Provisional assessment

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Provisional assessment 2017-04-13T23:54:45+00:00
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  • Ashish BadalaCA Ashish Badala
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    #945 |

    (1) Subject to the provisions of sub-section (2), where the taxable person is unable to determine the value of goods or services or both or determine the rate of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the date of receipt of such request, allowing payment of tax on provisional basis at such rate or on such value as may be specified by him.
    (2) The payment of tax on provisional basis may be allowed, if the taxable person executes a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, binding the taxable person for payment of the difference between the amount of tax as may be finally assessed and the amount of tax provisionally assessed.

    (3) The proper officer shall, within a period not exceeding six months from the date of the communication of the order issued under sub-section (1), pass the final assessment order after taking into account such information as may be required for finalizing the assessment.
    Provided that the period specified in this sub-section may, on sufficient cause being shown and for reasons to be recorded in writing, be extended by the Joint Commissioner or Additional Commissioner for a further period not exceeding six months and by the Commissioner for such further period not exceeding four years.

    (4) The registered person shall be liable to pay interest on any tax payable on the supply of goods or services or both under provisional assessment but not paid on the due date specified under sub-section(7) of section 39 or the rules made thereunder, at the rate specified under sub-section (1) of section 50, from the first day after the due date of payment of tax in respect of the said supply of goods or services or both till the date of actual payment, whether such amount is paid before or after the issuance of order for final assessment.
    (5) Where the registered person is entitled to a refund consequent to the order of final assessment under sub-section (3), subject to the provisions of sub-section (8) of section 54, interest shall be paid on such refund as provided in section 56.

    Priya MadrechaPriya Madrecha
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    60.1 Analysis
    A Provisional assessment can be resorted to in the following situations:
    (i)    Value of supply cannot be determined by the taxable person, viz, there is a difficulty in ascertaining:
         Transaction value to be adopted for determination of tax payable;      Inclusion or exclusion of any amounts in the value of supply
         Existence of any circumstance causing failure of transaction value declared
    (ii)    Rate of tax applicable on the supply cannot be determined by the taxable person, viz there is difficulty in ascertaining:
         Classification of the goods and / or services under the relevant Schedule;
     Eligibility to any exemption notification or compliance with conditions associated with such exemption.
    Except for the above instances i.e. the value or rate of tax applicable thereto the facility of provisional assessment is not available in any other instance. For example, there may be uncertainty about the kind of tax (IGST or CGST-SGST) applicable, time of supply, supplies to be treated as “supply of goods” or “supply of services”, etc. In these cases, no recourse is available to the taxable person to seek provisional assessment of tax.
    Once it is determined that this section is applicable, then the following conditions are to be fulfilled:
     Taxable person must initiate a request to the Proper Officer in writing giving reasons (i.e. information for which self-assessment cannot be done by him) to be permitted to pay tax on provisional basis;
     Proper Officer is to pass an order within 90 days of receipt of request allowing payment of taxes on provisional basis subject to execution of bond by the registered person with surety or security for any differential tax that may be eventually assessed.
    Thus, provisional assessment can be made only upon a written request made by the registered person in FORM GST ASMT-01 electronically through common portal, along with the documents in support of his request. The provisional assessment cannot be resorted to by the Proper Officer on suo-motu basis.
    The proper officer may, issue a notice in FORM GST ASMT-02 wherein it requires the registered person seeking provisional assessment to appear in person or furnish additional information or documents in support of his request. The applicant has to file a reply to the notice in FORM GST ASMT – 03.
    After considering the reply filed, the proper officer has to pass an order in FORM GST ASMT04, either rejecting the application, stating the grounds for such rejection or allowing payment of tax on provisional basis.
    Such order should indicate the value or the rate or both on the basis of which the provisional assessment is to be made.
    The order so passed should also indicate the amount for which bond has to be executed by the taxable person for payment of the difference between the amount of tax (IGST, CGST, SGST as well as UTGST), as may be finally assessed, and the amount of tax provisionally assessed. Further the said order would also intimate the quantum of security to be furnished which shall not exceed 25% of the bond amount.
    On such order by the proper officer, the registered person has to execute a bond in FORM GST ASMT-05 along with a security in the form of a bank guarantee as ordered. A bond furnished to the proper officer under the Central/State Goods and Services Tax Act or Integrated Goods and Services Tax Act or Union Territory Goods and Services Tax Act and cess, if any shall be deemed to be a bond furnished under the provisions of this Act and the rules thereunder.
    Under the GST Act, a Proper Officer shall be required to finalise the assessment and pass the final assessment order. For this purpose, the proper officer shall issue a notice in FORM GST ASMT-06, calling for information and records required for finalization of assessment. After that the proper officer would issue a final assessment order in FORM GST ASMT-07, specifying the amount payable by the registered person or the amount refundable, if any.
    The finalisation of assessment has to be completed, within a period of 6 months from the date of communication of provisional assessment order However, on sufficient cause being shown and for reasons to be recorded in writing, this period can be extended by Joint / Additional Commissioner or by the Commissioner for such further period as mentioned below:
    Additional / Joint Commissioner      Maximum of 6 months
    Commissioner     Maximum of 4 years
    It may be noted that, in the statement of outward supply to be furnished by a registered person under section 37(1) i.e. in Form GSTR-1, the invoices in respect of which tax is paid under provisional assessment is required to be mentioned.
    If the amount of tax determined to be payable under final assessment order, is more than tax which is already paid along with return under section 39, the registered person shall be liable to pay interest on the shortfall, at the rates specified in Section 50(1) of the Act, from the first day after due date of payment of tax in respect of the said goods and /or services, till the date of actual payment, irrespective of whether such shortfall is paid before or after the issuance of order for final assessment. Likewise, when the registered person is entitled to refund consequent upon the order for final assessment, interest shall be paid on such refund at the rates specified in Section 56. As such, the registered person must avail this opportunity of provisional assessment after much thought and careful consideration.
    Any claim for refund of taxes paid in excess under this Section must be in accordance with Section 54 and except for authorizing refund, this Section does not itself permit grant of refund.
    On issue of provisional assessment order, the applicant may file an application in FORM GST ASMT- 08 for release of security furnished after issue of order. On such application, the the proper officer has to release the security furnished, after ensuring the payment of the amount specified in the order and issue an order in FORM GST ASMT–09. This has to be issued within a period of 7 working days from the date of receipt of the application for release of security.
    60.2  Comparison with equivalent provisions under other laws:
    Section 60 of the CGST Act, is broadly drafted on the lines of the current provisions of Central Excise and Service Tax law. A provisional assessment is permitted under Central Excise Act & also under the Finance Act 1994, and is governed by the procedure contained in Rule 7 of the Central Excise Rules or as the case may be, Rule 6(4)/(4A)/(4B)/(5) of Service Tax Rules. Under both these Acts, provisional Assessment is carried out only at the instance of the assessee.
    Under the State VAT Acts, the concept of provisional assessment “at the instance of assessee”, is not prevalent. Some State Acts have used this term to cover the cases of bestjudgment assessment done by the tax authorities, in the absence of returns or records. For example, refer Section 32 of Gujarat Value Added Tax Act or Section 40 of the Orissa Value Added Tax Act.
    60.3 Related Provisions:
    Section / Rule / Form      Description
    Section 50     Interest
    Section 54      Refunds

