Frequently Asked Questions – Officials

Q 1. What is Goods and Service Tax (GST)?

Ans. It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Q 2. What type of GST is proposed to be implemented?

Ans. It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

Q 3. What principles were adopted for subsuming the above taxes under GST?  

Ans. The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind: (i) Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services. (ii) Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other. (iii)The subsumation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST. (iv)Revenue fairness for both the Union and the States in dividually would need to be attempted.

Q 4. What is GSTN and its role in the GST regime?

Ans. GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST. The functions of the GSTN would, inter alia, include:

  • facilitating registration;
  • forwarding the returns to Central and State authorities;
  • computation and settlement of IGST;
  • matching of tax payment details with banking network;
  • providing various MIS reports to the Central and the State Governments based on the tax payer return information;
  • providing analysis of tax payers’ profile; and
  • running the matching engine for matching, reversal and reclaim of input tax credit.

The GSTN is developing a common GST portal and applications for registration, payment, return and MIS/ reports. The GSTN would also be integrating the common GST portal with the existing tax administration IT systems and would be building interfaces for tax payers. Further, the GSTN is developing back-end modules like assessment, audit, refund, appeal etc. for 19 States and UTs (Model II States). The CBEC and Model I States (15 States) are themselves developing their GST back-end systems. Integration of GST front-end system with backend systems will have to be completed and tested well in advance for making the transition smooth.

Q 5. How are the disputes going to be resolved under the GST regime?

Ans. The Constitution (one hundred and first amendment) Act, 2016 provides that the Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute- (a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side and one or more other Sates on the other side; or (c) between two or more States, arising out of the recommendations of the Council or implementation thereof.

Q 6. What are the other legislative requirements for introduction of the GST?

Ans. Suitable legislation for the levy of GST (Central GST Bill, Integrated GST Bill and State GST Bills) drawing powers from the Constitution would need to be passed by the Parliament and the State Legislatures. Unlike the Constitutional Amendment which requires 2/3rd majority, the GST Bills would need to be passed by a simple majority. Obviously, the levy of the tax can commence only after the GST law has been enacted by the Parliament and respective Legislatures.

Assessment and Audit

Q 1. Who is the person responsible to make assessment of taxes payable under the Act?

Ans. Every person registered under the Act shall himself assess the tax payable by him for a tax period and after such assessment he shall file the return required under section 34.

Q 2. Is there any provision in MGL for tax treatment of goods returned by the recipient?

Ans. Tax paid can be adjusted by the supplier by issuing credit notes, and the tax liability can be adjusted in the return relating to the months in which credit note was issued, but not later than September following the end of the year or date of filing of annual returns.

Q 3. ‘A’ supplied goods to ‘B’ in April 2017, these goods were returned by ‘B’ to ‘A’ on June 2017. The tax rate charged by ‘A’ on such goods was 18%. In May 2017, the rate was amended to 18.5%. What is the tax payable on return of such inward supply by ‘B’ to ‘A’?

Ans. 18%.

Q 4. When can a taxable person pay tax on a provisional basis?

Ans. As a taxpayer has to pay tax on self-assessment basis, a request for paying tax on provisional basis has to come from the taxpayer which will then have to be permitted by the proper officer. In other words, no tax officer can suomoto order payment of tax on provisional basis. This is governed by section 58 of MGL. Tax can be paid on a provisional basis only after the proper officer has permitted it through an order passed by him. For this purpose, the taxable person has to make a written request to the proper officer, giving reasons for payment of tax on a provisional basis. Such a request can be made by the taxable person only in such cases where he is unable to determine: a) the value of goods or services to be supplied by him, or b) determine the tax rate applicable to the goods or services to be supplied by him. In such cases the taxable person has to execute a bond in the prescribed form, and with such surety or security as the proper officer may deem fit.

Q 5. What is the latest time by which final assessment is required to be made?

Ans. The final assessment order has to be passed by the proper officer within six months from the date of the communication of the order of provisional assessment. However, on sufficient cause being shown and for reasons to be recorded in writing, the above period of six months may be extended: a) by the Joint/Additional Commissioner for a further period not exceeding six months, and b) by the Commissioner for such further period as he may deem fit.

Q 6. Where the tax liability as per the final assessment is higher than in provisional assessment, will the taxable person be 119 liable to pay interest?

Ans. Yes. He will be liable to pay interest from the date the tax was due to be paid originally till the date of actual payment.

