Section 61 of the CGST Act, 2017, empowers the proper officer to scrutinize a return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, and seek his explanation thereto. The section goes on to mention that in case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard. However in case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 (Audit by tax authorities) or section 66 (Special audit) or section 67 (Inspection, Search & Seizure), or proceed to determine the tax and other dues under section 73 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts) or section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts).
As per Rule 99 of the CGST Rules, 2019, In case of any discrepancy, the proper officer shall issue a notice in FORM GST ASMT-10, informing the registered person of such discrepancy and seeking his explanation thereto within such time, not exceeding thirty days from the date of service of the notice or such further period as may be permitted by him and also, where possible, quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy. The registered person may accept the discrepancy mentioned in the notice issued and pay the tax, interest and any other amount arising from such discrepancy and inform the same or furnish an explanation for the discrepancy in FORM GST ASMT-11. In case the explanation furnished by the registered person is found to be acceptable, the proper officer shall inform him accordingly in FORM GST ASMT-12. However in case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action, as mentioned above.
The Government, in an effort to streamline the entire process of Scrutiny of Returns, recently issued Standard Operating Procedure (SOP) for Scrutiny of Returns for FY 2017-18 and 2018-19 vide Instruction No. 02/2022-GST dt. 22nd March, 2022. The SOP will ensure uniformity in selection/ identification of returns for scrutiny, methodology of scrutiny of such returns and other related procedures. Selection of returns for scrutiny will be done based on robust risk parameters decided by the Government. These include the following 13 parameters identified by the Government for this purpose (the said list is only indicative, and not exhaustive as the proper officer may also consider any other parameter, as he may deem fit, for the purpose of scrutiny):
1. Mismatch in tax liability on account of "Outward taxable supplies (other than zero-rated, nil rated and exempted)" and "Outward taxable supplies (zero-rated)" as declared in table 3.1(a) and table 3.1(b) respectively of FORM GSTR-3B with corresponding tax liability in respect of outward taxable supplies declared in FORM GSTR-1;
2. Mismatch in tax liability on account of "Inward supplies (liable to reverse charge)" as declared in Table 3.1(d) of FORM GSTR-3B with (i) ITC availed in Table 4(A)(2) and Table 4(A)(3) of FORM GSTR-3B, (ii) ITC in respect of inward supplies attracting reverse charge as available in FORM GSTR-2A and Tax/Cess paid in cash as per column 8 of Table 6.1 of FORM GSTR-3B;
3. Mismatch in ITC availed in respect of "Inward supplies from ISD" in Table 4(A)(4) of FORM GSTR-3B with FORM GSTR-2A;
4. Mismatch in ITC availed in respect of "All other ITC" in Table 4(A)(5) of FORM GSTR-3B with FORM GSTR-2A;
5. Mismatch in 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 with net amount liable for TCS and TDS credit as per GSTR-2A;
6. Mismatch in liability on account of outward supplies in Table 3.1(a) and 3.1(b) of FORM GSTR-3B with the tax liability as declared in e-way bills;
7. Cases of claim of ITC in respect of supplies from taxpayers whose registrations have been cancelled retrospectively;
8. 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;
9. Cases, where ITC has been availed in case of returns in GSTR 3B, filed for a tax period after the last date of availment of ITC i.e. September of the next year, in respect of any invoice/ debit note as per section 16(4);
10. Mismatch in ITC availed in respect of "Import of goods" in Table 4(A)(1) of FORM GSTR-3B with corresponding details in FORM GSTR-2A;
11. Cases in which a taxpayer is required to do reversals of ITC in accordance with provisions of rule 42 and rule 43 of the CGST Rules and whether the same has been done or not;
12. Cases, where a registered person is required to pay interest liability in terms of section 50 and the same, has not been paid; and
13. Cases, where a registered person is required to pay late fee in terms of section 47 and the same, has not been paid.
This SOP is envisaged to enable the department to leverage technology and risk-based tools to encourage self-compliance and to conduct scrutiny of returns with minimal interaction with the registered persons. The Government is also in the process of developing on-line tools for the officers wherein many of the abovementioned scrutiny will be done on-line and taxpayers will be intimated for any discrepancy.
The Department has already initiated scrutiny of returns for the FYs 2017-18 and 2018-19 and many taxpayers have received notices for the mismatch. It is suggested that taxpayers may themselves undertake such scrutiny at their end so that in case of any discrepancy, reconciliations can be prepared before scrutiny is officially launched by the Department.
Views expressed by the author in the article are personal. Readers are suggested to take professional assistance in case of any opinion related to the subject.
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