Unit 5 ASSESSMENT RETURNS AND REFUND OF GST

Meaning:

Goods and Services Tax or GST will consolidate all indirect taxes under one umbrella and help Indian
businesses become globally competitive. To facilitate easy calculation and payment of taxes, GST have
provisions for assessments such as self-assessment.

Types of Assessment under GST

 Self-assessment
 Provisional assessment
 Scrutiny assessment
 Best judgement assessment
 Assessment of non-filers of returns
 Assessment of unregistered persons
 Summary assessment
 Only self-assessment is done by the taxpayer himself. All the other assessment are by tax
authorities.
 Self-Assessment under GST
 Every registered taxable person shall himself assess the taxes payable and furnish a return for
each tax period. This means GST continues to promote self-assessment just like the Excise, VAT
and Service Tax under current tax regime.
 Provisional Assessment
 An assessee can request the officer for provisional assessment if he is unable to determine
value or rate.
 Unable to determine value due to difficulty in
 Calculating the transaction value
 Understanding whether certain receipts should be included or not
 Unable to determine rate of tax due to difficulty in
 Classifying the goods or services
 Identifying whether any notification is applicable or not
 Provisions of Provisional Assessment
 Requests for provisional assessments will be given in writing
 The proper officer can allow paying tax on provisional basis at a rate or on a value specified by
him
 Order will be passed within 90 days from date of request.
 The taxable person has to issue a bond with a security promising to pay the difference between
provisionally assessed tax and final assessed tax.
 Provisional assessments will be followed by final assessments. The proper officer canask for
information before final assessment.
 Time Limit for Final Assessments
 The final assessment will be done within 6 months of the provisional assessment. This can be
extended for 6 months by the joint of Additional Commissioner. However, the
Commissioner can extend it for further 4 years as he seems fit.
 Interest on Additional Tax Payable and Refunds
  The tax payer will have to pay interest on any tax payable under provisional assessment which
was not paid within the due date. Interest period will be calculated from the date when tax was
first due on the goods or services (and not the date of provisional assessment) till the actual
payment date, irrespective of payment being before or after final assessment. Rate of interest
will be maximum 18%
 If the tax as per final assessment is less than provisional assessment then the taxable person
will get a refund. He will also get interest on refund.
 Rate of interest will be maximum 6%

Scrutiny of Returns

The proper officer can scrutinize the return to verify its correctness. It is a non-cassessment under
gstompulsory pre-adjudication process. In simple words, it is not mandatory for the officer to scrutinize
return. Scrutiny of returns is not a legal or judicial proceeding, i.e., no order to be passed. The officer
will ask for explanations on discrepancies noticed

 When Explanation is Satisfactory

 If the officer finds the explanation satisfactory then the taxable person will be informed and no
further action will be taken

 When Explanation is not Satisfactory

 The proper officer will take action
 If the taxable person does not give a satisfactory explanation within 30 days or
 He does not rectify the discrepancies within a reasonable time (not yet prescribed)
 The officer may
 Conduct audit of the tax payer u/s 65
 Start Special Audit procedure u/s 66
 Inspect and search the places of business of the tax payer
 Start Demand and Recovery provisions

Similar provisions regarding scrutiny are existing in current excise, VAT and service tax laws.

Best Judgement Assessment under GST

In the best judgement assessment, an assessing officer assessing based on his reasoning and
using the information available. The assessment will be made without any having any bias. Under
GST, best judgement assessment becomes applicable in 2 situations

 When a taxable person has not filed a return

 When a person has not registered for GST even though he is liable to
Assessment of Non-Filers

 If the registered taxable person does not file his return (even with a notice) he will be sent a
notice u/s 60. If he does not file return, the proper officer will assess the tax liability to the best of
his judgement. He will assess on the basis of the available information.
 Notice of being heard may not be given (different from service tax law).
  The assessment order will be issued within 5 years from the due date of the annual return.

Filing of Valid Returns

 If the taxable person file a valid return within 30 days from the above assessment order, the the
best judgement assessment order will be withdrawn. Valid return includes return along with
payment of all due taxes.
 However, late fees, penalty, interest will still be payable in best judgment orders.

Assessment of Unregistered Persons

 This is concerning a taxable person who fails to obtain registration even though he is liable to do
so. The officer will assess the tax liability for relevant tax periods to the best of his judgement.
He can issue assessment order within 5 years from the due date of annual return for the year
when the tax was not paid.
 The taxable person will receive a show cause notice and an opportunity of being heard before
passing any order.
 If it is found that he did not register when he was liable to, then demand and recovery for unpaid
tax will commence and the penalty for not registering will also apply.
 This shows that even unregistered persons will be assessed to keep a check on their eligibility of
not registering. It is similar to Maharashtra VAT.