Q 7. What recourse may be taken by the officer in case proper explanation is not furnished for the discrepancy detected in the return filed under section 59 of MGL?

Ans. If the taxable person does not provide a satisfactory explanation within 30 days of being informed (extendable by the officer concerned) or does not take corrective action within a reasonable period after accepting the discrepancies, the Proper Officer may take recourse to any of the following provisions: (a) Proceed to conduct audit under Section 63 of the Act; (b) Direct the conduct of a special audit under Section 64 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or (c) Undertake procedures of inspection, search and seizure under Section 79 of the Act; or (d) Initiate proceeding for determination of tax under Section 66 or 67 of the Act.

Q 8. Whether Proper Officer is required to give any notice to taxable person before completing assessment u/s 60?

Ans. As this provision relates to ‘best judgment assessment’, giving a notice to the taxable person is not required.

Q 9. If a taxable person fails to file the return required under law (under section 34 or 40), what legal recourse is available to the tax officer?

Ans. The proper officer has to first issue a notice to the defaulting taxable person under section 41of MGL requiring him to furnish the return within a specified period of time, which has to be a minimum of fifteen days as per section 60 of MGL. If the taxable person fails to file return within the given time, the proper officer shall proceed to assess the tax liability of the return defaulter to the best of his judgment taking into account all the relevant material available with him. This power is given under section 60 of MGL.

Q 10. Under what circumstances can a best judgment assessment order issued under section 60 be withdrawn?

Ans. The best judgment order passed by the Proper Officer under section 60 of MGL shall automatically stand withdrawn if the taxable person furnishes a valid return for the default period (i.e. files the return and pays the tax as assessed by him), within thirty days of the receipt of the best judgment assessment order.

Q 11. What is the time limit for passing order u/s 60 and 61?

Ans. The time limit for passing an assessment order under section 60 or 61 is three or five years from the due date for filing the annual return.

Q 12. What is the legal recourse available in respect of a person who is liable to pay tax but has failed to obtain registration?

Ans. Section 61 of MGL provides that in such a case, the proper officer can assess the tax liability and pass an order to his best judgment for the relevant tax periods. However, such an order must be passed within a period of five years from the due date of filing of the annual return for the financial year to which non-payment of tax relates.

Q 13. Under what circumstances can a tax officer initiate Summary Assessment?

Ans. As per section 62of MGL, Summary Assessments can be initiated to protect the interest of revenue when: a) the proper officer has evidence that a taxable person has incurred a liability to pay tax under the Act, and b) the proper officer believes that delay in passing an as sessment order will adversely affect the interest of revenue. Such order can be passed after seeking permission from the Additional Commissioner / Joint Commissioner.

Q 14. Other than appellate remedy, is there any other recourse available to the taxpayer against a summary assessment order?

Ans. A taxable person against whom a summary assessment order has been passed can apply for its withdrawal to the jurisdictional Additional/Joint Commissioner within thirty days of the date of receipt of the order. If the said officer finds the order erroneous, he can withdraw it and direct the proper officer to carry out determination of tax liability in terms of section 66 or 67 of MGL. The Additional/Joint Commissioner can follow a similar course of action on his own motion if the finds the summary assessment order to be erroneous (section 62of MGL).

Q 15. Is summary assessment order to be necessarily passed against the taxable person?

Ans. No. In certain cases like when goods are under transportation or are stored in a warehouse, and the taxable person in respect of such goods cannot be ascertained, the person in charge of such goods shall be deemed to be the taxable person and will be assessed to tax (section 62 of MGL).

Q 16. Who can conduct audit of taxpayers?

Ans. As per section 63 of MGL, any officer of CGST or SGST authorized by his Commissioner by a general or specific order may conduct audit of a taxpayer. The frequency and manner of audit will be prescribed in due course.

Q 17. Whether any prior intimation is required before conducting the audit?

Ans. Yes, prior intimation is required and the taxable person should be informed at least 15 days prior to conduct of audit.

Q 18. What is the period within which the audit is to be completed?

Ans. The audit is required to be completed within 3 months from the date of commencement of audit or within a further period of a maximum of 6 months subject to the approval of the Commissioner.

Q 19. What is meant by commencement of audit?

Ans. The term ‘commencement of audit’ is important because audit has to be completed within a given time frame in reference to this date of commencement. Commencement of audit means the later of the following: a) the date on which the records/accounts called for by the audit authorities are made available to them, or b) the actual institution of audit at the place of business of the taxpayer.

