SCRUTINY OF RETURNS UNDER GST – STANDARD OPERATING PROCEDURE (SOP)

Scrutiny means thorough checking of documents, verification of records of business transaction, cross examination of turnover of the taxpayers vis-à-vis payment of tax. Returns means summary of information or statement in prescribed format in nutshell, pertaining to a particular tax period. Section 37 to Section 45 of the CGST Act, 2017 specified the provision of GST returns and Section 61 of the CGST Act, 2017 prescribes the provisions of scrutiny of returns under GST.

The objective behind scrutiny of returns is to verify the correctness of various returns furnished by the taxpayers in a particular tax period. In order to ascertain the correct payment of tax or any short payment of tax, the proper officer has to undertake the scrutiny of returns periodically furnished by the taxpayers.

Statutory provisions under GST:

Section 61 of the CGST Act, 2017 read with Rule 99 of the CGST Rules, 2017 provides for scrutiny of returns and related particulars furnished by the registered person. The relevant statutory provisions for scrutiny of returns are reproduced for reference as under:

Section 61. Scrutiny of returns.

• 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.
• In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.
• If 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 Section 74.

Rule 99. Scrutiny of returns

• 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 the 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.
• 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.
• Where the explanation furnished by the registered person or the information submitted under sub-rule (2) is found to be acceptable, the proper officer shall inform him accordingly in FORM GST ASMT-12.

SOP – Standard Operating procedure for scrutiny of returns:

C.B.I & C., issued standard operating procedure for scrutiny or returns vide its Circular No. 2/2022-GST, dated 22^nd March, 2022 [2022(58) G.S.T.L. C29). The basic ingredients of scrutiny of returns are listed as under:

(a) Selection of returns furnished by a registered person for scrutiny preferably based on robust risk parameters.

(b) Security of returns particulars furnished by the registered person to verify the correctness of the return. Information available with the proper officer in various returns and statements furnished by the registered person and the data/details available through various source like DGARM, ADVAIT, GSTN, E-Way Bill portal, etc. may be relied upon for this purpose.

(c) informing the registered person of the discrepancies noticed, if any, along with quantification of the amount of tax, interest and any other amount payable in relation of such discrepancy and seeking his explanation thereto.

(d) where the registered person accepts the discrepancy and pays the tax, interest and any other amount arising from such discrepancy or where the explanation furnished by the registered person is found acceptable, conclude the proceedings after informing the registered person.

(e) where no satisfactory explanation is furnished by the registered person or where the registered person, after accepting the discrepancy, fails to pay tax, interest and any other amount arising from such discrepancy initiate appropriate action including those under Section 65 or Section 66 or Section 67, or determination of tax and other dues under Section 73 or Section 74 of the CGST Act.

Procedures for scrutiny of returns: The standard operating procedure also prescribes the certain parameters for scrutiny of returns and the same are summarized as under:

Section of returns for scrutiny: Selection of returns for scrutiny is to be based on specific risk parameters. For this purpose, the Directorate General of Analytics and Risk Management (DGARM) has been assigned the task to select the GSTINs registered under Central tax authorities, whose returns are to be scrutinized and to communicate the same to the field formation from time to time through the DDM portal (to the nodal officer of the Commissionerate  concerned) for further action. For convenience of field officers, DGARM would also provide some relevant data (along with revenue implication) pertaining to the returns to be scrutinized through the DDM portal. It may be noted that the data provided by the DGARM is generated at a particular point of time which may undergo change at the time of scrutiny of returns by the proper officer due to subsequent compliances carried out by the taxpayer or by the suppliers of the taxpayer. The proper officer shall, therefore, reply upon the latest available data.

Proper office for scrutiny of returns: C.B.I. & C, vide Circular No. 3/3/2017-GST , dated 05.07.2017 [2017(2) G.S.T.L. 3(4), wherein the “Superintendent of Central Tax” has been assigned the functions as the proper officer in related to sub-section (1) and sub-section (3) of section 61 of the CGST Act. Accordingly, scrutiny of returns of a taxpayer may be conducted by Superintendent of Central Tax in-charge  of the jurisdictional range of the said taxpayer.

Scrutiny Schedule:

Once the list of GSTINs, whose returns have been selected for scrutiny, is communicated to the field formation, the proper officer, with the approval of the divisional Assistant / Deputy Commissioner, shall finalise a scrutiny schedule. Such scrutiny schedule will specify month-wise schedule for scrutiny in respect of all the GSTINs selected for scrutiny. While preparing the scrutiny schedule, the scrutiny of the GSTINs, which appear to be riskier based on the likely revenue  implication indicated by DGARM, may be prioritized. Such scrutiny schedules in respect of all the rangers withtin the CGST Zone shall be reported to the Directorate General of Goods and Services Tax (DGGST) by the concerned Zone, in the format was prescribed.

The proper officer shall conduct scrutiny of returns pertaining to minimum of 3 GSTINs per month. Scrutiny of returns of one GSTIN shall mean scrutiny of all returns pertaining to a financial year for which the said GSTIN has been identified for scrutiny.

