SCRUTINY ASSESSMENT BY PROPER OFFICER - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

7. SCRUTINY ASSESSMENT BY PROPER OFFICER 7.1 Scrutiny assessment is a cross check and verification done by the proper officer to verify the correctness of the returns filed by taxpayers. This is applicable for only registered persons and not to unregistered persons. 7.2 Section 61 (1) of the CGST Act, 2017 provides that the proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in the prescribed manner and seek explanation on the same. 7.3 Section 61(2) of the CGST Act, 2017 provides that in case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard. However, if no satisfactory explanation is furnished within the stipulated time of thirty days or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the tax authorities may initiate the following actions- Conduct a tax audit under Section 65 of the CGST Act, 2017; or Start a special audit under Section 66 of the CGST Act, 2017; or Inspect and search the places of the taxpayer s business under Section 67 of the CGST Act, 2017; or Initiate demand and recovery provisions; or Send notices under Section 73 of the CGST Act, 2017 for outstanding demand or shortfall of tax, when there is no wilful intention of doing fraud or suppression of facts or wilful misstatement of facts; or Send notices under Section 74 of the CGST Act, 2017 for outstanding demand or shortfall of tax when there is wilful intention of fraud or suppression of facts or wilful misstatement of facts. 7.4 Procedure for Scrutiny Assessment : (i) A Scrutiny Module for online scrutiny of returns is available for scrutiny of returns filed in F.Y. 2019-20 onwards. (ii) The Superintendent of Central Tax is assigned as a proper officer for performing functions, as stated under section 61 of the CGST Act, 2017. (iii) Central Board of Indirect Taxes and Customs (CBIC) has issued two SOPs (Standard Operating Procedures), Instruction No. 02/2022-GST dated 22.03.2022 and Instruction No. 02/2023-GST dated 26.05.2023, to ensure uniformity in selecting returns for scrutiny in 2022 for F.Y. 2017-18 and F.Y. 2018-19 as well as in 2023 for F.Y. 2019-20 onwards. The details of the said SOP have been discussed at length in the later part of this CHAPTER. (iv) As per Rule 99 of the CGST Rules, 2017, when a return is selected for scrutiny, the proper officer shall scrutinise the same as per Section 61 of the CGST Act, 2017 based on information available to him. The discrepancies shall be intimated to the taxpayer via Form GST ASMT-10 and seek his explanation within 30 days from the date of service of notice (v) If the discrepancies pointed out in FORM GST ASMT-10 is not acceptable to the taxpayer then he has to submit his explanation electronically through common portal vide FORM GST ASMT-11 [Rule 99(2)]. (vi) If the reply of the taxpayer is found to be satisfactory and acceptable, then the proper officer may inform the taxpayer electronically in FORM GST ASMT-12 [Rule 99(3)]. (vii) If no explanation is provided by the taxpayer or if he fails to pay tax within 30 days of intimation, the proper officer may proceed to determine the tax and other dues as per Section 73 or Section 74 of CGST Act, 2017. The officer may refer the matter to the Jurisdictional Principal Commissioner or Commissioner, if he believes that an audit or investigation is required to determine the correct amount of liability. The Principal Commissioner or Commissioner can decide the appropriate action, like audit by the tax officers under Section 65, special audit by a Chartered Accountant or a Cost Accountant nominated by Commissioner under Section 66 or inspection, search and seizure in terms of Section 67 of the CGST Act, 2017 to be referred to the Audit Commissionerate or Anti Evasion Wing. (viii) No order can be passed under scrutiny assessment as it is not a legal or judicial proceeding. (ix) Presently the Directorate General of Analytics and Risk Management (DGARM) selects the GSTIN whose returns are to be scrutinised and communicates the same to the field formations through the DDM portal. The DGARM will make the list of GSTINs available through the DG systems on the scrutiny dashboard of the officers on the ACES-GST application. (x) The list of parameters for selection of GST returns for scrutiny are as follows- (a) The tax liability in Tables 3.1(a) and (b) of GSTR-3B must match with tax liability in Tables 4, 5, 6. 7A(1), 7B(1), 11A and 11B of GSTR-1 [Net of amendments in Tables 9, 10, and 11(II)]. (b) Advances adjusted are accurately reflected by reporting the same in Table 11B and Tables 4, 5, 6 and 7 of GSTR-1. (c) Reporting and paying in cash the exact tax liability under the reverse charge mechanism using Tables 3.1(d) for tax liability and 4(A)(2) and 4(A)(3) for ITC claimed on it in GSTR-3B. The value in GSTR-3B should be more than the eligible ITC in Tables 3, 4, 5 and 6 of GSTR-2A. (d) ITC claimed in Table 4(A)(4) of GSTR-3B should match with amounts marked as eligible ITC in Table 7 of GSTR-2A (Net of amendments in Table 8). (e) Sales subjected to TCS or TDS under GST in GSTR-3B should match the TDS and TCS credit reflected under Column 6 of Table 9 of the GSTR-2A. (f) In Table 3.1(a) and (b) of the GSTR-3B the tax liability should match with the corresponding e-way bills. (g) ITC is ineligible for claims for the period after the effective date of cancellation of the supplier s GST registrations, especially in case of retrospective cancellation