Notice for Scrutiny of Returns (GST ASMT-10)

Extract of Section 61 of the CGST Act, 2017

Section 61 of the Central Goods and Services Tax (CGST) Act 2017 provides for scrutinising GST returns filed by taxpayers. This section empowers the tax authorities to scrutinise returns to ensure their correctness and compliance with GST laws.

Section 61: Scrutiny of Returns

(1) The proper officer may scrutinise 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 and within such period as may be prescribed.

(2) The registered person, being a key participant in this process, shall, on receipt of the discrepancies under sub-section (1), either accept the differences and pay the tax, interest, and penalty, if any, arising from such discrepancies or furnish an explanation for the differences to the proper officer in such manner and within such period as may be prescribed.

(3) Where the explanation furnished by the registered person is found to be acceptable, the proper officer shall inform him accordingly, and no further action shall be taken in this regard.

(4) Where the explanation furnished by the registered person is not found to be acceptable, 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 received, the proper officer shall initiate appropriate action including those under Section 65, Section 66, and Section 67, or proceed to determine the tax and other dues under Section 73 or Section 74.

Notice for Scrutiny of Returns (GST ASMT-10)

GST ASMT-10 is a notice of utmost importance issued by the GST authorities to taxpayers when significant discrepancies are found in the returns filed. This notice requires the taxpayer to promptly explain or rectify these discrepancies to avoid potential legal consequences.

Example Scenario

Suppose a business, XYZ Pvt Ltd, files its GST returns for a particular period. Upon scrutiny, the GST officer identifies discrepancies between the reported sales and the details from other sources, such as e-way bills and GSTR-2A. Consequently, the officer issues a GST ASMT-10 notice to XYZ Pvt Ltd to explain or rectify the discrepancies.

Legal Recourse and Proceedings

Legal Recourse

When a taxpayer receives a GST ASMT-10 notice, they should:

1. Understand the Notice: It’s crucial to thoroughly comprehend the identified discrepancies in the GST ASMT-10 notice as this is the first step in formulating a response and can help you avoid potential penalties.
2. Prepare a Response: Gather relevant documents and evidence to support your case and prepare a detailed reply addressing the issues raised in the notice.
3. Act Promptly: It’s essential to file your response to the GST ASMT-10 notice within the specified time frame, typically 30 days from receipt of the notice. This prompt action can prevent further legal action and demonstrate your commitment to resolving the issue.

Legal Proceedings

If the taxpayer fails to respond adequately or if the response is not satisfactory, the GST authorities may proceed with the following:

• Initiate Audit (Section 65): Conduct an audit to thoroughly examine the records and returns.
• Special Audit (Section 66): A chartered accountant or cost accountant may initiate a special audit if required.
• Inspection, Search, and Seizure (Section 67): In cases of significant discrepancies or suspicion of tax evasion, inspection, search, and seizure operations may be conducted.
• Demand and Recovery (Sections 73 and 74): Issue a demand notice for tax recovery, interest, and penalties.

Penalties and Prosecution

Penalties and prosecution depend on the nature and severity of the discrepancies:

Minor Discrepancies

• Monetary Penalty: A nominal penalty for minor errors that are rectified promptly.

Major Discrepancies

• Monetary Penalty: Penalties up to 10% of the tax due or Rs. 10,000, whichever is higher.
• Interest: Interest on the unpaid tax as per Section 50 of the CGST Act.
• Prosecution: In cases of willful misstatement or fraud, prosecution under GST laws may be initiated, including imprisonment and additional fines.

Do’s and Don’ts on Receiving a GST ASMT-10 Notice

Do’s

1. Read Carefully: Understand the specific discrepancies and the amount of tax, interest, and penalties, if any.
2. Gather Evidence: Collect all necessary documents, such as invoices, returns, and correspondence with GST authorities.
3. Consult a Professional: Seek advice from a GST practitioner or tax consultant to formulate a strong response.
4. Respond Promptly: Submit your response within the specified deadline to avoid further legal action.
5. Maintain Records: Keep copies of the notice and your response for future reference.

Don’ts

1. Ignore the Notice: Ignoring the notice will lead to further action, including audits and recovery proceedings.
2. Delay Response: Delaying your response can result in additional interest and penalties.
3. Provide Incomplete Information: Ensure all the information and documents submitted are complete and accurate.
4. Disregard Professional Advice: Always consult with a professional if you are unsure about the content or implications of the notice.

Legal Remedy

If a taxpayer believes that the scrutiny and subsequent actions are unjust, they can take solace in the fact that they have the following legal remedies at their disposal:

1. File an Objection: Respond to the notice with valid evidence and explanations within the stipulated time frame.
2. Appeal: If dissatisfied with the order following the scrutiny, the taxpayer can file an appeal under Section 107 of the CGST Act within three months from the order date.
3. Seek Legal Advice: Consult with a legal expert or GST practitioner to explore further legal remedies, including filing a writ petition if there is a violation of principles of natural justice.

Conclusion

Section 61 of the CGST Act 2017 provides the framework for scrutinising GST returns to ensure compliance and correctness. The GST ASMT-10 notice is crucial for tax authorities to identify and rectify discrepancies. Understanding how to respond to such notices, the potential penalties, and the available legal remedies can help businesses navigate the complexities of GST compliance and avoid severe legal consequences.