CGST department likely to commence Scrutiny of GST returns for 2017-18 and 2018-19

The CGST department was gearing up all these years and providing training to its officials to undertake GST scrutinies in a professional way and now it has come up with Standard Operating Procedure. The robust growth in GST revenues and the regular detection of ITC frauds are testimony to the fact that GST department has acquired technical skills in the last few years and is much equipped to undertake scrutinies.

The CBIC has issued Instruction No. 02/2022-GST vide file no. CBIC-20006/4/2022-GST dated 22nd March, 2022 with regard to Standard Operating Procedure (SOP) for Scrutiny of returns for FY 2017-18 and 2018-19. It refers to the Section 61 of CGST Act read with Rule 99 of CGST rules which provides for scrutiny of GST returns and related particulars.

The document gives an indication that the online scrutiny module is underway and as an interim measure, specific Standard Operating Procedure (SOP) has been issued by the Board in order to ensure uniformity in selection/ identification of returns for scrutiny, methodology of scrutiny of such returns and other related procedures. The assesses must evaluate the methodologies of scrutiny and od some exercise at their own before the department comes knocking their doors and follow the methodology.

There will be five step scrutiny process

(a) Selection of returns furnished by a registered person for scrutiny, preferably based on robust risk parameters.

(b) Scrutiny of the returns and related particulars furnished by the registered person to verify the correctness of the return. The information available with the proper officer in various returns and statements furnished by the registered person and the data/details made available through various sources like Director General of Analytics and Risk management -DGARM, Advanced Analytics in Indirect Taxation-ADVAIT, GSTN, E-Way Bill Portal, etc. may be relied upon for this purpose.

(c) Informing the registered person of the discrepancies noticed, if any, along with quantification of the amount of tax, interest and any other amount payable in relation to such discrepancy and seeking his explanation thereto.

(d) Where the registered person accepts the discrepancy and pays the tax, interest and any other amount arising from such discrepancy or where the explanation furnished by the registered person is found acceptable, conclude the proceedings after informing the registered person.

(e) Where no satisfactory explanation is furnished by the registered person or where the registered person, after accepting the discrepancy, fails to pay the tax, interest and any other amount arising from such discrepancy, initiate appropriate action including those under section 65 or section 66 or section 67, or determination of tax and other dues under section 73 or section 74 of the CGST Act.

GST was implemented from Ist July 2017 and the GST annual returns and GST Audit Reports were filed for the years 2017-18 & 2018-19. There were no much queries from the department about the filings. All of us struggled a lot to file the returns timely, there were endless issues which everybody faced while filing the returns and submitting the data on GST portal. But as there was no questioning from the department primarily, all were relaxed that whatever was filed has been accepted and now there is no questioning. But now it is the time to pull up our socks and be ready to brave the multiple queries which the departmental officials are likely to raise as the scrutinies by CGST are likely to begin

The organisations face various issues like

1.  The persons who were involved in filing of the returns during 2017-18 and 2018-19 have already left and sometimes it is difficult to trace the backup of the figures filed with the department.
2. The amounts were filled in the GST returns without proper back ups by the concerned junior staff to avoid wrath of senior management.
3. The figures of sale, purchases, returns & taxes with GST department were filed at that time in hurry and the same could not be aligned with financials later due to certain reasons and wherever required for reconciliations, the headings like “Adjustment in Turnover due to reasons not listed above” were used. We should be ready with replies with proper backup on items like these.
4. Inadmissible ITC were availed and utilized but later reversed once identified, however interest was not paid.
5. The ITC was not reversed where it should have been like cases of delayed payments

and much more.

As per the SOPs, the proper officer shall conduct scrutiny of returns pertaining to minimum of 3 GSTINs per month. Scrutiny of returns of one GSTIN shall mean scrutiny of all returns pertaining to a financial year for which the said GSTIN has been identified for scrutiny.

The proper officer will review the various returns and statements furnished by the registered person and the data/details made available through various sources like DGARM, ADVAIT, GSTN, E-Way Bill Portal, etc.. Practically it means that whatever data has been submitted through E-way bills etc. must be matched with the data being filed through returns like GSTR1 etc..

Minimal Interface approach: One very important point in standard operating procedures is that the proper officer is expected to rely upon the information available with him or with the department. There should be minimal interface between the proper officer and the registered person scrutiny of returns and, there should normally not be any need for seeking documents/ records from the taxpayers before issuance of FORM GST ASMT-10.

The officer has to issue notice in form GST ASMT-10 mentioning about the discrepancies noticed and seek clarifications. While issuing such notice, the Proper Officer may, as far as possible, quantify the amount of tax, interest and any other amount payable in relation to such discrepancies. It may also be ensured that the discrepancies so communicated may, as far as possible, be specific in nature and not vague or general. There may be cases where the registered person may already have made additional payment of tax, cess, etc., after filing of the returns for the relevant tax period, through FORM GST DRC-03. The payments thus made through FORM GST DRC-03 may also be taken into consideration while communicating discrepancies to the taxpayer in FORM GST ASMT-10.

So the assesses must identify the discrepancies in returns beforehand and make a list of those and keep the replies ready along with DRC-03 forms if any.

To safeguard themselves, assesses can go for interim scrutiny for 2017-18 and 2018-19 at their own end as presently the practices of GST audits and review have matured much more than those existed during the audit periods for 2017-18 & 2018-19.