Q 20. What are the obligations of the taxable person when he receives the notice of audit?

Ans. The taxable person is required to: a) facilitate the verification of accounts/records available or requisitioned by the authorities, b) provide such information as the authorities may re quire for the conduct of the audit, and c) render assistance for timely completion of the audit.

Q 21. What would be the action by the proper officer upon conclusion of the audit?

Ans. The proper officer must without delay inform the taxable person about his findings, reasons for findings and the taxable person’s rights and obligations in respect of such findings.

Q 22. Under what circumstances can a special audit be instituted?

Ans. A special audit can be instituted in limited circumstances where during scrutiny, investigation, etc. it comes to the notice that a case is complex or the revenue stake is high. This power is given in section 64 of MGL.

Q 23. Who can serve the notice for special audit?

Ans. The Assistant / Deputy Commissioner is to serve the notice for special audit only after prior approval of the Commissioner.

Q 24. Who will do the special audit?

Ans. A Chartered Accountant or a Cost Accountant so nominated by the Commissioner may undertake the audit.

Q 25. What is the time limit to submit the audit report?

Ans. The auditor will have to submit the report within 90 days or within the further extended period of 90 days.

Q 26. Who will bear the cost of special audit?

Ans. The expenses for examination and audit including the remuneration payable to the auditor will be determined and borne by the Commissioner.

Q 27. What action the tax authorities may take after the special audit?

Ans. Based on the findings / observations of the special audit, action can be initiated under Section 66 or 67 of the MGL.

Demands and Recovery

Q 1. Which is the applicable section for the purpose of recovery of tax short paid or not paid or amount erroneously refunded or input tax credit wrongly availed or utilized?

Ans. Section 66 in cases where there is no invocation of fraud/ suppression/mis-statement etc and Section 67where the ingredients of fraud/suppression/mis-statement etc are present.

Q 2. Can the person chargeable with tax pay the amount of demand along-with interest before issue of notice under section 66?

Ans. Yes. In such cases no notice can be issued by the proper officer.

Q 3. If notice is issued under Section 66 and thereafter the noticee makes payment, is there any need to adjudicate the case?

Ans. Where the person to whom a notice has been issued under sub-section (1) of section 51A, pays the tax along with interest within 30 days of issue of notice, no penalty shall be payable and all proceedings in respect of such notice shall be deemed to be concluded.

Q 4. What is the relevant date for issue of Show Cause Notice under Section 66/67?

Ans. The relevant date is the date of filing of annual return where such returns of actually filed or where such returns are not filed, the due date for filing of annual return.

Q 5. Is there any time limit to issue SCN or adjudicate the case u/s 66/67?

Ans. There is no time limit to issue SCN. However the issuance of SCN and adjudication of the case has to be completed within the period of 3 years (for Section 66 cases) and 5 years (for Section 67 cases) from the relevant date.

Q 6. Can the person chargeable with tax pay the amount of demand along-with interest before issue of notice under section 67?

Ans. Yes. Before issue of notice under sub section (1) or a statement under sub-section (2), a person chargeable with tax, shall have an option to pay the amount of tax along with interest and fifteen percent penalty, ascertained either on his own or informed by the proper officer, and on such payment, no notice shall be issued with respect to the tax so paid.

Q 7. If notice is issued under Section 67 and thereafter the noticee makes payment, is there any need to adjudicate the case?

Ans. No if tax/interest and penalty has been paid. Where the person to whom a notice has been under sub-section (1) issued, pays the tax along with interest with twenty five percent penalty within 30 days of issue of notice all proceedings in respect of such notice shall be deemed to be concluded.

Q 8. In case a notice is adjudicated under Section 67 and order issued confirming tax demand and penalty, does the noticee have any option to pay reduced penalty?

Ans. Yes. He needs to pay tax/interest and 50% of penalty within 30 days of communication of order. Where any person served with an order issued under sub-section (7) of Section 67 pays the tax along with interest and a penalty equivalent to fifty percent of such tax within thirty days of the communication of order, all proceedings in respect of the said tax shall be deemed to be concluded.

Q 9. What happens in cases (both under Section 66 & 67) where notice is issued but order has not been passed within 3 years (66)/5 years (67)?

Ans. The Model GST Law(section 68(10)) provides for deemed conclusion of the adjudication proceedings if the order is not issued within three years as provided for in section 66 or within five years as provided for in section 67.

Q 10. What happens if a person collects tax from another person but does not deposit the same with Government?

