ASSESSMENT OF NON-FILERS OF RETURNS UNDER GST LAW

A tax return means a summary of information in prescribed format in a nutshell, pertaining to a particular tax period. Every registered person, other than an Input Service Distributor, a non-resident taxable person and a person paying tax under the provision of Section 10 or Section 51 or Section 52, is required to furnish returns, electronically on Common Portal, giving the details of inward as well as outward supplies of goods or services or both with details of tax payable or paid to the Government.

Section 37 to Section 45 of the CGST Act, 2017 prescribes the provision of various GST returns but FORM GSTR-1 and FORM GSTR-3B are the most vital returns under GST, which are required to be furnished monthly or quarterly depending upon the threshold limit of turnover of the taxpayers. Recently, the Government has introduced Quarterly Return filing & Monthly payment of taxes (QRMP) Scheme with effect from 1^st January, 2021.

Consequences of non-filing of returns

In case of failure by taxpayers to submit periodic returns, a defaulter list will be generated by the IT System by comparing the return filers with the registrant database. Such defaulter list will be provided to the respective GST Authorities for necessary enforcement and follow up action and for imposition of automatic late fee for non-filers and late filers which will be in-built in the notices in FORM REG-17.

The proper officer may cancel the registration of any registered person other than a person paying tax under Section 10, who has not furnished returns for a continuous period of six months under Section 29(2)(C) of the CGST Act, 2017.

Provided that during pendency of the proceedings, the proper officer may suspend the registration that will continue till the proceedings of dropped.

Statutory provisions of non-filers of returns

The assessment of non-filers of returns are required to be assessed by the assessing officer or the proper officer through best judgment in terms of Section 62 of the CGST Act, 2017 and the relevant statutory provision in reproduced as under:

“62.(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.

(2) where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for the payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue.”

Standard Operating Procedure (SOP) in case of non-filers of returns

Circular No.129/48/2019-GST, dated 24-12-2019 [2020 (32) G.S.T.L. C12] has clarified that “Doubts have been raised across the field formations in respect of the appropriate procedure to be followed in case of non-furnishing of return under Section 39 or Section 44 or Section 45 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”). It has further been brought to the notice that divergent practices are being followed in case of non-furnishing of the said returns.

2.  The matter has been examined. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by Section 168(1) of the CGST Act, hereby issues the following clarifications and guidelines.

3.  Section 46 of the CGST Act read with Rule 68 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the “CGST Rules”) requires issuance of a notice in FORM GSTR-3A to a registered person who fails to furnish return under Section 39 or Section 44 or Section 45 (hereinafter referred to as the “defaulter”) requiring him to furnish such return with fifteen days. Further Section 62 provides for assessment of non-filers of return of registered persons who fails to furnish return under Section 39 or Section 45 even after service of notice under Section 46. FORM GSTR-3A provides as under:

                “Notice to return defaulter u/s 46 for not furnishing the return”

                                Tax Period –                                        Type of Return –

Being a registered taxpayer, you are required to furnish return for the supplies made or received and to discharge resultant tax liability for the aforesaid tax period by due date. It has been noticed that you have not filed the said return till date.

1. You are, therefore, requested to furnish the said return within 15 days failing which the tax liability may be assessed u/s 62 of the Act, based on the relevant material available with this office. Please note that in addition to tax so assessed, you will also be liable to pay interest and penalty as per provisions of the Act.
2. Please note that no further communication will be issued for assessing the liability.
3. The notice shall be deemed to have been withdrawn in case the return referred above, is filed by you before issue of the assessment order.

As such, no separate notice is required to be issued for best judgment assessment under Section 62 and in case of failure to file return within 15 days of issuance of FORM GSTR-3A; the best judgment assessment in FORM ASMT-13 can be issued without any further communication.

4. Following guidelines are hereby prescribed to ensure uniformity in the implementation of the provisions of law across the field formations:

(i) Preferably, a system generated message would be sent to all the registered persons 3 days before the due date to nudge them about filing of the return for the tax person by the due date.

(ii) Once the due date for furnishing the return under Section 39 is over, a system generated mail/message would be sent to all the defaulters immediately after the due date to the effect that the said registered person has not furnished his return for the sais tax period: the said mail/message is to be sent to the authorized signatory as well as the proprietor/partner/director/karta, etc.

