SCRUTINY OF GST RETURNS- SOME ISSUES

[Dr. Sanjiv Agarwal]

Meaning of Scrutiny

The literal meaning of ‘scrutiny’ is critical observation for examination of any paper / document etc. The purpose of scrutiny is different in different enactments. For example, for the purpose of voting in elections, scrutiny means examination of anything; an official examination of votes cast at an election in order to eliminate any votes that are invalid and to rectify or confirm the numbers stated in the return.

The term ‘scrutiny assessment’ has been explained in Advanced Law Lexicon by P. Ramanatha Aiyar in following terms:

“Scrutiny assessment – It arises where an assessing officer considers it necessary to ensure that the assessee has not (a) understated his income, (b) returned excessive loss, or (c) underpaid the tax. He may serve a notice on the assessee requiring him to appear on the specified date or to furnish any documents/ evidence in support of his return.

Scrutiny and Audit

While GST return scrutiny is conducted under section 61 of the CGST Act, 2017, the audit is prescribed under section 65 and 66 of the CGST Act, 2017. GST scrutiny may include comparisons, matching and reconciliations of various figures and tables. Scrutiny of returns may lead to order for audit of return but any audit will not lead to scrutiny of return. In cases, where audit has already been conducted, the same cases cannot be selected for scrutiny of returns. Scrutiny leads to audit and not vice-versa.

No Return, No Scrutiny

As per the scheme of section 61 of CGST Act, 2017, ‘Scrutiny’ is conducted of the return filed. The return becomes the subject matter of scrutiny. It implies that if the taxpayer has not filed the return or is not registered with the tax authorities which enables him to file the return, scrutiny of return cannot take place.

Filing of return is a pre-requisite for scrutiny of return. ‘No return, no scrutiny’ is the principle of section 61 of CGST Act, 2017.

The cases of non-filing of return are covered under section 62 of CGST Act, 2017, which enables the proper officer to carry out the best judgment assessment.

Section 61 also does not authorize the proper officer to issue a notice for filing of return.

Online Scrutiny of Return

Since the entire system of GST is online, scrutiny of return is also done online right from selection, issuance of notice, reply, payment etc. Nothing in scrutiny is done offline. Even where some documents are submitted offline, Proper Officer is required to upload the same on the system under the ‘reference tab’ available on the system.

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.