The reply from the assessee has to be filed in from GST ASMT-11. After that either the proceedings can be closed with issue of GST Form ASMT-12 by Proper Officer or matter can be referred to the higher authorities.

Some of the parameters given for scrutiny are given in brief here for reference purposes

1. Mapping of Taxable supplies in GSTR 3B with GSTR 1
2. Mapping of Tax payment on advances as shown in Table 11B of Form GSTR1
3. Matching of Tax payment and ITC availmenton Inward supplies (liable for reverse Charge)
4. Where the RCM supplies declared in table 3.1(d) of FORM GSTR-3B are less than the inward supplies attracting reverse charge as per details available in FORM GSTR-2A, it may indicate short payment of tax liability on account of RCM supplies.
5. In respect of inward supplies liable to reverse charge, tax/cess is to be paid in cash. Besides such RCM payments in cash, there may also be other payments in cash by the registered person. In any case, tax liability off-set in cash should not be less than the liability arising on account of reverse charge as per table 3.1(d) of FORM GSTR-3B
6. ITC availed in respect of “Inward supplies from ISD” in Table 4(A)(4) of FORM GSTR-3B may be verified with Table 7 (along with the net effect of amendments thereof in Table 8) of FORM GSTR-2A
7. ITC availed in respect of “Inward supplies from ISD” in Table 4(A)(4) of FORM GSTR-3B may be verified with Table 7 (along with the net effect of amendments thereof in Table 8) of FORM GSTR-2A.
8. The details of TDS and TCS under GST are furnished by the corresponding deductors and operators in their FORM GSTR-7 and FORM GSTR-8 respectively and communicated to the registered person in table 9 of FORM GSTR-2A. Besides such supplies, the registered person may have other supplies also. However, the taxable value declared on account of “Outward taxable supplies (other than zero-rated, nil rated and exempted)” in Table 3.1(a) of FORM GSTR-3B cannot be less than the net amount liable for TCS and TDS credit as per Column 6 of Table 9 of FORM GSTR-2A. A discrepancy on the aforementioned count may indicate short payment of tax.
9. E-way bills capture a part of supplies made by the registered person. However, in table 3.1 of FORM GSTR-3B, the registered person is required to declare details of all outward supplies. Accordingly, liability declared in table 3.1 (a) and (b) of FORM GSTR-3B should not be less than tax liability as declared in the e-way bills.
10. Claim of ITC in respect of supplies from taxpayers whose registrations have been cancelled retrospectively.

In case of retrospective cancellation of registration of a supplier, the recipient is not entitled to claim ITC in respect of invoices or debit notes issued after the effective date of cancellation of the registration. Effective date of cancellation of registrations of the suppliers, if any, is made available in relevant tables of FORM GSTR-2A. Accordingly, it may be verified whether the registered person has availed ITC in respect of such invoices or debit notes issued by the suppliers after the effective date of cancellation of their registrations.

11. Ineligible ITC availed in respect of invoices / debit notes issued by the suppliers who have not filed their GSTR-3B returns for the relevant tax period.FORM GSTR-2A of the registered person contains the details of “GSTR-3B filing status” of the supplier in respect of each invoice / debit note received by the registered person. Where the said status is “No”, it indicates the supplier has furnished invoice details in his FORM GSTR-1, but has not furnished the return in FORM GSTR-3B for the corresponding tax period. The availment of ITC in respect of such invoices / debit notes may be checked.

12. Sub-section (4) of section 16 of CGST Act provides for availment of ITC only till the due date of furnishing of FORM GSTR-3B for the month of September following the end of FY to which such ITC pertains or furnishing of relevant Annual Return, whichever is earlier. Accordingly, if any return in FORM GSTR-3B is furnished after such time by the registered person under scrutiny, any ITC availed therein is inadmissible. It may also be noted that vide proviso to sub-section (4) of section 16, for FY 2017-18, availment of ITC was allowed beyond the due date of furnishing of return for the month of September, 2018 till the due date of furnishing of the return in FORM GSTR-3B for the month of March, 2019 subject to the condition that the details of the said invoices/debit notes should have been furnished by the suppliers in their FORM GSTR-1 till the due date of furnishing of FORM GSTR-1 for the month of March, 2019.
13. ITC availed in respect of “Import of goods” in Table 4(A)(1) of FORM GSTR-3B may be verified with corresponding details in Table 10 and Table 11 of FORM GSTR-2A
14. As per section 50 of the CGST Act a registered person is required to pay interest on delayed payment of tax. It may be verified whether interest payable as per the provisions of section 50 of the CGST Act has actually been paid by the registered person. Earlier, Interest liability was required to be calculated and included in the return by assessee for payment and in case the same has not been done, the department may ask for the same during scrutiny.

It needs to be noted that GSTR 2A will also be referred by department officials for scrutiny and Inward supplies details in GSTR-2A, auto-drafted on the basis of GSTR-1/IFF/5/6/7/8, can be downloaded as either Json file to view in offline tool or can be downloaded as Excel file. The assesses can download the same and start the exercise at their own beforehand for the year 2017-18 and 2018-19.

The readers are requested to refer to the relevant provisions and the relevant Instructions issued by CBIC as mentioned above.

The author can also be reached at navneetic@yahoo.com.