The Central Board of Indirect Taxes and Customs (CBIC) has recently issued a revised Standard Operating Procedure (SOP) for Scrutiny of Returns for Financial Years 2019-20 and onwards, vide GST Instructions 2/2023, in view of the recent introduction of an automated scrutiny module. This article explores the key aspects of the revised SOP and its implications for taxpayers.
CBIC GST Instructions 2/2023 dated 26/05/2023: Revisd SOP for Scrutiny of GST Returns (FY 2019-20 Onwards)
Automated Scrutiny Module Enhancing Tax Compliance
The introduction of an automated return scrutiny module marks a significant development in the scrutiny process of GST returns. Integrated into the ACES-GST backend application, this module utilizes data analytics to identify discrepancies and risks in GST returns. Its primary objective is to enhance tax compliance while reducing manual intervention. By leveraging data analytics, the module facilitates non-intrusive verification and enables central tax officers to scrutinize GST returns more effectively.
CBIC’s Automated GST Return Scrutiny Module: Enhancing Compliance
Risk-based Selection of Returns by DGRAM for Scrutiny
The Directorate General of Analytics and Risk Management (DGARM) plays a crucial role in the selection of returns for scrutiny. Using risk parameters and data analytics, DGARM identifies Goods and Services Tax Identification Numbers (GSTINs) that require scrutiny. It’s important to note that scrutiny of returns for a particular GSTIN encompasses all returns pertaining to the identified financial year.
The Scrutiny Process and Communication with Taxpayers
The scrutiny process revolves around the issuance of Form GST ASMT-10, commonly known as the scrutiny notice. This notice serves as a communication tool between tax officers and taxpayers, highlighting areas of concern that require further investigation. The process of scrutiny by the Proper Officer involves the following steps:
1. Scrutiny of returns:
The Proper Officer examines the returns and related details provided by registered persons to ensure their accuracy. The officer can rely on information available in the system from various sources such as DGARM, ADVAIT, GSTN, E-Way Bill Portal, etc., for this purpose.
2. Risk parameters and selection:
The Proper Officer considers risk parameters associated with the GST Identification Number (GSTIN) and the potential revenue implications. The details of these risk parameters are available in the scrutiny dashboard. The officer may also consider other relevant parameters for scrutiny.
3. Minimal interface and notice issuance:
The Proper Officer relies on the information already available in records and aims to minimize direct interaction with the registered person. The officer issues a notice in FORM GST ASMT-10 through the ACES-GST application, informing the registered person of the discrepancies identified and requesting an explanation. If the registered person has already made additional payments through FORM DRC-03, these payments are also taken into account while communicating the discrepancies.
4. Communication of notice:
The notice in FORM GST ASMT-10 is communicated to the registered person through the common portal, eliminating the need for separate manual communication. The notice should quantify the amount of tax, interest and other payable amounts related to the discrepancies. The notice should provide specific details and not be vague or general. The user manual issued by DG Systems provides the detailed procedure for issuing FORM GST ASMT-10.
5. Scrutiny of returns and single notice:
The Proper Officer scrutinizes all returns for the corresponding financial year related to the identified GSTIN. A single compiled notice in FORM GST ASMT-10 is issued for that financial year.
6. Response and conclusion of proceedings:
The registered person can accept the discrepancies mentioned in the notice and pay the applicable tax, interest and other amounts. Alternatively, they can provide an explanation for the discrepancies in FORM GST ASMT-11 within the prescribed time period. The registered person’s response in FORM GST ASMT-11 is made available to the Proper Officer in the scrutiny dashboard. If the explanation or payment is found acceptable, the officer concludes the proceedings by informing the registered person through FORM GST ASMT-12.
7. Further action for unsatisfactory response:
If the registered person fails to provide a satisfactory explanation within the specified time or after accepting the discrepancies, fails to make the necessary payments, the Proper Officer may initiate proceedings to determine the tax and other dues under Section 73 or Section 74 of the CGST Act. Monetary limits specified in GST Circular 31/05/2018 should be followed for such proceedings. The user manual issued by DG Systems provides the procedure for initiating proceedings under Section 73 or 74 of the CGST Act.
8. Referral for audit or investigation:
If the Proper Officer believes that further audit or investigation is necessary to determine the correct liability of the registered person, they can seek approval from the jurisdictional Principal Commissioner/Commissioner through the divisional Assistant/Deputy Commissioner. The matter can then be referred to the Audit Commissionerate or anti-evasion wing of the Commissionerate, with the uploaded copy of the approval, following the procedure detailed in the user manual issued by DG Systems.
