Scrutiny under GST

Section 61 of the CGST Act, 2017 empowers the proper officer to scrutinise the return filed and related particulars furnished by the registered person in order to verify the correctness of the return and inform the registered person about the discrepancies noticed and seek explanation on the same.

The Government has recently issued Standard Operating Procedure for scrutiny of returns for F.Y. 2017-18 and 2018-19 vide Instruction no. 02/2022-GST dt. 22^nd March 2022. The Government has identified 13 parameters to ensure uniformity in selection/identification of returns for scrutiny, methodology of scrutiny of such returns and other related procedures. However, the list of parameters is only indicative and not exhaustive. Below is the list of parameters:

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
13. Cases where a registered person is required to pay late fee in terms of section 47 and the same has not been paid

Notice for Scrutiny

Notice for scrutiny under GST is issued in form ASMT-10. The notice shall contain discrepancies identified in the return filed along with the tax, interest and penalty if any payable by the registered person.

The notice shall be issued by way of letter, SMS or through Email.

There is no specific time within which the notice shall be issued. However, a taxpayer is required to respond to the notice within 30 days from the date of issue of notice. The taxpayer also has an option for requesting extension of time limit. The officer upon being satisfied with the reasons for seeking such extension shall extend the time by not more than 15 days.

Response to the Notice

The taxpayer is required to respond to the notice in form ASMT-11.Before responding to the notice, the taxpayer is required to verify the correctness of the particulars in the notice. This would result in 2 scenarios:

1. The taxpayer agrees or admits the tax due as per the notice and has already paid the differential tax liability- The taxpayer shall declare the payment particulars while responding to the notice in Form ASMT-11
2. The taxpayer agrees or admits the tax due as the notice but is yet to pay the differential tax liability, the taxpayer shall pay the tax in the following ways and thereafter reply to the notice in Form ASMT-11:

• Pay tax in Form DRC-03
• Furnish supply invoice or debit note or amended invoice or amended debit note in GSTR-1
• Pays tax or reverse ITC while filing GSTR-3B

Procedure after Response to the Notice

On receipt of reply to the notice, the officer shall verify the correctness and if satisfied with the response, he shall inform the taxpayer in form ASMT-12 and the proceedings be dropped without any further action.

However, if the officer is not the satisfied with the response provided by the taxpayer or the taxpayer neither pays tax nor provides any explanation or the taxpayer does not rectify or provides reply within 30 days, following further action can be taken by the officer –

1. Conduct a tax audit under section 65
2. Conduct a special audit under section 66
3. Survey/inspection under section 67
4. Initiate demand and recovery provisions
5. Send notice of outstanding demand/shortfall in case there is wilful/no wilful intention of doing fraud under section 73/74 accordingly.