GUIDELINES FOR SCRUTINY OF GST RETURNS

[Dr. Sanjiv Agarwal]

CBIC has issued Instruction No. 02/2022-GST dated 22.03.2022 containing Standard Operation Procedure (SOP) for scrutiny of returns under section 61 of CGST Act, 2017 read with rule 99 of CGST Rules, 2017 for the financial year 2017-18 and financial year 2018-19. This will serve as guidelines for GST officials.

• This SOP contains the methodology for scrutiny and inter alia covers :
  • Statutory provisions (Section 61 / Rule 99)
  •  Selection of returns for scrutiny
  • Proper officer for scrutiny of returns
  • Scrutiny Schedule
  •  Process of scrutiny by the Proper Officer
  •  Timelines for scrutiny of returns
  •  Reporting and Monitoring
•   Annexures covering –

1. Scrutiny schedule
2. Indicative list of parameters for scrutiny
3. Scrutiny register to be maintained by proper officer
4. Monthly scrutiny progress report

• This SOP is aimed to ensure uniformity in selection / identification of returns for scrutiny, methodology of scrutiny of returns and related procedures.
• Schedule of Scrutiny
• Indicative list of parameters for scrutiny
• Maintenance of scrutiny registered by proper officer
• Proper officer to submit monthly scrutiny progress report of scrutinies undertaken by him.

Selection of cases and schedule

Selection of returns for scrutiny is shared based on specific risk parameters. For this purpose, the Directorate General of Analytics and Risk Management (DGARM) has been assigned the task to select the GSTINs registered with Central tax authorities, whose returns are to be scrutinized, and to communicate the same to the field formations from time to time through the DDM portal (to the nodal officer of the Commissionerate concerned) for further action.

For each GSTIN identified for scrutiny for a financial year, the proper officer is required to scrutinize all the returns pertaining to the corresponding Financial Year under consideration and a single compiled notice in FORM GST ASMT-10 may be issued to the taxpayer for that financial year.

The proper officer, with the approval of the Divisional Assistant / Deputy Commissioner, shall finalize a scrutiny schedule. Such scrutiny schedule will specify month-wise schedule for scrutiny in respect of all the GSTINs selected for scrutiny. While preparing the scrutiny schedule, the scrutiny of the GSTINs, which appear to be riskier based on the likely revenue implication indicated by DGARM, may be prioritized. Such scrutiny schedules in respect of all the ranges within the CGST Zone shall be reported to the Directorate General of Goods and Services Tax (DGGST) by the concerned Zone.

Conduct of Scrutiny

Scrutiny of returns of a taxpayer may be conducted by Superintendent of Central Tax in-charge of the jurisdictional range of the said taxpayer.

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 shall scrutinize the returns and related particulars furnished by the registered person to verify the correctness of the returns.

The proper officer is expected to rely upon the information available with him or with the Department. As far as possible, scrutiny of returns should have minimal interface between the proper officer and the registered person and, there should normally not be any need for seeking documents/ records from the taxpayers before issuance of FORM GST ASMT-10.

Issuance of Notice

The proper officer shall issue a notice to the registered person in FORM GST ASMT-10 informing him of the discrepancies noticed and seeking his explanation thereto. 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.

Action by Taxpayer

The registered person may accept the discrepancy mentioned in the notice issued in FORM GST ASMT-10, and pay the tax, interest and any other amount arising from such discrepancy through FORM GST DRC-03 and inform the same or may furnish an explanation for the discrepancy in FORM GST ASMT-11 to the proper officer within the time period prescribed under rule 99 of CGST Rules.

Where the explanation furnished by the registered person or the information submitted in respect of acceptance of discrepancy and payment of dues is found to be acceptable by the Proper Officer, he shall conclude the proceedings by informing the registered person in FORM GST ASMT-12.

Action by Proper Officer

In case no satisfactory explanation is furnished by the registered person in FORM GST ASMT-11 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 pay the tax, interest and any other amount arising from such discrepancies, the proper officer, may proceed to determine the tax and other dues under section 73 or section 74. Needless to mention, for proceeding under section 73 or section 74, monetary limits as specified in Circular No. 31/05/2018-GST dated 9th February 2018 shall be adhered to. However, if the proper officer is of the opinion that the matter needs to be pursued further through audit or investigation to determine the correct liability of the said registered person, then he may refer the matter to the jurisdictional Principal Commissioner / Commissioner through the divisional Assistant / Deputy Commissioner, for the decision whether the matter needs to be referred to Audit Commissionerate or Anti-evasion Wing of the Commissionerate, as the case may be.

