Concept of Scrutiny of GST Returns

Every GST Registered Taxpayer is required to file GST Returns on time and accurately. Otherwise, concealing transactions, providing false information, or making small mistakes may result in GST Returns being scrutinised. Scrutiny Notice will also have a significant influence on your business. As a result, if you get a Scrutiny of GST Returns Notice, you must also submit your response correctly and on time. Failure to respond to the notice’s examination leads in action under sections 73 (non-fraudulent) and 74. (Fraudulent). This post will teach you more about GST Return Scrutiny.

The Purpose of GST Return Scrutiny

A GST Return scrutiny evaluation’s primary purpose is to confirm that the information submitted in the return is correct, including the amount of tax paid vs. the amount of tax owing and the amount of eligible Input Tax Credit (ITC) versus the amount of ITC actually claimed. There are predetermined risk levels that a tax officer might use to assess whether a scrutiny notice is justified.

If the tax officer believes there is a strong likelihood of default or fraud, the assessment might be continued. It is also up to the tax officer to make this determination. Because orders are neither legal nor judicial proceedings, they cannot be passed as the next stage in the scrutiny evaluation process.

GST provisions in relation to Scrutiny

Provisions for control of returns are included in Section 61 of the CGST Act, 2017 and Rule 99 of the CGST Rules. Section 61(1) of the Act, states that “the competent officer may inspect the return and related particulars provided by the registered person to check the correctness of the return and any discrepancies therein, in such manner as may be specified, and require an explanation thereof.”

Appropriate officer for Scrutiny

According to Circular No. 3/3/2017 – GST, the “Superintendent of Central Tax” has the authority to audit GST returns. The statements and related data provided by the registrant must be checked by the relevant authorities to ensure their accuracy.

The verification will rely on the information available with the concerned officer in the system and details made available through various sources like DGRAM, ADVAIT, GSTIN, and E-WAY Bill site.

The flow of Selection of Returns for Scrutiny

The basic flow of Revenue Collection and its review process are explained below:

• Based on the specific risk parameters, DG Risk Analysis and Management will select the GSTIN whose returns are to be reviewed.
• The selected GSTIN for verification of returns will be communicated to the field formation.
• After receiving the list of selected GSTINs, the concerned officer will finalize the inspection plan.
• A proper officer will check the returns 

Process of Performing Scrutiny under GST

The registered person is notified of the Discrepancy

• When a return is selected for inspection, the appropriate officer examines it under section 61, having regard to the information available to him. In the event of a discrepancy, he should send a notice in FORM GST ASMT-10 to the person within this period, drawing his attention to the discrepancy and asking for an explanation. Such period shall not exceed 30 days from the date of service of the notice, or any extended period granted by it, and the calculation of the amount of tax, interest, and any other amount due in respect of such difference, if applicable.
• Under Rule 99 of the CGST Rules, the concerned officer can bring to the notice of the registered person any discrepancy found during the scrutiny of GST Form ASMT-10 and seek an explanation from him. The concerned officer has to scrutinise all returns for the relevant fiscal year under consideration and a single written notice on Form GST ASMT-10 may be served to the taxpayer for that fiscal year.

An Explanation from the Taxpayer: The taxpayer can accept the discrepancies mentioned in the notice issued on Form GST ASMT-10 and pay the tax through Form GST DRC-03. Or he may file an explanation on Form GST ASMT-11 within 30 days of being informed or within such time as may be allowed by the concerned officer.

• Follow-up Inspection by the Proper Authority: If the concerned officer finds the explanation satisfactory, he will close the matter and no further proceedings will be taken. The registered person will be informed through FORM GST ASMT-12.
  If no sufficient explanation is given within 30 days of notification by the competent authority or for such an extended period as it may allow Or if the registered person fails to provide a satisfactory explanation or take corrective action after noticing the irregularity, appropriate action may be taken against him by the competent authorities, including those contemplated under the following sections of the CGST Act.

• Section 65: Initiation of Audit by Financial Authorities

• Section 66: Commencement of a Special Audit by CA or CWA appointed by the Commissioner

• Section 67: Carry out Inspection, Search, and Seizure Procedures.

List of situation for which explanation can be asked by the proper officer while scrutiny of Returns

The following are the list of situation for which explanation can be asked by the proper officer while scrutiny of Returns

• Tax liability difference due to taxable external supplies reported in GSTR-1 and GSTR-3B, respectively. 
• Inconsistency between the Input Tax Credit (ITC) available in GSTR 2A and the ITC claimed in GSTR 3B. This will include ITC claimed on a carryover basis and ISD. 
• The reasons for the difference in tax liability due to outgoing deliveries declared in form 3B coincide with the tax liability declared in electronic freight bills. 
• ITC claims against suppliers whose registration has been cancelled may be thoroughly investigated as ITC in such a case will not be available after the effective date of such cancellation. Such an effective date of cancellation is available in GSTR 2A. 
• ITC will not be available for invoices/debit notes for which the supplier has not filed GSTR-3B. GSTR 3B’s filing status is reflected in GSTR 2A. 
• ITC declared in GSTR 3B for a specific period cannot be claimed if such GSTR 3B is filed by a registered person after the GSTR 3B due date, i.e., September following the end of the fiscal year to which such ITC relates or the provision of Annual Return, whichever comes first.
• ITC on import bills can be cross-checked against GSTR-2A. Details of these imports can also be verified from the ICEGATE portal.
• If the ITC has not been cancelled as per the provisions of Rule 42 and 43, 
• If the interest as per the provisions of Section 50 has not been paid for late payment of tax
• A late fee has or has not been paid under Section 47 for late filing of a GST return.

What happens in case any discrepancy is found on scrutiny of GST Return?

The competent officer shall bring the same to the attention of the registered person by issuing a notice in Form GST ASMT 10 seeking an explanation from the person within 30 days from the date of service of the notice or such time as he may allow and, if possible, a calculation of the amount of tax, interest and any other amount payable in connection with such non-compliance.

The registered person can accept the discrepancy and pay the amount of tax and any other amount arising out of it and report it or provide an explanation for the discrepancy found in GST Form ASMT-11 is acceptable, then the person concerned will be informed, but in the event that there is no satisfactory explanation, the relevant officer may initiate appropriate action.

What happens if you fail to respond to a Scrutiny Notice?

If a taxpayer fails to respond to the inspection of GST Returns, Sections 73 (non-fraudulent) and 74 (non-compliance) apply. The DRC-1 form can be used to issue a show-cause notice mandating the payment of taxes, interest, and penalties. The penalty amount is established based on the grounds for the difference. The officer may also undertake audits under Sections 65, 66, and 67.

Conclusion

GST Return Filing is required for all businesses with GST Registration. Even if there are no transactions, GST reports must be filed. Non-compliance with GST Return Filing might result in costly penalties or possibly harsh punishments. As a taxpayer, you have an obligation to the country to pay your taxes on time. If there is any discrepancy in the taxes you have filed, the tax official may issue you a notice.