Summary Assessment
 This is done when the assessing officer has sufficient grounds to believe any delay in assessing a
tax liability can harm the interest of the revenue. To protect the interest of the revenue, he can
pass the summary assessment on the basis of evidence of tax liability. The prior permission of
Additional or Joint commissioner is required.
 Summary Assessment means a fast-track assessment based on the return filed by the assessee.
It is completed on a priority basis without the presence of the taxpayer because the delay in
such assessments may lead to loss of revenue.
 Summary assessment is usually done in cases of defaulting or absconding taxpayers.

Withdrawal of Summary Assessment

 The taxpayer can apply within 30 days from the date of receipt of order. If he proves to the
Additional or Joint Commissioner that the order was wrongly passed, then the order will be
cancelled.
 The Additional or Joint Commissioner can on his own, cancel the order if he is of the opinion that
it was wrongly passed. Post this, demand and recovery provisions u/s 73 and 74 will be
applicable.
 Often summary assessments are carried out in situations where it is not possible to identify the
taxable person concerned in a case of supply of goods. In such cases, the person in charge of the
goods will be deemed to be the taxable person. He will be assessed and held liable to pay tax
and amount due under summary assessment. This provision is not applicable for services.
 Thus, we that most of the assessment provisions under GSt are similar to the current indirect tax
system.
Demand and Recovery
Science GST is absolutely new and it is payable on self-assessment basis, it is possible that the
taxable person may have made some errors. He might not have paid the tax correctly or may
not have paid the tax at all. He might have got the wrong refund of tax or input tax credit. In
these cases, demand and recovery provisions become applicable.
The proper officer will issue a show cause notice along with a demand for payment of tax (also
penalty for fraud cases).

Demands can arise in the following cases:

 Demands for unpaid or short paid tax or wrong refund (without any fraud)
 Demands for unpaid or short paid tax or wrong refund (for fraud cases)
 Tax collected but not deposited with the Central or a State Governments
 CGST/SGST paid when IGST was payable and vice versa.

Recovery of Tax
 If demand is not paid, the IT department can start recovery proceedings.

ACCOUNTS AND OTHER RECORDS:

UNDER GST ALL INDIRECT TAX WILL GET SUBSUMED INTO ONE GST, THEN
REDUCING NUMBER OF ACCOUNTS REQUIRED TO BE MAINTAINED.

For example, under GST, a trader has to maintain the following accepts:

 Input CGST a/c

 Output CGST a/c
 Input SGST a/c
 Output SGST a/c
 Input IGST a/c
 Output IGST a/c
 Electronic cash ledger(to be maintained on government GST portal)
ELECTRONIC CASH &CREDIT LEDGER:
Under this section we will discuss the mechanism of gst and e-ledger and
how does it work. E-ledger or electronic ledger is statement of cash and
input tax credit in respect of the registered taxpayer. Once a taxpayer makes
GST tax payment by cash, cheque, internet banking , rtgs, neft the number
is credited to the respected electronic ledger namely:
 Electronic cash ledger
 Electronic Credit ledger
PERIOD OF RETENTION:
  This section talks about the period for which the said books of accounts and
other records have to be maintained, i.e. how long the records have to be
saved by the business.
 As per the GST law every registered taxable person requires to keep and
maintain books of accounts or other records will maintain the books for
atleast 60 months , counted from the last date of filling the annual return.
ACCOUNTING ENTRIES UNDER GST:

GST will be one tax to subsume all taxes. It will bring in “one nation one tax”
regime. While there will be certain initial transition challenges, GST will bring in
much clarity in much areas of business. One of the areas is accounting and
book keeping.

CURRENT SCENARIO:

Separate accounts have to be maintained for exercise, VAT, CST and service tax.
Here’s a list of the few accounts currently any business has to maintain-

 Exercise payable a/c( for manufacturer)

 CENVAT credit a/c ( for manufacturers)
 Output VAT a/c
 Input VAT a/c
 Input service tax a/c
 Output service tax a/c
FOR EXAMPLE, a trader Mr. x must maintain the minimum basic accounts:

 Output VAT a/c

 Input VAT a/c
 CST a/c(for inter –state sales and purchases)
 Service tax a/c[he will not be able to claim any service tax input credit as he
is a trader with output VAT. service tax cannot be set off against VAT/CST]
GST REGIME

Under GST all these taxes (excise, VAT, service tax) will get subsumed into one
account. The same trader x has to then maintain the following a/cs.

