Provisional Assessment under GST

Provisional assessment under GST
(Section 60 of The CGST Act, 2017)

If you are unable to determine your tax liability, the GST law has the option to pay tax on a provisional basis. This article explains the procedure of provisional tax assessment under GST and lists out various online application forms under GST law. The procedure can be effectively used to avoid tax litigations.

The provisional assessment provides a way for calculating the tax liability in case the correct tax liability cannot be calculated at the time of supply. The inability to determine the tax amount can be of two types

1.      The inability to determining the rate of tax

2.     The Inability to determine the value of goods or services

The payment of provisional tax can be made only against a bond and security. At the time of finalization, the tax liability can either be high or less as compared to the provisionally paid tax. In case of an increase in the tax liability, the difference is payable along with interest at a specified rate from the first day after the due date of payment of tax till the date of actual payment and in case of the decrease in the tax liability, the amount will be refunded with interest at a specified rate.

Procedure: –

The assessee requesting payment of tax on a provisional basis has to furnish an application along with the supporting documents, electronically in FORM GST ASMT-01 on the common portal.

The Assistant Commissioner / Deputy Commissioner of Central Tax will scrutinize the application in FORM GST ASMT-01. In case, additional information or documents in support is required by the Assistant Commissioner / Deputy Commissioner of Central Tax to decide the case, notice in FORM GST ASMT-02 will be issued to the assessee requesting for submission of the same.

The assessee has to file a reply to the notice in FORM GST ASMT-03, and if he desires can also appear in person before the Assistant Commissioner / Deputy Commissioner of Central Tax to explain his view.

The Assistant Commissioner / Deputy Commissioner of Central Tax will then issue an order in FORM GST ASMT-04 within a period not later than 90 days from the date of receipt of Form GST ASMT-01, allowing the payment of tax on a provisional basis. The order will indicate the amount of tax payable and the amount for which the bond is to be executed along with the security to be furnished. The security in form of bank guarantee will not exceed 25 percent of the amount covered under the bond.

The assessee has to execute the bond in FORMGSTASMT-05 along with the security as bank guarantee for an amount as mentioned in FORM GST ASMT-04. After executing the bond the process of the provisional assessment is complete.

The provisional assessment has to be finalized within 6 months from the date of issuance of FORM GST ASMT-04. The Assistant Commissioner / Deputy Commissioner of Central Tax will issue a notice in FORM GST ASMT-06, calling for information and records required for finalization of assessment and shall issue a final assessment order, specifying the amount payable by the assessee or the amount refundable, if any, in FORM GST ASMT-07.

Once the order in FORM GST ASMT-07 is issued, the assessee has to file an application in FORM GST ASMT-08 for the release of the security furnished.

On receipt of this application, the Assistant Commissioner / Deputy Commissioner of Central Tax will issue an order in FORM GST ASMT-09 in within a period of 7 working days from the date of the receipt of the application for releasing the security after the amount payable specified in FORM GST ASMT-07 has been paid.

GST tax assessment

Assessment under GST

The article aims to highlight how tax assessment is carried under GST law. The law has very procedurally defined the steps and actions for assessee and GST officer.

Assessment means the determination of tax liability under GST law and includes self-assessment, re-assessment, summary assessment, and best judgment assessment. Given below are the various types of assessment under the GST Act.

  • Self-assessment (Section 59)
  • Provisional assessment (Section 60)
  • Scrutiny assessment (Section 61)
  • Best judgment assessment (Section 62 & 63)
    • Assessment of non-filers of returns (Section 62)
    • Assessment of unregistered persons (Section 63)
  • Summary assessment (Section 64)

Only self-assessment is done by the taxpayer himself/itself. All the other assessments are undertaken by tax authorities. Under this article, we will discuss about self-assessment under GST, please refer to our other articles on the subject to read about various other assessments.

Self-assessment (Section 59)

Every registered person would be required to assess his tax liability in accordance with the provision of GST laws and report the basis of calculation of tax liability to the tax authorities, by the filing of periodic tax returns under section 39. Currently, Form GSTR 3B is being filed for declaring output and input tax details by assessees.

Related provisions if there is a delay in the filing of periodic tax returns: –

Section 47: – Levy of late fees
Any registered person who fails to furnish the details of outward or inward supplies required under returns required under section 39 by the due date shall pay a late fee of Twenty-five rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees, equal amount of late fees under SGST act shall also be levied.

Provided that such late fees shall be reduced to Rs. 10 in case of nil reporting/liability during the tax period.

The late fee has recently been waived off for the returns being filed between 22nd December 2018 to 31st March 2019 for the period pertaining to July 2017 to September 2018

Section 50: – Interest on late payment of GST liability
(1) Every person who is liable to pay tax, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall pay on his own, interest eighteen per-cent or such rate as may be notified by the Government on the recommendations of the Council.
(2) The interest under sub-section (1) shall be calculated from the day succeeding the day on which such tax was due to be paid till the date of payment.

