MM TAX CLUB

Standard Operating Procedure (SOP) for Scrutiny of returns for FY 2017-18 and 2018-19

Section 61 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGSTAct”) read with rule 99 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “theCGST Rules”) provides for scrutiny of returns and related particulars furnished by the registered person.Till the time a Scrutiny Module for online scrutiny of returns is made available on the CBIC-GSTapplication, as an interim measure, the following Standard Operating Procedure (SOP) is being issued bythe Board in order to ensure uniformity in selection/ identification of returns for scrutiny, methodologyof scrutiny of such returns and other related procedures.

2. Relevant statutory provisions

2.1 Section 61 of the CGST Act, read with rule 99 of the CGST Rules, provides for scrutiny of returns.

The same are reproduced below for reference:

Section 61. Scrutiny of returns:

 “(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 initiateappropriate action including those under section 65 or section 66 or section 67, or proceed todetermine the tax and other dues under section 73 or section 74.”

Rule 99. Scrutiny of returns:

“(1) Where any return furnished by a registered person is selected for scrutiny, the proper officershall scrutinize the same in accordance with the provisions of section 61 with reference to theinformation available with him, and in case of any discrepancy, he shall issue a notice to the saidperson in FORM GST ASMT-10, informing him of such discrepancy and seeking his explanationthereto within such time, not exceeding thirty days from the date of service of the notice or suchfurther period as may be permitted by him and also, where possible, quantifying the amount oftax, interest and any other amount payable in relation to such discrepancy.

(2) The registered person may accept the discrepancy mentioned in the notice issued under subrule (1), and pay the tax, interest and any other amount arising from such discrepancy andinform the same or furnish an explanation for the discrepancy in FORM GST ASMT-11 to theproper officer.

(3) Where the explanation furnished by the registered person or the information submitted undersub-rule (2) is found to be acceptable, the proper officer shall inform him accordingly in FORMGST ASMT-12.”

2.2 The aforementioned provisions suggest that scrutiny of returns, inter-alia, entails the following:

(a) Selection of returns furnished by a registered person for scrutiny, preferably based on robust riskparameters.

(b) Scrutiny of the returns and related particulars furnished by the registered person to verify thecorrectness of the return. Information available with the proper officer in various returns andstatements furnished by the registered person and the data/details made available through varioussources like DGARM, ADVAIT, GSTN, E-Way Bill Portal, etc. may be relied upon for this purpose.

(c) Informing the registered person of the discrepancies noticed, if any, along with quantification of theamount of tax, interest and any other amount payable in relation to such discrepancy and seeking hisexplanation thereto.

(d) Where the registered person accepts the discrepancy and pays the tax, interest and any otheramount arising from such discrepancy or where the explanation furnished by the registered person isfound acceptable, conclude the proceedings after informing the registered person.

(e) Where no satisfactory explanation is furnished by the registered person or where the registeredperson, after accepting the discrepancy, fails to pay the tax, interest and any other amount arising fromsuch discrepancy, initiate appropriate action including those under section 65 or section 66 or section67, or determination of tax and other dues under section 73 or section 74 of the CGST Act.

 3. Selection of returns for scrutiny

3.1 Selection of returns for scrutiny is to be based on specific risk parameters. For this purpose, theDirectorate General of Analytics and Risk Management (DGARM) has been assigned the task to selectthe GSTINs registered with Central tax authorities, whose returns are to be scrutinized, and tocommunicate the same to the field formations from time to time through the DDM portal (to the nodalofficer of the Commissionerate concerned) for further action.

3.2 For convenience of field officers, DGARM would also provide some relevant data (along withlikely revenue implication) pertaining to the returns to be scrutinized through the DDM portal. It may benoted that the data provided by the DGARM is generated at a particular point of time which mayundergo change at the time of scrutiny of returns by the proper officer due to subsequent compliancescarried out by the taxpayer or by the suppliers of the taxpayer. The proper officer shall, therefore, relyupon the latest available data.

4.Proper officer for scrutiny of returns

Vide Circular No. 3/3/2017 – GST dated 05.07.2017, “Superintendent of Central Tax” has beenassigned the functions as the proper officer in relation to sub-section (1) and sub-section (3) of section61 of the CGST Act. Accordingly, scrutiny of returns of a taxpayer may be conducted by Superintendentof Central Tax in-charge of the jurisdictional range of the said taxpayer.

5. Scrutiny Schedule

5.1 Once the list of GSTINs, whose returns have been selected for scrutiny, is communicated to thefield formations, the proper officer, with the approval of the divisional Assistant / Deputy Commissioner,shall finalize a scrutiny schedule. Such scrutiny schedule will specify month-wise schedule for scrutiny inrespect of all the GSTINs selected for scrutiny. While preparing the scrutiny schedule, the scrutiny of theGSTINs, which appear to be riskier based on the likely revenue implication indicated by DGARM, may beprioritized. Such scrutiny schedules in respect of all the ranges within the CGST Zone shall be reported tothe Directorate General of Goods and Services Tax (DGGST) by the concerned Zone, in the formatenclosed as Annexure A.

5.2 The proper officer shall conduct scrutiny of returns pertaining to minimum of 3 GSTINs permonth. Scrutiny of returns of one GSTIN shall mean scrutiny of all returns pertaining to a financial yearfor which the said GSTIN has been identified for scrutiny.