Ans. As per Section 69 of MGL, every person who has collected from any other person any amount as representing the tax under this Act, shall deposit the said amount to the credit of the Central or a State Government, regardless of whether the supplies in respect of which such amount was collected are taxable or not.

Q 11. In case the person does not deposit tax collected in contravention of Section 69, what is the proper course of action to be taken?

Ans. Notice to be issued. Principles of natural justice to be followed and order to be issued. It is to be noted that such order has to be invariably issued within 1 year of date of issue of notice. However there is no time limit for issue of show cause notice. Thus, in such cases duty can be recovered even after ten years.

Q 12. Is there any time limit to issue notice in cases under Section 69- tax collected but not paid?

Ans. No. There is no time limit. Notice can be issued on detection of such cases without any time limit. Once notice is issued, the order has to be passed within 1 year from the date of issue of notice.

Q 13. What are the modes of recovery of tax available to the proper officer?

Ans. The following options are available to the proper officer:

  1. The proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person;
  2. The proper officer may recover or may require any other specified officer to recover the amount so payable by detaining and selling any goods belonging to such person;
  3. The proper officer may, by a notice in writing, require any other person from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central or a State Government;
  4. The proper officer may, on an authorization by the competent authority, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; if the dues remains unpaid for a period of thirty days after any such distress, he may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and pay the surplus amount, if any, to such person;
  5. The proper officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and on receipt of such certificate, the Collector shall proceed to recover from such person the amount specified as if it were an arrear of land revenue

Q 14. Can the proper officer allow payment of tax dues in installments?

Ans. Yes, in cases other than self-assessed tax. The Commissioner/Chief Commissioner may extend the time for payment or allow payment of any amount due under the Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly installments not exceeding twenty four, subject to payment of interest under section 24 with such restrictions and conditions as may be prescribed. However, where there is default in payment of any one installment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and recovered without any further notice.

Q 15. What happens in cases where the tax demand confirmed is enhanced in appeal/revision proceedings?

Ans. The notice of demand is required to be served only in respect of the enhanced dues. In so far as the amount already confirmed prior to disposal of appeal/revision, the recovery proceedings may be continued from the stage at which such proceedings stood immediately before such disposal.

Q 16. If a person liable to pay tax has certain tax liability and in the meantime he transfers his business to another person, what happens to the existing tax liability?

Ans. Where any person liable to pay tax, transfers his business in whole/part, by sale, gift, lease, leave and license, hire, or in any other manner, then such person and the person to whom the business is transferred shall jointly and severally be liable to pay the tax, interest or penalty due from the taxable person up to the time of such transfer, whether such dues has been determined before such transfer, but has remained unpaid or is determined thereafter.

Q 17. What happens to tax dues where the Company (taxable person) goes into liquidation?

Ans. When any company is wound up and any tax or other dues determined whether before or after liquidation that remains unrecovered, every person who was a director of the company during the period for which the tax was due, shall jointly and severally be liable for payment of dues unless he proves to the satisfaction of the Commissioner that such non-recovery is not attributed to any gross neglect, misfeasance or breach of duties on his part in relation to the affairs of the company.

Q 18. What is the liability of partners of a partnership firm (Taxable person) to pay outstanding tax?

Ans. Partners of any firm shall jointly and severally liable for payment of any tax, interest or penalty. Firm/ partner shall intimate the retirement of any partner to the Commissioner by a notice in writing – liability to pay tax, interest or penalty up to the date of such retirement, whether determined on that date or subsequently, shall be on such partner. If no intimation is given within one month from the date of retirement, the liability of such partner shall continue until the date on which such intimation is received by the Commissioner.

Q 19. What happens to the tax liability of a taxable person, whose business is carried on by any guardian/ trustee or agent of a minor?

Ans. Where the business in respect of which any tax is payable is carried on by any guardian / trustee / agent of a minor or other incapacitated person on behalf of and for the benefit of such minor/incapacitated person, the tax, interest or penalty shall be levied upon and recoverable from such guardian / trustee / agent.

Q 20. What happens when the estate of a taxable person is under the control of Court of Wards?

Ans. Where the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable is under the control of the Court of Wards/Administrator General / Official Trustee / Receiver or Manager appointed under any order of a Court, the tax, interest or penalty shall be levied and recoverable from such Court of Wards/ Administrator General / Official Trustee / Receiver or Manager to the same extent as it would be determined and recoverable from a taxable person.

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