Further, the GST officer can levy penalties under Section 122 of the CGST Act, in case one file any wrong or false information in the GST returns.

Clubbing of Income / Income tax on gifts

Although the Gift tax in India is abolished although certain provisions in Income Tax law makes gifts or income derived from gifts taxable. The below article explains the summary of related gift related provisions under the Income Tax Act.

SECTION

NATURE OF TRANSACTION

TO BE CLUBBED IN THE HANDS OF

CONDITIONS/EXCEPTIONS

Section 60 of Income Tax Act

Transfer of Income without transfer of Assets.

Transferor who transfers
the income.

Irrespective of:
1. Whether such transfer is revocable or not.

2. Whether the transfer is effected before or after the commencement of IT Act.

Income for the purpose of Section 64 includes losses.

Section 61 of the Income Tax Act

Revocable transfer of Assets.

Transferor who transfers
the Assets.

Transfer also held as revocable
1. If there is also a provision in the agreement to re-transfer directly or indirectly whole/part of income/asset to the transferor;

2. If there is a right to reassume power, directly or indirectly, the transfer is held revocable and actual exercise is not necessary.

3. Where no absolute right is given to transferee and asset can revert back to the transferor in prescribed circumstances, the transfer is held as revocable.

Exceptions
Trust/transfer irrevocably during the lifetime of beneficiaries/transferee

Section 64(1)(ii) of Income Tax Act

Salary, Commission,
Fees or remuneration
paid to spouse from a concern in which an individual has a
substantial* interest.

Spouse (husband/wife) whose total income (excluding income to be clubbed)
is greater.

Condition

The relationship of husband
and wife must subsist at the
time of accrual of the income

Exceptions (Clubbing not applicable if)


1. Spouse possesses technical
or professional qualification
and remuneration is solely
attributable to the application of
that knowledge/qualification.

2. Income other than salary, commission, fees or remuneration.

Section 64(1)(iv) of Income Tax Act

Income from assets
transferred directly or indirectly to the spouse without adequate consideration.

(other Than House property*)

Individual transferring
the asset.

Clubbing also applicable, if:-

1. Cash gifted to spouse and he/she invests to earn interest.

2. Capital gain on sale of property which was received without consideration from the spouse.

3. The transaction must be real.

Clubbing not applicable if:
The assets are transferred;


1. With an agreement to live apart.

2. Before marriage.

3. Income earned when relation does not exist.

4. By Karta of HUF gifting co-parceners property to his wife.

5. Property acquired out of pin (saved) money.

6. Income earned out of Income arising from transferred assets not liable for clubbed.

Section 64(1)(vi) of Income Tax Act

Income from the assets transferred to Daughter in Law (son’s wife).

Individual transferring
the Asset.

Conditions:


The transfer should be without adequate consideration. Cross transfers are also covered.

Section 64(1)(vii) of Income Tax Act

Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his Spouse.

Individual transferring
the Asset.

Conditions:


1. The transfer should be
without adequate consideration.

2. Transferor need not necessarily have taxable income of his own

Section 64(1)(viii) of Income Tax Act

Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his Son’s wife.

Individual transferring
the Asset.

Conditions:

1. The transfer should be
without adequate consideration.

2. Transferor need not necessarily have taxable income of his own

Section 64(1A) of the Income Tax Act

Income of a minor child
[Child/kid includes step child, adopted child, and minor married daughter].

1. If the marriage subsists, in the hands of the parent whose taxable income is higher or

2. If parents are staying separate because of divorce, in the hands of the person who maintains the minor child.

3. Income once included
in the total income of either of parents, it shall continue to be included in the hands of the same parent in the subsequent year unless AO is satisfied that it is necessary to do so

Clubbing not applicable for:


1. Income of a minor child
suffering any disability specified u/s. 80U.

2. Income on account of manual work done by the minor child.

3. Income on account of any
activity involving the application
of skills, talent or specialized knowledge and experience such as income from KBC or quiz competition.

4. Income out of property transferred for without consideration to a minor married daughter,

Exemption up to limit:-

The parent in whose hands the minor’s income is clubbed is entitled to an exemption up to Rs. 1,500 per child. [Section 10(32)]

Section 64(2) of the Income Tax Act

Income of HUF from
property converted by the individual into HUF property.

Income is included in
the hands of individual
& not in the hands of
HUF.

Clubbing applicable even if:
The converted property is
subsequently partitioned;
income derived by the spouse from such converted property will be taxable in the hands of the individual.

Section 27 of the Income Tax Act

Income from House property
transferred directly or indirectly to the spouse without adequate consideration.

Individual transferring
the asset.

Income from transfer of such house property will be the income of transferor such as Rental Income etc.