6. Process of scrutiny by the Proper Officer

6.1 The Proper Officer shall scrutinize the returns and related particulars furnished by the registeredperson to verify the correctness of the returns. Information available with the proper officer on thesystem in the form of various returns and statements furnished by the registered person and thedata/details made available through various sources like DGARM, ADVAIT, GSTN, E-Way Bill Portal, etc.may be relied upon for this purpose.

6.2 For convenience of proper officers, an indicative list of parameters to be verified is enclosed asAnnexure B. It may be noted that the said list is only indicative, and not exhaustive. The proper officermay also consider any other parameter, as he may deem fit, for the purpose of scrutiny.

6.3 It may be noted that at this stage, the proper officer is expected to rely upon the informationavailable with him or with the department. As far as possible, scrutiny of returns should have minimalinterface between the proper officer and the registered person and, there should normally not be anyneed for seeking documents/ records from the taxpayers before issuance of FORM GST ASMT-10.

6.4 The proper officer shall issue a notice to the registered person in FORM GST ASMT-10 informinghim of the discrepancies noticed and seeking his explanation thereto. While issuing such notice, theProper Officer may, as far as possible, quantify the amount of tax, interest and any other amountpayable in relation to such discrepancies. It may also be ensured that the discrepancies socommunicated may, as far as possible, be specific in nature and not vague or general. There may becases where the registered person may already have made additional payment of tax, cess, etc., afterfiling of the returns for the relevant tax period, through FORM GST DRC-03. The payments thus madethrough FORM GST DRC-03 may also be taken into consideration while communicating discrepancies tothe taxpayer in FORM GST ASMT-10.

6.5 For each GSTIN identified for scrutiny for a financial year, the proper officer is required toscrutinize all the returns pertaining to the corresponding Financial Year under consideration and a singlecompiled notice in FORM GST ASMT-10 may be issued to the taxpayer for that financial year.

6.6 The registered person may accept the discrepancy mentioned in the notice issued in FORM GSTASMT-10, and pay the tax, interest and any other amount arising from such discrepancy through FORMGST DRC-03 and inform the same or may furnish an explanation for the discrepancy in FORM GSTASMT-11 to the proper officer within the time period prescribed under rule 99 of CGST Rules.

6.7 Where the explanation furnished by the registered person or the information submitted inrespect of acceptance of discrepancy and payment of dues is found to be acceptable by the ProperOfficer, he shall conclude the proceedings by informing the registered person in FORM GST ASMT-12.

6.8 In case no satisfactory explanation is furnished by the registered person in FORM GST ASMT-11within a period of thirty days of being informed by the proper officer or such further period as may bepermitted by him or where the registered person, after accepting the discrepancies, fails to pay the tax,interest and any other amount arising from such discrepancies, the proper officer, may proceed todetermine the tax and other dues under section 73 or section 74. Needless to mention, for proceedingunder section 73 or section 74, monetary limits as specified in Circular No. 31/05/2018-GST dated 9^thFebruary 2018 shall be adhered to. However, if the proper officer is of the opinion that the matterneeds to be pursued further through audit or investigation to determine the correct liability of the saidregistered person, then he may refer the matter to the jurisdictional Principal Commissioner /Commissioner through the divisional Assistant / Deputy Commissioner, for the decision whether thematter needs to be referred to Audit Commissionerate or Anti-evasion Wing of the Commissionerate, asthe case may be.

7. Timelines for scrutiny of returns

7.1 Scrutiny of returns is to be conducted in a time bound manner, so that necessary action to safeguard revenue may be taken up expeditiously. In this regard, the following timelines may be observed by all concerned:

7.2 It may also be ensured while conducting scrutiny that the requisite action for issuing notices/orders is taken well ahead of the time limits as prescribed in section 73 or section 74 of the CGST Act, as the case may be, in respect of a return identified for scrutiny for a financial year.

8. Reporting and Monitoring

A Scrutiny Register shall be maintained by the proper officer in respect of the GSTINs allotted for scrutiny, in the format detailed in Annexure C. The progress of the scrutiny exercise as per the scrutiny schedule shall be monitored by the jurisdictional Principal Commissioner/ Commissioner on monthly basis. Further, a Scrutiny Progress Report, in the format detailed in Annexure D, shall be prepared by the proper officer at the end of every month. The monthly Scrutiny Progress Report for each Commissionerate of the CGST Zone shall be compiled for each month and forwarded to the Director General of Goods and Service Tax (DGGST) by the Principal Chief Commissioner/Chief Commissioner of the concerned Zone by 10th day of the succeeding month. The DGGST, in turn, would present the progress report to the Board, through the GST Policy Wing, by the 20th day of the corresponding month.

9. Till the time scrutiny module is made available on the CBIC-GST application/AIO for CBIC officers, the aforesaid interim procedure for scrutiny of returns may be conducted on manual basis. Any communication with the taxpayer for the purpose of scrutiny shall be made with the use of DIN as per the guidelines mentioned in the Circular No. 122/41/2019-GST dated 5th November 2019.

10. This SOP is envisaged to enable the department to leverage technology and risk-based tools to encourage self-compliance and to conduct scrutiny of returns with minimal interaction with the registered persons. All Principal Chief Commissioners (PCCs)/ Chief Commissioners (CCs) are requested to closely monitor timely scrutiny of returns of the identified GSTINs within their jurisdictions.

11. Difficulties, if any, in implementation of these instructions may be informed to the Board (gstcbec@gov.in).

Annexure can be accessed from the below link

SOP