of GST registrations. (h) The GSTR-3B filing status of respective vendors must not be No while claiming ITC of such invoice or debit note in the GST returns, despite it appearing in the GSTR-2A. (i) No ITC should be claimed if the relevant period s GSTR-3B is filed after the last date allowed under Section 16(4) of the CGST Act, 2017, i.e. 30th November of the year following the financial year in which such invoice/debit note is raised or date of filing annual returns, whichever is earlier. (j) ITC on import of goods in Table 4(A)(1) of GSTR-3B should match with amounts in Tables 10 and 11 of GSTR-2A and data on ICEGATE. (k) Adherence to Rule 42 and 43 of CGST Rules, 2017 for accurate reversals of ITC in Table 4(B) of GSTR-3B. (l) Computation and payment of late fee/interest as per Sections 47 and 50 of the CGST Act, 2017, wherever return filing/tax payment is delayed. (xi) The CGST department has introduced the automated return scrutiny module for returns from F.Y. 2019-20 onwards. It ensures minimal manual intervention in the adjudication process, making it more transparent, efficient and bridges any gaps leading to tax evasion. (xii) A month-wise schedule shall be prepared by the proper officer for scrutiny regarding all GSTINs selected. The priority may be based on the revenue implication involved. GSTINs with a higher revenue implication shall be prioritised. (xiii) The proper officer scrutinises the return for its correctness based on the information available on the system in various forms and statements filed by the registered taxpayer and other sources, such as DGARM, ADVAIT, E-way Bill portal, etc. (xiv) The proper officer is expected to depend on the information available to the Department itself. He should have a minimal interface with the taxpayer and normally should not ask for documents from the taxpayer before the issuance of FORM GST ASMT-10. (xv) The proper officer shall issue a notice to the taxpayer indicating all the discrepancies noticed and seek his explanation thereon in FORM GST ASMT-10 . He shall quantify the tax, interest, and other such sums payable regarding the discrepancies noticed. If the registered taxpayer has already made the additional tax payment through FORM GST DRC-03, then the same should be considered while communicating discrepancies to the taxpayer in FORM GST ASMT-10. (xvi) For each selected GSTIN, the proper officer must scrutinize all the returns of the corresponding financial year and issue a single notice via FORM GST ASMT-10 . (xvii) The scrutiny of returns shall be completed in a specified period to safeguard revenue. Below are some of the timelines: Sr. No. Process Time Line 1 Communicating the list of GSTINs selected for scrutiny by the DGARM to the nodal officer From time to time 2 Communicating the list of GSTINs selected for scrutiny by the nodal officer to the proper officer Within 3 working days from the date of receipt of the list of GSTINs from the DGARM (not applicable for online scrutiny from F.Y. 2019-20 onwards) 3 Finalisation of scrutiny schedule with the Assistant/ Deputy Commissioner Within 7 working days of receipt of the list of GSTINs from the nodal officer (from 19-20 scrutiny onwards, it is available online on ACES portal) 4 Sharing the scrutiny schedule with the DGGST Within 30 days of receipt of the list of GSTINs from DGARM 5 Issue of notice in Form GST ASMT-10 Within a month as specified in the scrutiny schedule 6 Issue of response in GST ASMT-11 Within 30 days of service of notice under GST ASMT-10 7 Issue of order in Form GST ASMT-12 Within 30 days of receipt of response in Form GST ASMT-11 8 Initiating action for determining tax under section 73 and section 74 If the reply is received: Within 30 days from receipt of reply in GST ASMT-11. If the reply is not received: Within 15 days of completion of 30 days of service of notice in GST ASMT-10 or further period as may be notified by the proper officer. 9 Reference to Commissioner for taking appropriate action under section 65, section 66 or section 67 If the reply is received: Within 30 days from receipt of reply in GST ASMT-11. If the reply is not received: Within 45 days of service of notice in GST ASMT-10. (xviii) A Scrutiny Register shall be maintained by the proper officer for all the GSTINs allotted for scrutiny in the format prescribed in Instruction No. 2/2022-GST dated 22.03.2022, issued by GST Policy Wing of CBIC. For scrutiny from the FY 2019-20 onwards, MIS report of scrutiny register along with the Monthly Scrutiny Progress Report is available on the dashboard of the officer over the ACES portal. (xix) The progress of the scrutiny shall be monitored by the jurisdictional Principal Commissioner every month. The proper officer shall prepare a scrutiny progress report at the end of every month in the prescribed format in Instruction No. 2/2022-GST dated 22.03.2022, issued in GST Policy Wing of CBIC. This report shall be forwarded to the Director General of Goods and Service Tax by the Principal Chief Commissioner of the concerned zone by the 10th of the succeeding month. The DGGST shall submit this report to the Board by the 20th of the corresponding month. (xx) Instruction No. 2/2022-GST dated 22.03.2022 issued by GST Policy Wing of CBIC on 22.03.2022 shall be followed for the scrutiny of returns for the Financial years 2017-18 and 2018-19 whereas the Instruction No. 02/2023-GST issued on 26.05.2023 will be followed along with the previous instruction for F.Y. 2019-20 onwards.