Valuation of Tax liabilities Under GST Regime

[Priya Sharma]

Valuation of tax is also known as calculation of tax liability of an individual. When we discuss about the tax liability of an individual, it is basically the sum total of amount of tax that an individual is liable to pay during the period of taxation. The types of valuation of tax in the GST regime as per the GST rules and regulations in India is quite similar when we compare it to the ones in the current regime. Typically, there are two types of valuations- valuation done by an individual on his own, also known as self-valuation, and valuation made by the respective tax authorities.

Valuation of tax by the tax authorities can be comprised under 3 categories:

1. Provisional valuation
2. Best judgement valuation
3. Scrutiny valuation

• Self-valuation of taxes

Every individual that is registered to pay the necessary taxes on his own must calculate the tax payable by him/her and must return the relevant files for each period during which the tax is levied. Depending on the category of taxable individual, the respective returns that need to be filed have been specified.

Eg: A dealer that is that has opted to register for GST online must be able to produce Form GSTR-3 every month and Form GSTR-9 on an annual basis. This is the point of time when the dealer is going through the process of self-valuation.

• Valuation by respective tax authorities

1. Provisional valuation

If an individual that is taxable as per the required GST rules and regulations in India is unable to assess the value of goods and services or find or find out the tax rate that is applicable for his offering, that individual can put forth a request to the officer to permit the disbursal of tax at provisional timelines. Once the officer passes an order giving the necessary permission to the individual, he/she can make the tax payment on provisional basis. The individual has to sign a bond and pay a certain security, also known as surety, as the respective officer deems fit. By signing the bond, the individual becomes obligated to pay the difference between the amount provisionally valuated and the final valuation.

The officer must pass the order for final valuation within 6 months from the date of provisional valuation order.
The individual will be accountable to pay some interest on any additional amount of tax that is payable under the provisional valuation but not paid on the specified date it becomes due on. Interest will be calculated from the very next day until the time, the dealer shows up with the remainder payment.

2. Best judgement valuation

As per the best judgement valuation, an officer is required to determine the tax liability of an individual who as opted to register for GST online to the best of his/her ability. Some of the circumstances under this are:

1. Valuation of returns of non-filers

If an individual is unable to produce a return, despite the fact that notice is served to that individual, an officer will certainly valuate the tax liability of that individual to the best of the abilities. The relevant material that is available and what the officer is able to garner are some of the things that will be taken into account. The officer will then have to issue an assessment order within 5 years from the due date of filing the tax return. The assessment will be withdrawn if the individual is able to file the return within the first 30 days from the order.

2. Valuation of unregistered individuals

If an individual that is liable to pay taxes fails to complete the registration formalities despite the fact that he/she is responsible to do the same, an officer will evaluate the tax liability of an individual to the best of this ability according to the relevant tax durations, and will issue an order for valuation within 5 years from the date on which he/she was due to file the return.

3. Scrutiny valuation

As per the scrutiny valuation, an officer can check and evaluate the return and other necessary information produced by an individual, to verify the accuracy of the return that is filed.

In case of any inconsistency in filing as per GST rules and regulations in India, the officer is liable to inform the individual and look for a plausible explanation. If the explanation given is found acceptable, officer will take no further action. In a scenario where the individual is unable to furnish any acceptable reason within the first 30 days of information, or if the person does not make the required corrections post acceptance of inconsistencies, the officer is liable to initiate necessary action.