Process of scrutiny by the Proper Officer: The proper officer shall scrutinize the returns and related particulars furnished by the registered person to verily correctness of the return in respect of the following indicative list of parameters but this list is only indicative and not exhaustive and the proper officer may consider other parameters, as he may deem fit for the purpose of scrutiny of returns.

• Tax liability on account of “Outward taxable supplies” (other than zero rated, nil rated and exempted), that is difference, of tax liability declared in FORM GSTR-1 and FORM GSTR-3B.
• Tax liability on account of “inward supplies (liable reverse charge) of GSTR-3B and ITC availed of FORM GSTR-3B.
• ITC in respect of inward supplies attracting reverse charge received from registered person to be matched with FROM GSTR-2A
• Availment of ITC in excess of the liability discharged on account of reverse supplies.
• Tax/Cess paid in cash as per coloumn 8 of Table 6.1. of FROM GSTR-3B in respect of inward supplies liable to reverse charge, tax /cess is to be paid in cash, the liability off-set in cash should not be less than the liability arising on account of reverse charge, it may indicative short payment of tax.
• ITC availed in respect of “inward supplies from ISD” in table 4(A)(4) of GSTR-3B may be verified with table 7 of FORM GSTR—2A
• ITC availed in respect of “All other ITC” in table 4(A)(5) of FORM GSTR-3B may be verified with table 3 and table 5 of Form GSTR-2A.
• It may be verified that the taxable value declared on account of “Outward taxable supplies (other than zero rated, nil rated and exempted)” in table 3.1(a) of FORM GSTR-3B is not less than the net amount liable for TCS and TDS credit as per Column 6 of table 8 of FORM GSTR-2A.
• Tax liability on account of outward supplies in table 3.1(a) and 3.1(b) of FORM GSTR-3B should be verified with the Tax liability as declared in e-way bills.
• Claim of ITC in respect of supplies from taxpayers whose registrations have been cancelled retrospectively.
• Ineligible ITC availed in respect of invoices/debit notes issued by the suppliers who have not filed their GSTR-3B returns for the relevant tax period.
• Whether GSTR-3B of a tax period is filed after the last date of availment of ITC in respect of any invoice/debit note as per section 16(4). In such cases, no ITC shall be availed in the return.
• ITC availed in respect of “import of goods” in table 4(A)(1) of FORM GSTR-3B may be verified with corresponding details in table 10 and table 11 of FORM GSTR-2A and cross verification from ICEGATE portal.
• Whether the registered person has made reversals of ITC in accordance with provision of rule 42 and rule 43 of the CGST Rules, it may be verified whether requisite reversal have actually made by the said registered person.
• Whether the registered person has paid interest liability in terms of section 50 of the CGST Act towards delayed payment of tax and actually has been paid by the registered person.
• Whether the registered person has paid late fee in terms of section 47 in respect of returns/statement and verification of actually has been paid by the registered person.

Timelines for scrutiny of returns: Scrutiny of returns is to be conducted in a time bound manner, so that necessary action to safeguard revenue may be taken up expeditiously. Such as list of GSTINs selection by the Nodal Officer of the Commissionerate from time to time. Distribution of list within 3 working days. Finalise scrutiny schedule within 7 working days. Sharing the scrutiny schedule by the zone with DGST within 30 days of receipt of GSTINs. Intimating discrepancy in FORM ASMT-10 within 30 days by the proper officer. Reply by the registered person in FORM GST ASMT-11 within 30 days or further extension period as per the proper officer. Issuance of Order in FORM ASMT-12 by the proper officer within 30 days of receipt of reply from the registered person in FORM ASMT-11. Intimation of appropriate action for the determination of tax dues under section 73 or section 74 of the Act, and Reference to Commissionerate for decision appropriate action under section 65 or section 66 or section 67 of the Act, within 30 days of receipt of reply from the registered person in FORM GST AMST-11 or within 45 days of issuance of FORM GST ASMT-10. In case no reply furnished by the registered person.

Reporting and Monitoring: A scrutiny Register shall be maintained by the proper office in respect of GSTINs allotted for scrutiny and progress shall be monitored by the jurisdictional Principal Commissionerate / Commissioner on monthly basis. A scrutiny progress report shall be prepared by the proper officer at the end of every month. The monthly scrutiny progress report for each Commissionerate of the CGST Zone shall be compiled for each month and forwarded to the DGGI by the Principal Chief Commissioner, of the concerned zone by 10^th day of the succeeding month. The DGCGST, in turn would present the progress report to the board, through the GST Policy Wing by the 20^th day of corresponding month.

Conclusion:

The very objective of scrutiny of returns is to safeguard the Government revenue and to control the mischievous registered person, fake ITC availment and fake transactions across the country. It is also observed that litigation under GST increasing day by day due to non-compliance statutory provisions by the registered person as well as revenue authorities. The revenue authorities /the proper officers are not following the prescribed formats for intimating and initiating proceedings against the registered person on account of discrepancy in the returns of the taxpayers. Thus, the Government has developed Scrutiny Model for online scrutiny of returns is made available on the C.B.I. & C-GST application and till implementation of the same, as an interim measure the standard operating procedure is being issued by the Board in order to ensure uniformity in selection /identification or returns for scrutiny and other related procedures for the financial year 2017-2018 and 2018-19.