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.

Reverse charge mechanism under GST: A boon or bane for small players

 

Any taxes are generally being paid out by seller of goods and services. Under reverse charge mechanism, the tax payment is made by buyer instead of supplier. There are many instances under which one needs to pay tax under reverse charge. In this article, we will analyse the most important section for reverse charge, we will analyse Section 9(4) of CGST Act, which requires payment of tax by registered dealer on any taxable supplies received from unregistered dealers.

 

“The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”

 

This wasn’t a condition in earlier draft model GST law and has been incorporated in revised version of law. The recipient of goods or services needs to pay this tax and claim the amount paid as input. Though it doesn’t increase any tax liability of recipient but will increase administrative and compliance hassle for him. The prescribed process requires one the recipient to raise an Invoice for such transaction and pay the tax. Due to this reason, this move of imposing tax is being considered as unfriendly for small business man.

 

However, this will be a very peculiar position in case the unregistered dealer is dealing with dealers under registered under composition scheme. Under the composition scheme, the dealers are not entitled to claim any input tax and they straight away needs to pay a fixed lowered percentage of tax on total turnover. In such cases for recipient, any such transaction with unregistered dealer becomes a straight forward cost.

 

Let’s see the positive side of RCM provisions, if we deep dive the situation, this may prove as a blessing in disguise for small unregistered players for the reasons as under:

 

  1. If small supplier doesn’t file his GST return, the large players will hesitate to deal with him. Thus, GST restricts business between small and big player.

 

  1. With the introduction of RCM, any small player who generally doesn’t have any input as such is free to remain unregistered. But still the large player can deal with him and pay tax on their own. With the introduction of RCM provisions, now large player don’t need to depend upon tax payment and return filing by such small unregistered suppliers.

 

  1. One also needs to check the cost benefit analysis of GST compliance for a small player vis-a-vis the amount of benefit of GST input availed by him before commenting upon tax efficiency.

 

Thus in our view, though RCM it is being considering as show stopper, it is rather an enabler for small business man and one needs to carefully analyse the matter on highlighted parameters before reaching the conclusion.

GST registration for feeelancers

 

Query: Does a freelancer service provider needs to take GST registration.

Answer:

  • If the amount of taxable goods or services is greater than Rs 20 lacs, it is a must.
  • In case, the freelancer needs to give services outside the state of fixed place of business, the above limit of Rs 20 lacs doesn’t apply. He is required to take registration irrespective of turnover
  • If the freelancer occasionally undertakes transaction involving taxable supply of goods or services outside the state of his fixed place of business, he needs to take temporary registration in the state wherein the supply has been made.