 Input CGST a/c

  Output CGST a/c
 Input SGST a/c
 Output SGST a/c
 Input IGST a/c
 Output IGST a/c
 Electronic cash ledger(to be maintained on government GST portal to
pay GST)
While the number of accounts is more apparently, once you go through the
accounting you will find it is much easier for record keeping. one of the biggest
advantages X will have is that he can set off his input tax on service and output tax
on sales

LET US CONSIDER A FEW BASIC BUSINESS TRANSACTION (all amount excluding

GST):

EXAMPLE 1: INTRA-SCALE

 Mr.x purchased goods Rs.1,00,000 locally(intrastate)

 He sold them for Rs1,50,000 in the same state
 He paid legal consultation fees Rs5,000
 He purchased furniture for his office for Rs12,000
Outward Supplies
All the particulars filed under GSTR-1 will flow under this heading. GSTR-1
requires an assessee to furnish details of outward supplies. All such information
gets auto-populated under respective heading. This subheadings have been
provided below:
 Intra-state Supplies to Registered Taxable Person
 Intra-State Supplies to Registered Taxable Person
 Inter-State Supplies to Consumers
 Intra-State Supplies to Consumers
 Exports (including deemed exports)
 Revision of Supply Invoice / Credit Notes / Debit Notes
 Total Tax Liability on Outward Supplies
Filing GSTR-3 on GST Portal
 Every registered business is required to furnish details of Inward and
Outward Supply and make payment of GST in monthly GSTR-3 Return.
Filing of Monthly Return under GST-GSTR-3
 We discussed earlier various heads under GSTR-1 abd GSTR=2. GSTR-a
requires the taxpayer to furnish details of outward supply. Similarly, GSRT-2
mandates furnishing details of inward supply or purchases in simple words.
Continuing further in our series, here we are discussing various heads and
their information source under GSTR-3.
 Every registered taxpayer is required to file monthly return before 20th of
text month.
 Below we have provided all the heads under which information is
required to be furnished:
 GSTIN- Each taxpayer will be allotted a stare-wise PAN-based 15 digit Goods
and Services Taxpayer Identification Number (GSTIN). A format of proposed
GSTIN has been shown in the image below. GSTIN of the taxpayer will be auto-
populated at the time of return filing
 Name of Taxable Person: Name of the taxpayer, will also be auto-populated
at the time of logging into the common GST Portal.
 Address: Business address of the registered taxable person will get auto-
populated here.
 Period: (month-year) A Taxable person is required to select from a drop
down the relevant month and year respectively for which GSTR-3 is being
field.
 Turnover Details: This heading will include consolidated turnover of all
types of supplies. Gross turnover needs to be bifurcated between:
 Taxable Turnover
 Export Turnover
 Nil rated and Exempted Turnover
 Non-GST Turnover
 Total Turnover (sum of above all)

Annual Return – GSTR=9

Every registered taxable person is required to furnish an annual return under
GST law, electronically in FORM GSTR-9 through the Common GST Portal.
Likewise, a taxable person registered as a composition dealer shall furnish the
 annual return in FORM GSTR-9A. GST law also states that every registered
taxable person whose aggregate turnover during a financial year exceeds one
crore rupees shall get his accounts audited. Such business shall furnish a copy
of audited annual accounts and a reconciliation statement, duly certified, in
FORM GSTR-9B, electronically through the Common Portal. GSTR-9 needs to
be furnished by 31st December of next financial year.

Final return under GST: GSTR-10

 Every registered taxable person is required to furnish a final return under
section 31, and they shall furnish such returns electronically in FORM GSTR-
10 through the Common Portal within three months of the date of
cancellation or date of cancellation order, whichever is later.
 A taxable person who ceases to do business voluntarily or by way of an
order by the authorities is required to furnish this return.
 GSTIN
 Legal Name
 Business Name
 Address.`

Payment of Tax Under GST

Currently, companies pay VAT tax on a monthly/quarterly basis depending on
the state and their turnover. CST is paid when crossing state borders and it is not
allowed as input tax credit under the current laws. Excise duty is also levied on
manufacturer.

 GST would subsume all the above-mentioned taxes. Tax payment would be
due at the time of supply of goods under GST.
 As per the updated GST model law “Every deposit made towards tax, interest,
penalty, fee or any other amount by a taxable person by internet banking or
by using credit/debit cards r National Electronic Fund Transfer or Real Time
Gross Settlement or by any or the mode, subject to such conditions and
restrictions as may be prescribed in this behalf, shall be credited to the
electronic cash ledger of such person to be maintained in the manner as may
be prescribed.
 It states that the taxpayer can pay the tax due through electronic modes and it
will be automatically debited to his electronic cash ledger.
 Electronic cash ledger, electronic input tax credit ledger, and tax liability ledger
have to be maintained
 By each person registered under GST.
 Electronic cash ledgers will record data of tax, interest, penalty, fees paid and
payment under CGST, SGST, and IGST. Details of the input tax credit available
under all heads would be a available in the electronics Input Tax credit ledger.
 Tax liability ledger is to be also maintained electronically for any outstanding
liability arising out of the regular return, notices, penalties.
TDS and TCS under GST

There are four basic question which can explain the basic application of TDS as
provided under GST law :

Who is liable to deduct TDS under GST?

