proper officer or such other specified officer.
  • Detaining and selling any goods belonging to such person which are under the control of the proper officer or such other specified officer.
  • Recovery from any other person from whom money is due or may become due to such person from whom recovery is to be made.
  • Distrain any movable or immovable property belonging to or under the control of such person.
  • Recovery as an arrear of land revenue through certification sends to the Collector of the district in which such person owns any property or resides or carries on his business.

Application to the appropriate Magistrate for recovery of tax.

The Goods & Services Act (GST) further specifies that if a bond or any other instrument has been executed under this Act or any rules or regulations made thereunder and the manner of recovery is specified in such bond in accordance with section 79(1) of the CGST Act, 2017 then the amount will be recovered in accordance with the provisions of that sub-section.

Where any amount of tax, interest or penalty is payable by a person to the Government under any of the provisions of this Act or the rules made thereunder and which remains unpaid, the proper officer of State tax or Union territory tax, during the course of recovery of said tax arrears, may recover the amount from the said person as if it were an arrear of State tax or Union territory tax and credit the amount so recovered to the account of the Government.

How arrest is made under GST

Section 69 of the CGST Act, 2017 grants power to a Commissioner to authorise any officer of Central Tax to arrest such person who has committed following offence:

Offence – Section 132(1)

  • (a) supplies any goods or services or both without issue of any invoice,with the intention to evade tax
  • (b) issues any invoice or bill without supply of goods or services or both leading to wrongful availment or utilisation of input tax credit or refund of tax
  • (c) avails input tax credit using such invoice or bill without supply of goods or services or both
  • (d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due

Punishment – Section 132(1) of GST

When a person commits any of the offences stated above the punishment will be as follows:

Where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds

  • a) 500 lakh Rupees: imprisonment for a term which may extend to 5 years and with fine
  • b) 200 to 500 lakh Rupees: imprisonment for a term which may extend to 3 years and with fine

Under Section 132 (2) of GST

Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.

Impact of GST on Movie tickets and Entertainment Industry

Impact of GST on Entertainment industry

The impact of GST on the entertainment industry will vary from state to state.

Impact of GST Rates: The table below shows the final rates that will apply to the entertainment industry post-July, 2017:

GST Rates on Movie Tickets

Movie tickets will now attract GST at 28%. As food and beverages fall under the supply of food/drinks in outdoor catering, they will attract 18% GST. Thus, the GST rates for the entertainment industry are lower than rates of VAT and Service Tax. GST, thus, will have a mixed effect on the entertainment industry, depending on the states.

  • GST Council has decided to reduce the tax on movie tickets below Rs 100 to 18 percent from the previously fixed rate of 28 percent.
  • Ticket price above Rs 100 is fixed at the rate of 28 percent.

Understanding Seizure under GST

A seizure is defined as taking of something by force. Section 67 of Central Goods and Services Tax Act, 2017, read
with respective rules state provisions relating to seizure. The salient points of seizure are as follows:

Order of Seizure

A proper officer not below the rank of Joint Commissioner or an officer authorized by such proper officer can make an order of seizure in the form GST INS-02 for cases authorized under Section 67(2)

Order of Prohibition

Where Goods or things cannot be seized, the proper officer or the authorized officer may serve on the owner or the custodian of the goods, an order of prohibition in FORM GST INS-03 that he shall not remove, part with, or otherwise, deal with the goods except with the previous permission of such officer

Preparation of Inventory

When goods are seized the officer is required to prepare an inventory of such goods or books or documents seized containing, inter alia, description, quantity or unit, make, mark or model, where applicable, and get it signed by the person from whom such goods or documents or books or things are seized.

Bond for release of seized goods

Goods seized by a proper officer or an authorized officer can be released on a provisional basis upon execution of a bond for the value of goods and furnishing of a security. The bond so executed will be in Form GST INS-04 and the security in the form of a bank guarantee equivalent to the amount of applicable tax, interest, and penalty payable. In case the person to whom the goods were released provisionally fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest, and penalty and fine, if any, payable in respect of such goods.

Procedure in respect of seized goods

If the goods so seized are of perishable or hazardous nature, such goods can be released by an order under Form GST INS-05 only after the taxable person pays an amount equivalent to the market price of such goods or things or the amount of tax, interest, and penalty that is or may become payable by the taxable person, whichever is lower and produce the proof of payment. If the taxable person doesn’t pay the amount, the Commissioner has the power to dispose of such goods or things and the amount realized thereby will be adjusted against the tax, interest, penalty, or any other amount payable in respect of such goods or things.

Learn GST Series: What is Electronic Cash Ledger?

The Electronic Cash Ledger contains a summary of all the deposits/payments made by a taxpayer. In the ledger, information is kept minor head-wise for each major head. For the convenience of the user, the ledger is displayed major head-wise i.e., IGST, CGST, SGST/UTGST, and CESS. Each major head is divided into five minor heads: Tax, Interest, Penalty, Fee, and Others. It can be accessed under the post-login mode on the GST portal under Services > Ledgers > Electronic Cash Ledger

Electronic Cash Ledger is an account of the taxpayer maintained by GST system reflecting the cash deposits in recognized Banks and payments of taxes and other dues made by the taxpayer. The Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are also accounted for in the Electronic Cash Ledger as cash deposits of the taxpayer.

A registered taxpayer can make cash deposits in the recognized Banks through the prescribed modes to the Electronic Cash Ledger using any of the Online or Offline modes permitted by the GST Portal. The Cash deposits can be used for making payment(s) like tax liability, interest, penalties, fee, and others.

The Electronic Cash Ledger has four Major Heads IGST, CGST, SGST/UTGST, and CESS. Each of these Major Heads has the five following Minor Heads:

  1. Tax
  2. Interest
  3. Penalty
  4. Fee
  5. Others

When a taxpayer creates a Challan, the taxpayer chooses the amounts to be added to each Minor Head within Each Major Head. Once the payment against the Challan is made successfully and the CIN communicated to the GST system, the Electronic Cash Ledger gets updated with the funds under the Major and Minor Heads respectively as per the Challan. Cross utilization of funds across major or minor heads is NOT possible once payment is made.

Let us understand this better with an example. A taxpayer made a cash deposit of INR 1000 to IGST – Tax through net banking. After successful payment, the Bank reference number communicated by the bank along with the CIN to the GST system will be reflected in the Electronic Cash Ledger as the reference number. The taxpayer can utilise this cash deposit of INR 1000 in the cash ledger to make payment ONLY of the IGST – Tax liability by debiting the Cash Ledger.

Source: GST.gov.in