In this time and era when receiving a notice from the GST department has become quite common for every tax payer, most of us are being subjected to scrutiny proceedings under GST.
From what it appears to be common practice, the tax officers in most instances are not following the proper procedures, often ignoring them entirely.
In our replies for case submissions, we should not focus solely on the facts and merits of the case, but also on the procedural aspects.
We will now explain in detail how the procedure of scrutiny of returns works in GST.
Before discussing the forms, we will examine both the relevant Sections and the forms parallelly:
1. Scrutiny of returns
Section 61 States:
“(1) 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 such manner as may be prescribed and seek his explanation thereto.
(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.
(3) In case no satisfactory explanation is furnished 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 take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section74.”
Rule 99 for the section states:
(1) Where any return furnished by a registered person is selected for scrutiny, the proper officer shall scrutinize the same in accordance with the provisions of section 61 with reference to the information available with him, and in case of any discrepancy, he shall issue a notice to the said person in FORM GST ASMT-10, informing him of such discrepancy and seeking his explanation thereto within such time, not exceeding thirty days from the date of service of the notice or such further period as may be permitted by him and also, where possible, quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy.
(2) The registered person may accept the discrepancy mentioned in the notice issued under sub-rule (1), and pay the tax, interest and any other amount arising from such discrepancy and inform the same or furnish an explanation for the discrepancy in FORM GST ASMT-11 to the proper officer.
Moreover, in instruction No. 02/2022-GST dated 22.03.2022 issued by CBIC the procedure that needs to be followed before invoking section 73 or section 74 has been stated. The same has been reproduced below:
“6.8 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.”
By combining the readings of the above section and rule, it can be understood that the procedure involving ASMT-10, ASMT-11, and ASMT-12 is mandatory for issuing the final order/ notices under DRC-01A/01/02/07. Failure to follow this procedure will invalidate the entire proceeding (Ref: Vadivel Pyrotech Private Limited vs. Assistant Commissioner (ST), Madras High Court, W.P. (MD) No. 22642 of 2022 and W.M.P. (MD) Nos. 16803 and 16804 of 2022, dated 27/09/2022).
Note: ASMT-12 is closure of the proceeding if the officer is satisfied by the reply
2. When officer is not satisfied and wants to go ahead with section 73 remedy
Procedure of section 73 states that as mentioned in rule 142.
a. As per the GST Rules, previously, when serving a notice or statement, the proper officer had to issue a summary in Form GST DRC-01 or Form GST DRC-02, as the case may be specifying the details of tax payable. However, now, with this new sub-rule inserted (Notification No. 49/2019), the tax, interest and penalty payable will need to be communicated to the taxpayer first (in Form GST DRC-01A), before the notice or statement gets served. Hence, it is an intimation rather than a show-cause notice.
b. Notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01,
c. Statement under sub-section (3) of section 73 or sub-section (3) of section 74, a summary thereof electronically in FORM GST DRC-02, specifying therein the details of the amount payable.
So here is the process:
DRC-01A is issued first, followed by DRC-01 and DRC-02, After these, we respond using DRC-06, If the officer is not satisfied with our response, they will issue a summary of the order under DRC-07. (Note: Any of the forms skipped will invalidate the proceedings and all should be done electronically).
3. Post this, if the taxpayer is not satisfied then they may file Appeal in APL-01.
Quote of the day:
"We cannot solve the problems with the kind of thinking we employed when we came up with them"
"Albert Einstein"
Regards
CA Umang Jain
+ 91 96323-32850
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