SCRUTINY OF GST RETURNS FOR FINANCIAL YEAR 2019-20 ONWARDS

[Dr. Sanjiv Agarwal]

Section 61 of CGST Act, 2017 contains the provisions of scrutiny of GST returns which empowers proper officer to scrutinize the return and related particulars furnished by the taxable person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in a manner as may be prescribed.

CBIC has been issuing instructions for conduct of scrutiny of GST returns under section 61 of CGST Act, 2017.

Scrutiny for Financial Years 2017-18 & 2018-19     

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.

Automated Return Scrutiny Module

During the recent review of the performance of the Central Board of Indirect Taxes & Customs (CBIC), Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman had given directions to roll out an Automated Return Scrutiny Module for GST returns at the earliest. In order to implement this non-intrusive means of compliance verification, CBIC has rolled out the Automated Return Scrutiny Module for GST returns in the ACES-GST backend application for Central Tax Officers this week.  This module will enable the officers to carry out scrutiny of GST returns of Centre Administered Taxpayers selected on the basis of data analytics and risks identified by the System.

In the Module, discrepancies on account of risks associated with a return are displayed to the tax officers. Tax officers are provided with a workflow for interacting with the taxpayers through the GSTN Common Portal for communication of discrepancies noticed under FORM ASMT-10, receipt of taxpayer’s reply in FORM ASMT-11 and subsequent action in form of either issuance of an order of acceptance of reply in FORM ASMT-12 or issuance of show cause notice or initiation of audit / investigation. Implementation of this Automated Return Scrutiny Module has commenced with the scrutiny of GST returns for FY 2019-20, and the requisite data for the purpose has already been made available on the officers’ dashboard.

DG, system has developed functionality ‘Scrutiny of Returns’, containing the online workflow for scrutiny of returns in the CBIC ACES-GST application. Advisory No. 22/2023- Returns dated 16.05.2023 has also been issued by DG Systems along with a User Manual providing for the detailed workflow of the said functionality.

Scrutiny for Financial Year 2019-20 and onwards

CBIC has issued instructions vide instruction No. 02/2023-GST dated 26.05.2023 in the form of Standard Operating Procedure (SOP) for scrutiny of returns for the FY 2019-20 onwards on the manner, procedure and methodology to conduct scrutiny of returns under section 61 of CGST Act, 2017 read with Rule 99 of the CGST Rules, 2017.

CBIC has modified the earlier instructions dated 22.03.2022 for the FY 2019-20 onwards. This SOP also provides for:

• Selection of returns for scrutiny and communication of the same to the field formations
• Scrutiny Schedule
• Process of scrutiny by the Proper Officer
• Timelines for scrutiny of returns
• Reporting and Monitoring

Since the scrutiny functionality has been provided on ACES-GST application only for the Financial Year 2019-20 onwards, the procedure specified in Instruction No. 02/2022 dated 22.03.2022 shall continue to be followed for the scrutiny of returns for the financial years 2017-18 and 2018-19.

The salient features of SOP on Scrutiny of Returns are as under:

Selection of Returns for Scrutiny

Under the new scrutiny regime, selection of returns for scrutiny will be done by the Directorate General of Analytics and Risk Management (DGARM) based on various risk parameters identified by them. The details of GSTINs selected for scrutiny for a financial year will be made available by DGARM through DG Systems on the scrutiny dashboard of the concerned proper officer of Central Tax on ACES-GST application.

Not only this, the details of the risk parameters, in respect of which risk has been identified for a particular GSTIN, and the amount of tax/ discrepancy involved in respect of the concerned risk parameters (i.e. likely revenue implication), will also be shown on the scrutiny dashboard of the proper officer.

Schedule of Scrutiny

The proper officer, with the approval of the divisional Assistant/ Deputy Commissioner, shall finalize a scrutiny schedule in the prescribed format. The format will be the same as per earlier instructions. This 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 higher revenue implication indicated on the dashboard, may be prioritized. Scrutiny of returns of one GSTIN shall mean scrutiny of all returns pertaining to a financial year for which the said GSTIN has been selected for scrutiny.

Scrutiny Process

The proper officer shall conduct the scrutiny of returns and related particulars / documents with the objective to verify the correctness of the returns. Information available with the proper officer on the system in the form of various returns and statements furnished by the registered person and the data/ details made available through various sources. The details of the risk parameters involving risk/ discrepancies in respect of the GSTIN, along with the amount of tax/ discrepancy involved in respect of the concerned risk parameters (i.e. likely revenue implication), will be made available in the scrutiny dashboard of the proper officer. The details of all the risk parameters taken into consideration for the selection of GSTINs for scrutiny of returns for the particular financial year will also shared.

The proper officer shall issue a notice to the registered person in FORM GST ASMT-10 through the scrutiny functionality on ACES-GST application, informing him of the discrepancies noticed and seeking his explanation thereto. The notice in FORM GST ASMT-10, issued by the proper officer through scrutiny functionality on ACES-GST application, shall be communicated by the system to the concerned registered person on the common portal and therefore, there will be no need for sending any manual communication of notice in FORM GST ASMT-10 by the proper officer to the registered person separately. The proper officer shall mention the parameter-wise details of the discrepancies noticed by him in FORM GST ASMT-10 and shall also upload the worksheets and supporting document(s), if any.

In response to notice, the registered person may accept the discrepancy mentioned in the said notice, and pay the tax, interest and any other amount arising from such discrepancy and inform the same or may furnish an explanation for the discrepancy in FORM GST ASMT-11, through the common portal, to the 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 74 of CGST Act, 2017.

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 take the approval of the jurisdictional Principal Commissioner / Commissioner through the divisional Assistant/ Deputy Commissioner, through e-file or other suitable mode, for referring the matter to the Audit Commissionerate or anti-evasion wing of the Commissionerate, as the case may be.

Time-frame for Scrutiny of Returns

The SOP on scrutiny provides for conduct of scrutiny in a time bound manner so as to complete the scrutiny an conclude the same expeditiously. The instructions stipulate the following guidelines:  

1. Communication of GSTINs selected for scrutiny by DGARM on ACES GST Application for a financial year - From time to time.
2. 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 on ACES-GST application
3. 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 for the said GSTIN.
4. 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
5. 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
6. 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
7. 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
8. Reference, if any, to the Audit Commissionerate or the anti-evasion wing of the Commissionerate for action, under section 65 or section 66 or section 67, as the case may be- 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.

It may be noted that a time bound scrutiny of returns should ensure compliance with time-lines specified in section 73 and 74 of CGST Act, 2017.

Reporting and Monitoring

The monitoring and reporting requirements have been modified to ensure objectivity and

purpose. The progress of the scrutiny exercise as per the scrutiny schedule shall be monitored by the jurisdictional Principal Commissioner/ Commissioner on regular basis.

The requirement of compiling and sending the Monthly Scrutiny Progress Report by the CGST zones to DGGST has been dispensed with for the Financial Year 2019-20 onwards. However, the CGST zones will continue to send Monthly Scrutiny Progress Reports to DGGST in respect of the Financial Years 2017-18 and FY 2018-19 till the completion of scrutiny of returns for these financial years, as per the timelines mentioned in Instruction No. 02/2022- GST dated 22nd March, 2022.

The online scrutiny functionality on ACES-GST application will further boost the efforts

of 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 person.