Prescribed Scrutiny Schedule and Timelines
To ensure a well-defined framework for scrutiny activities, the revised SOP establishes specific timelines. The CBIC has prescribed timelines and procedures for conducting scrutiny of returns in a time-bound manner. The goal is to conclude the cases efficiently. Here is a summary of the main points:
1. Communication of selected GSTINs for scrutiny:
The Directorate General of Anti-Profiteering (DGARM) communicates the GST Identification Numbers (GSTINs) selected for scrutiny through the ACES GST Application periodically.
2. Finalization of scrutiny schedule:
The Assistant/Deputy Commissioner responsible for the scrutiny finalizes the scrutiny schedule within seven working days of receiving the details of the selected GSTINs on the ACES-GST application.
3. Issuance of notice for discrepancies:
The proper officer issues a notice (in FORM GST ASMT-10) to the registered person, notifying them of any discrepancies found during scrutiny. The notice is issued within the month specified in the scrutiny schedule.
4. Reply by the registered person:
The registered person must provide a reply (in FORM GST ASMT-11) to the proper officer within thirty days of being informed about the discrepancies. The proper officer may allow additional time if requested.
5. Issuance of acceptance order:
If the reply furnished by the registered person is satisfactory, the proper officer issues an order (in FORM GST ASMT-12) accepting the reply within thirty days of receiving it.
6. Initiation of action for determination of tax and dues:
If no reply is received from the registered person within thirty days of the notice (FORM GST ASMT-10) or if the reply is not found acceptable, the proper officer initiates appropriate action for determining the tax and other dues within fifteen days of the expiry of the notice period.
7. Reference to Audit Commissionerate or anti-evasion wing:
If the reply is furnished by the registered person but not found acceptable or if no explanation is provided, the proper officer refers the case to the Audit Commissionerate or the anti-evasion wing for further action within thirty days of receiving the reply or within forty-five days of issuing FORM GST ASMT-10, respectively.
Reporting, Monitoring and Compliance
The proper officer’s actions regarding the scrutiny of GSTINs (Goods and Services Tax Identification Numbers) will be tracked and available through two Management Information System (MIS) reports on the scrutiny dashboard of the ACES-GST application. One report, called the “Monthly Scrutiny Progress Report,” provides a summary of the scrutiny status of returns for a selected month within a financial year and a selected formation. The other report, the “Scrutiny Register,” provides GSTIN-wise details of the actions taken during the scrutiny of returns.
Starting from the financial year 2019-20, there is no longer a requirement for CGST zones to compile and send the Monthly Scrutiny Progress Report to the Directorate General of Goods and Services Tax (DGGST). However, for the financial years 2017-18 and 2018-19, CGST zones will still need to send these reports to DGGST until the scrutiny of returns for those years is completed, following the timelines mentioned in GST Instructions 2/2022 dated 22/03/2022.
Additionally, the progress of the scrutiny exercise, as per the scrutiny schedule, will be regularly monitored by the jurisdictional Principal Commissioner/Commissioner.
Clarification on Scrutiny for FY 2017-18 & 2018-19
CBIC has clarified that the automated scrutiny functionality on the ACES-GST application is available only for the financial year 2019-20 onwards. Therefore, the procedure outlined in GST Instructions 2/2022 dated 22/03/2022 will still be followed for scrutinizing GST returns for the financial years 2017-18 and 2018-19.
Conclusion
The CBIC has introduced a revised SOP for scrutinizing GST returns starting from the financial year 2019-20. This includes the use of an automated scrutiny module in the ACES-GST application, leveraging data analytics for identifying discrepancies and improving tax compliance. DGARM plays a key role in selecting returns for scrutiny based on risk parameters. The scrutiny process involves issuing Form GST ASMT-10 as a notice to taxpayers, followed by minimal interaction, communication of discrepancies, taxpayer response and conclusion of proceedings. Specific timelines are established for conducting scrutiny activities and MIS reports on ACES-GST monitor the progress. The automated scrutiny functionality only applies from 2019-20 onwards, while the procedure outlined in GST Instructions 2/2022 is used for scrutinizing returns for 2017-18 and 2018-19.
Is it possible now (in 2023) to get notices for scrutiny of GST Returns in respect of financial years 2017-18 and 2018-19? Further, the automated scrutiny module has been implemented recently in 2023 only, however the revised SOP for automated scrutiny of GST returns has been implemented from FY 2019-20?
It’s not clear when a reference can be made to the Audit Commissionerate or the Anti-evasion Wing? What is the meaning of the statement…. “If the reply is furnished by the registered person but not found acceptable or if no explanation is provided?”