    60.4 FAQ
    Q1.     When is a taxable person permitted to pay tax on a provisional basis?
    Ans. Tax payments can be made on a provisional basis only when a proper officer passes an order for permitting the same. For this purpose, the registered person has to make a written request to the proper officer, giving reasons for payment of tax on a provisional basis. The reasons for this purpose may be a case where the registered person is unable to determine the value of goods and/ or services or determine the applicable tax rate, etc. Further, the registered person may also be required to execute a bond in the prescribed form, and with such surety or security as the proper officer may deem fit.
    Q2.     What is the latest time by which final assessment is required to be made?
    Ans. It is the responsibility of the proper officer to pass the final assessment order after taking into account such information as may be required for finalizing the assessment, within six months from the date of the communication of the order for provisional assessment. However, on sufficient cause being shown and for reasons to be recorded in writing, the timelines may be extended by the Joint/Additional Commissioner for a further period not exceeding six months and by the Commissioner for such further period not exceeding 4 years as he may deem fit.
    60.5 MCQs
    Q1. Where the tax liability as per the final assessment is higher than tax paid at the time of filing of return u/s 39 the registered person shall_______________.
    (a)    not be liable to interest, Provided he proves that his actions were bonafide
    (b)    be liable to pay interest from due date till the date of actual payment
    (c)    be liable to pay interest from date of the final assessment till the date of actual payment
    (d)    be liable to pay interest from due date till the date of the final assessment Ans. (b) be liable to pay interest from due date till the date of actual payment Q2.     Provisional assessment under the GST law is permitted to be:
    (a)    At the instance of the taxable person
    (b)    At the instance of the tax authorities on a best judgment basis in absence of adequate details or response from registered person
    (c)    Either of (a) and (b)
    (d)    Available only to certain notified persons
    Ans. (a) At the instance of the taxable person
    Q3. On the grounds of sufficient reasons being Provided by proper officer the time period for passing final assessment order can be extended by Joint/ Additional Commissioner for further period of not exceeding
    (a)    2 months
    (b)    4 months
    (c)    6 months
    (d)    No time limit.
    Ans. (c) 6 months
    Q4.     On the grounds of sufficient reasons being Provided by proper officer the time period for passing final assessment order can be extended by Commissioner for further period of
    (a)     2 months (b)     4 years
    (c)    6 months
    (d)    No time limit.  Ans. (b) 4 years

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