 Following people are responsible for deducting tax :

a. A department or establishment of the central or state
government, or
b. Local authority, or
c. Governmental agencies, or
d. Such persons or category of persons as may be notified, by the
central or a state government on the recommendations of the
council.

For example: If the finance department , government of India, enters into a

contract with reliance then the department would be liable to deduct TDS.

What is the rate of TDS to be deducted under GST?

The rate of TDS is 2% under GST.

Is there any limit for deducting TDS under?

If the total value of supply under a contract exceeds Rs 2.5 lakhs then the person
entity would be liable to deduct TDS.

Time limit for payment of TDS?

The deductor would be liable to make the payment of TDS by the 10 th day of the
next month.

For example: X department of central government deducts TDS @ 2% Y on 5

August 2017 then it is liable to make payment by 10 September

The deductor shall furnish to the deducte a certificate, after deducting tax at
source within five days of such deduction.

Impact of TDS on government civil contractors

The Indian government, on an averages, gives out more than 10,000 civil contracts
every year throughout the country. The country for constructing / repairing of the
national highways average more than Rs 100 crores . These contracts or acquired
by big construction companies and then sub-contracted to smaller firms and then
again further sub-contracted to another small firm. This loop will face problems
due to GST and in particular due to the TDS liability.

The government would need to deduct TDS from the contractor which would
ensure tax compliance by the concractors and all the other sub-contractor.
Currently, many small civil / labour contractors do not fulfill tax compliance.
Under GST it will be imperative for them to get registered and fulfill tax
compliance.

 For example: ABC got a contract for repair work on an 800-meter

road by the government for Rs.10 lakhs. ABC outsources work to XYZ
and then XYZ further outsources it to a small civil/labour contractor
DEF:
 Earlier,DEF would not have registered under service tax/VAT but now
he would need to register under GST for claiming the ITC credit.
 The purpose of inserting the TDS clause under GST is to ensure tax
compliance from the unorganized construction sector.

TCS compliance for e-commerce sector

A clause has been instered under GST law for all the e-commerce
aggregators. E-commerce aggregators are made responsible under the GST law
for deducting and depositing tax at the rate of 1% CGST and 1% SGST, from
aggregate value of taxable supplies (Net of returns) made through it by other
suppliers where the consideration with respect to such supploies is to be collected
by the operator. Any dealers/traders selling goods/services online would get the
payment after deduction of 2% tax. It is significant change which would increase a
lot of compliance and administration cost for online aggregators like Flipkart,
snapdeal, amazon etc. They would need to deposit the tax deducted by the 10 th
day of the next month.

 All the traders/dealers selling goods/services online would need to get

registered under GST mandatorily even if their turnover is less thanthe
threshold (20Lakhs/10Laksh). Registration would also be required for
climing the tax deducted by Ecommerce operators. (This requirement of
TCS and Registration by suppliers is for the time being withheld by GST
Council, till further notification)
 For example:
 Mr. Vinay Dua is a trader who sells his ready-made clothes online on
Amazon India. He reciv4es an order for Rs. 10,000 inclsive of tax and
commission. Amazon charges a commission of Rs200
 Amazon would, therefore, need to deduct 2% tax (TCS) on the amount,
including the money paid as commission (Rs.200) and GST (Rs. 1800 when
GST @18%). Amazon would thus be deducting tax for Rs. 200 (2% of Rs.
10000).

Refund Under GST:

Current, the refund for the excess of VAT/CST paid is claimed annually.
Refund on the excess of excise duty paid is paid through the duty drawback
scheme. There are a lot of delays under the current system in providing the refund
for excise/VAT/CST.
 GST would improve the system of calculation, application, and processing of the refund. Refunds
would be calculated for each major head (CGST, SGST, IGST) SEPARATELY. An application form
has to be filed on the GSTN portal portal for claiming the refund. Since all the data will be
uploaded electronically, calculation of refunds would become automated.
 As stated in the GST Model Law, ”If any tax ordered to be refunded under section 48 to any
applicant is not refunded within sixty days from the date of receipt of application under sub-
section (1) of that section, interest at such rate as may be specified in the notification issued by
the Central or a State Government on the recommendation of the Council shall be payable in
respect of such refund from the date immediately after expiry of sixty days from the date of
receipt of application under the said subsection till the date of refund of such tax”.
 The processing time for a refund application has been kept as sixty days under GST model law
but it could be as early as two weeks.