Brief Note on Scrutiny of Returns by Proper Officer under GST

The scrutiny of GST returns under the Central Goods and Services Tax (CGST) Act, 2017, is an essential compliance mechanism aimed at verifying tax liabilities, ensuring accurate input tax credit (ITC) claims, and detecting discrepancies in tax filings. The procedure is primarily governed by Section 61 of the CGST Act, 2017, along with Rule 99 of the CGST Rules, 2017, providing the framework for the proper officer to review and analyze returns filed by registered taxpayers.

Provisions Governing Scrutiny

1. Section 61 of the CGST Act, 2017: 0 Empowers the proper officer to scrutinize returns to verify ITC claims and tax liabilities. 0 Discrepancies identified are communicated to the taxpayer, seeking their explanation. 0 If the explanation is satisfactory, no further action is taken.
2. Rule 99 of the CGST Rules, 2017: 0 Establishes procedures for scrutiny, including intimation of discrepancies via Form GST ASMT-10. 0 Requires taxpayers to respond with explanations through Form GST ASMT-11 within 30 days. 0 Satisfactory responses are acknowledged via Form GST ASMT-12. 0 Unsatisfactory responses or non-compliance lead to proceedings under Sections 73 or 74 of the CGST Act, 2017.

Process of Scrutiny

1. Initiation

Returns are selected for scrutiny based on risk parameters or observed discrepancies. The officer reviews the returns using available data, including:

• GSTR-1 (outward supplies).
• GSTR-3B (tax liability and ITC claims).
• GSTR-2A (inward supplies).
• E-way bills and ICEGATE data (in case of imports).

2. Notification to Taxpayer

Discrepancies are communicated to the taxpayer via Form GST ASMT-10, and they are required to either provide an explanation or rectify errors within 30 days.

3. Actions and Responses

• If the taxpayer’s explanation is acceptable, the officer closes the scrutiny process and issues Form GST ASMT-12.
• If unresolved or unexplained, the officer initiates proceedings under Sections 73 or 74 to determine tax dues.

4. Escalation

In cases of suspected fraud or major discrepancies, the matter may escalate to the Principal Commissioner or Commissioner for audit or investigation under:

• Section 65: Audit by tax officers.
• Section 66: Special audit by a Chartered or Cost Accountant.
• Section 67: Inspection, search, and seizure.

Parameters for Scrutiny

The officer evaluates multiple aspects, including:

1. Outward Tax Liability: 0 Comparing GSTR-3B with GSTR-1 and e-way bills. 0 Verifying all taxable supplies are accurately declared.
2. Input Tax Credit (ITC): 0 Matching ITC claims in GSTR-3B with GSTR-2A and import data. 0 Ensuring compliance with timelines under Section 16(4) of the CGST Act.
3. Reverse Charge Mechanism (RCM): 0 Verifying RCM tax liabilities and ITC claims.
4. TDS/TCS Credits: 0 Ensuring proper reconciliation of credits reflected in GSTR-3B and GSTR-2A.
5. Timely Filing and Payments: 0 Verifying adherence to deadlines for filing returns and payment of interest or late fees under Sections 47 and 50 of the CGST Act.

Critical Observations in Scrutiny

1. Cancellation of GST Registration: ITC claims are inadmissible if they relate to invoices issued after the supplier's registration cancellation.
2. Unfiled GSTR-3B: ITC claimed on invoices from suppliers who haven’t filed GSTR-3B is questionable.
3. Delay in Filing Returns: ITC availed after the deadline specified in Section 16(4) is not allowable.
4. E-way Bill Reconciliation: Tax liability declared in GSTR-3B should align with liability reflected in e-way bills.

Impact of Non-Compliance

1. Penalties: Additional tax liabilities, interest, and penalties under Sections 73 and 74.
2. Audits and Investigations: Escalation to audits or enforcement actions, such as search and seizure.

Benefits of Scrutiny

1. Improved Compliance: Ensures taxpayers maintain accurate records and declarations.
2. Revenue Safeguarding: Identifies and rectifies discrepancies to prevent revenue leakage.
3. Minimization of Fraud: Deters practices like fake invoicing and misuse of ITC.

Conclusion

The scrutiny of returns under GST plays a pivotal role in enhancing transparency and compliance. While it safeguards revenue and detects discrepancies, the onus is on taxpayers to ensure accurate filings, timely responses, and proper record maintenance. By adhering to the provisions and maintaining transparency, businesses can avoid penalties and contribute to the efficiency of India’s GST framework.

Disclaimer: This article is for informational purposes only. Readers are advised to consult relevant legal provisions and seek professional advice for specific concerns.