Timelines for various activities covered under scrutiny

Standard Operating Procedure (SOP) stipulates various timelines to be observed so as to conduct the scrutiny in a time bound manner as prescribed in law. The following activities have been identified in the SOP itself.

S. No.	Process/Event	Timeline/ Frequency
(i)	Communication of list of GSTINs selected for scrutiny (by DGARM to the nodal officer of the Commissionerate concerned)	From time to time.
(ii)	Distribution of the list of GSTINs selected for scrutiny by the nodal officer to the proper officers concerned.	Within three working days of receipt of the list from DGARM.
(iii)	Finalization of scrutiny schedule with the approval of the concerned Assistant/Deputy Commissioner	Within seven working days of receipt of the details of the concerned GSTINs from the nodal officer.
(iv)	Sharing the scrutiny schedule by the zone with DGGST	Within thirty days of receipt of the details of the concerned GSTINs from DGARM.
(v)	Issuance of notice by the proper officer for intimating discrepancies in FORM GST ASMT-10, where required	Within the month, as mentioned in scrutiny schedule for scrutiny of the returns of the said GSTIN.
(vi)	Reply by the registered person in FORM GST ASMT-11	Within a period of thirty days of being informed by the proper officer in FORM GST ASMT-10 or such further period as may be permitted by the proper officer
(vii)	Issuance of order in FORM GST ASMT-12 for acceptance of reply furnished by the registered person, where applicable	Within thirty days from receipt of reply from the registered person in FORM GST ASMT-11
(viii)	Initiation of appropriate action for determination of the tax and other dues under section 73 or section 74, in cases where no reply is furnished by the registered person	Within a period of fifteen days after completion of the period of thirty days of issuance of notice in FORM GST ASMT-10 or such further period as permitted by the proper officer
(ix)	Initiation of appropriate action for determination of the tax and other dues under section 73 or section 74, in cases where reply is furnished by the registered person, but the same is not found acceptable by the proper officer	Within thirty days from receipt of reply from the registered person in FORM GST ASMT-11
(x)	Reference, if any, to the Commissioner for decision regarding appropriate action under section 65 or section 66 or section 67	Within thirty days from receipt of reply from the registered person in FORM GST ASMT-11 or within a period of forty-five days of issuance of FORM GST ASMT-10, in case no explanation is furnished by the registered person.

Risk parameters to be considered for Scrutiny

The SOP provides for an indicative list of parameters based on which the scrutiny shall be undertaken by the Proper Officer.

Accordingly, following parameters have to be considered:

1. 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 may be verified with corresponding tax liability in respect of outward taxable supplies declared in table 4 (other than table 4B), table 5, table 6, table 7A(1), table 7B(1), table 11A and table 11B (along with the net effect of amendments thereof in Table 9, 10 and 11(II)) of FORM GSTR-1.
2. Tax liability on account of ‘Inward supplies (liable to reverse charge)’ as declared in Table 3.1(d) of FORM GSTR-3B may be verified with the following:

1. ITC availed in Table 4(A)(2) and Table 4(A)(3) of FORM GSTR-3B.
2. ITC in respect of inward supplies attracting reverse charge as available in Table 3 and Table 5 (along with the net effect of amendments thereof in Table 4 and Table 6 respectively) of FORM GSTR-2A.
3. Tax/Cess paid in cash as per column 8 of Table 6.1 of FORM GSTR-3B.

3. 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.
4. ITC availed in respect of ‘All other ITC’ in Table 4(A)(5) of FORM GSTR-3B may be verified with Table 3 and Table 5 (along with the net effect of amendments thereof in Table 4 and Table 6 respectively) of FORM GSTR-2A.
5. It may be verified that 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 is not less than the net amount liable for TCS and TDS credit as per Column 6 of Table 9 of FORM GSTR-2A.
6. Liability on account of outward supplies in Table 3.1(a) and 3.1(b) of FORM GSTR-3B should be verified with the Tax liability as declared in e-way bills.
7. 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. Whether GSTR-3B of a tax period is filed after the last date of availment of ITC in respect of any invoice / debit note as per section 16(4). In such cases, no ITC shall be availed in the return.
10. 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.
11. Whether the registered person has made reversals of ITC in accordance with provisions of rule 42 and rule 43 of the CGST Rules.
12. Whether the registered person has paid interest liability in terms of section 50.
13. Whether the registered person has paid late fee in terms of section 47 in respect of returns/statements.