SCRUTINY OF RETURNS UNDER GST

[Dr. Sanjiv Agarwal]

Section 61 of CGST Act, 2017 contains the provisions of scrutiny of GST returns which empowers proper officer to scrutinize the return and related particulars furnished by the taxable person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in a manner as may be prescribed. Rule 99 of CGST Rules, 2017 provides for manner of scrutiny of returns.

Statutory provision for Scrutiny of Returns (Section 61)

61. (1) 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.

(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard. (3) In case 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.

Gist of provisions of section 61 of CGST Act, 2017

• The proper officer can scrutinize the return to verify its correctness.
• It is a non-compulsory pre-adjudication process.
• In simple words, it is not mandatory for the officer to scrutinize return.
• Scrutiny of returns is not a legal or judicial proceeding, i.e., no order can be passed.
• The officer will ask for explanations on discrepancies noticed.
• The proper officer may issue SCN, if required.
• Department can select returns for verification – Can seek explanation for discrepancy detected
• GST officers can scrutinize a GST return and related particulars furnished by the registered person to verify the correctness of the return.
• In case of any discrepancies noticed by the officer, he/she would inform the same to the registered person and seek his explanation on the same.
• On the basis of the explanations received from the registered person, the officer can take following actions:
• If the explanation is satisfactory, officer will inform about the same to the registered person and no further action taken.
• If the explanation provided is not satisfactory or the registered person has failed to take corrective measures after accepting the discrepancies, proper officer to initiate appropriate action:
  • Conducting audit of registered person,
  • conducting special audit,
  • inspect and search the place of business of registered person, or
  • initiate demand and recovery provisions.

What is meant by scrutiny has not been defined in GST law. Though, scrutiny cannot be considered as detailed and independent as of audit, scrutiny implies verification of correctness of information submitted in the returns by the taxpayers. It is basically a scrutiny of information submitted, its timeliness, its authentic accuracy and corroborative verification from other documents.

The scrutiny of returns could be manual, desk review or an online evaluation. The scrutiny of returns becomes important in an era of self assessment where the need for a strong compliance mechanism cannot be over emphasized.  The person who does the scrutiny is called scrutineer and the process is called scrutiny or to scrutinize

When any return is selected for scrutiny, the proper officer verifies the information with reference to the information available with him. In case of observance of any discrepancy, to issue notice to the taxable person and seek his explanation to the discrepancy observed by him.

There could be following different scenarios in response to such notice received from proper officer, viz,

(a)   The taxable person accepts the discrepancy, deposits the shortfall in the payment of tax along with interest thereon and informs to proper officer.

(b)   The taxable person submits the explanation to the points raised by proper officer in his reply, the explanation is found to be acceptable to proper officer, the proper officer closes the matter and informs the taxable person.

(c)   The explanation is not found to be acceptable or after accepting the discrepancy, the taxable person fails to deposit the tax with interest, the proper officer takes the following actions.

1. Orders for audit by tax authorities – section 65 of the CGST Act, 2017
2. Orders for special audit – section 66 of the CGST Act, 2017
3. Initiates inspection, search or seizure – section 67 of the CGST Act, 2017
4. Determination of tax not paid or short paid – section 73 of the CGST Act, 2017
5. Determination of tax not paid or short paid by reason of fraud or willful misstatement – section 74 of the CGST Act, 2017

Time limit for reply to Notice

The notice of discrepancy issued by proper office in respect of scrutiny of returns has to be replied within such time not exceeding 30 days from date of service of notice or such further period as may be permitted by proper officer.

Applicable Rules

Rule 99 of the CGST Rules, 2017, provide for manner and procedure for provisional assessment under section 61 of the CGST Act, 2017 which inter-alia, contain the following :

Sub-rule	Providing for
1	Provides for initiating scrutiny of returns furnished by registered person, based on information available; issue notice on finding discrepancies, seeking explanation, quantifying the liability and extending the period of 30 days if deemed fit.
2	Provides the manner in which registered person may either accept the discrepancy or furnish an explanation to the proper officer.
3	Manner in which proper officer should send the intimation to the registered person in case the information / explanation is, acceptable.

Applicable Forms

According to rule 99 of CGST Rules, 2017, following forms are required to be used for various purposes and are to be filed online.

S.No.	Form No.	Purpose
1	GST ASMT-10	Issuance of notice by proper officer on noticing discrepancies on return
2	GST ASMT-11	Response by registered person against ASMT-10 by way of accepting the discrepancy or submitting explanation
3	GST ASMT-12	Intimation by proper officer on finding explanations satisfactory