(iii) Five days after the due date of furnishing the return, a notice in FORM GSTR-3A (under Section 46 of the CGST Act read with Rule 68 of the CGST Rules) shall be issued electronically to such registered person who falls to furnish return under Section 39, requiring him to furnish such return within fifteen days;

(iv) In case the said return is still not filled by the defaulter within 15 days of the said notice, the proper officer may proceed to assess the tax liability of the said person under Section 62 of the CGST Act, to the best of his Judgment taking into account all the relevant material which is available or which he has gathered and would issue order under Rule 100 of the CGST Rules in FORM GST ASMT-13. The proper officer would then be required to upload the summary thereof in FORM GST DRC07;

(v) For the purpose of assessment of tax liability under Section 62 of the CGST Act, the proper office may take into account the details of outward supplies available  in the statement furnished under Section 37 (FORM GSTR-1), details of supplies auto populated in FORM GSTR-2A, information available from e-way bills, or any other information available from any other source, including from inspection under Section 71:

(vi) In care the defaulter furnishes a valid return within thirty day of the service of assessment order in FORM GST ASMT-13, the said assessment order shall be deemed to have been withdrawn in terms of provision of sub-section (2) of Section 62 of the CGST Act. However, if the said return remains unfurnished within the statutory period of 30 days from issuance of order in FORM ASMT-13, then proper office may initiate processing under Section 78 and recovery under Section 79 of the CGST Act.

5. Above general guidelines may be followed by the proper office in case of non-furnishing of return .In deserving cases, based on the facts of the case, the Commissioner may resort to provisional attachment to protect revenue under Section 83 of the CGST Act before issuance of FORM GST ASMT-13.

6. Further, the proper office would initiate action under sub-section (2) of Section 29 of the CGST ACT for cancellation of registration in cases where the return has not been furnished for the period specified in Section 29.” 

Initiation of recovery proceedings

(a) the proper office initiate proceedings under Section 78 and recovery under Section 79 of the CGST Act and in deserving cases, based on the facts of the case, the commissioner may resort to provisional attachment to protect revenue under Section 83 of the CGST Act, 2017 before issuance of Form GST ASMT-12.

(i) Last Opportunity: Best Judgment Assessment shall be deemed to withdrawn if the person furnishes the return within 30 days of service of FORM GST ASMT-13.

(ii) Recovery initiate if return not furnishes within 30days from ASMT-13.

(b) the proper officer would initiate action for cancellation of registration as per Section 29(2) of the CGST Act , 2017.

Justification of best judgment assessment

It is observed that in case of non-fillers of returns, the proper officers are sending show cause notices toe-mail id, which was provided to the department at the time of obtaining GST registration. The GST officers are not uploading show cause notices electronically on the portal thereby SCNs are not properly served to the taxpayers. Hence, there is no opportunity given to the taxpayer to present his case before the GST authority. Thereafter, the GST officer passes order in FORM ASMT-13 under section 62 of the CGST Act, to the best of his judgment taking into account all the relevant material which is available with the department. The best judgment assessments are being passed by the GST officer in a hassle, routine manner without justification and non-application of his mind. The GST officers are considering past returns of the tax payers to assess the tax liability for the defaulting period and also considering e-way bills values to ascertain demand of tax without bifurcation of export sales values and domestic sales values thereby passing huge demand of tax in FORM GST DRC-07.

The Hon’ble Appellate Authority Andhra Pradesh, In Re: Omsai Professional Detective and Security Pvt. Ltd., reported in 2020 (38) G.S.T.L/ 120 (Appellate Authority-A.P.) observed that “it is further reasonable here to note that the main principle emanates from the decisions on the best judgment assessment is that any levy basing on mere presumptions, but not substantiated by and sort of incriminating material to establish the suppression indubitably , shall be seen as bad in law and in violation to the principles of natural justice”

Conclusion

                The provision of assessment of non-filers of returns has been incorporated under Section 62 of the CGST Act, 2017, which prescribes method of recovery of tax would be followed by the proper officer by adopting the procedure “the best of his judgment assessment” in place of procedures contains under Section 73 or Section 74 of the CGST Act, 2017. The best judgment assessment is one of the statutory recovery proceedings in the hands of the assessing officer in case of non-filers of returns, but the best judgment assessment should be passed with due verification of relevant records, taking into account all relevant materials which is available or which he has gathered, should be supported by sufficient proof; it should have nexus with material of facts, should not be arbitrary, and it should be honest guess of work with justification and giving an opportunity of being heard to the assessee in accordance with principles of natural justice

Author:

Mr. Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.),

D.M.M., LL.B.

ADVOCATE & TAX CONSULANT