Indirect Tax Alert – June 2023

GST Calendar –Compliances for the month of June’2023

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	July 10, 2023
GSTR-8 (Tax Collected at Source ‘TCS’)	July 10, 2023
GSTR-1	July 11, 2023
IFF- Invoice furnishing facility (Availing QRMP)	July 13, 2023
GSTR-6 Input Service Distributor	July 13, 2023
GSTR-2B (Auto Generated Statement)	July 14, 2023
GSTR-3B	July 20, 2023
GSTR-5 (Non-Resident Taxable Person)	July 20, 2023
GSTR-5A (OIDAR Service Provider)	July 20, 2023
PMT-06 (who have opted for QRMP scheme)	July 25, 2023

1- CBIC has issues SOP for scrutiny of GST returns for FY 2019-20 onwards to ensure a systematic and efficient process.

• Background
• The Central Board of Indirect Taxes and Customs (CBIC) has issued a revised Standard Operating Procedure (SOP) for the scrutiny of returns under the Central Goods and Services Tax Act. 
• An interim measure was introduced through an SOP for the financial years 2017-18 and 2018-19. However, the CBIC has now developed an online workflow called “Scrutiny of Returns” within the CBIC ACES-GST application, accompanied by an advisory and user manual. 
• Consequently, the revised SOP replaces the interim measure and provides updated guidelines for conducting the scrutiny process from the financial year 2019-20 onwards

• Standard Operating Procedure

• The Directorate General of Analytics and Risk Management (DGARM) is responsible for selecting Goods and Services Tax Identification Numbers (GSTINs) for scrutiny based on identified risk parameters. Once selected, the relevant details of these GSTINs, including the risk parameters and the amount of tax or discrepancy involved, will be provided to the proper officer of Central Tax on the ACES-GST application. It is important for the officer to consider the latest available data during the scrutiny process, as the information may have changed due to subsequent compliances carried out by the taxpayer or their suppliers.
•  Scrutiny schedule

• The selection of GSTINs for scrutiny is based on risk parameters determined by the Directorate General of Analytics and Risk Management (DGARM). Once selected, a scrutiny schedule is prepared by the proper officer in consultation with the divisional Assistant/Deputy Commissioner, giving priority to GSTINs with higher revenue implications.
• During the scrutiny process, the officer verifies the accuracy of returns and related details provided by the taxpayer. They rely on system data, returns, statements, and information from various sources. The officer considers risk parameters, including quantified tax discrepancies, and may request additional parameters for scrutiny.
• The officer initiates the scrutiny by issuing a notice in GST ASMT-10, notifying the taxpayer of identified discrepancies and the amount of tax, interest, or other payable amounts involved. The discrepancies mentioned in the notice are specific and not vague. If the taxpayer accepts the discrepancies and pays the required amounts or provides an acceptable explanation in GST ASMT-11, the proceedings are concluded.
• However, if the taxpayer does not provide a satisfactory explanation or fails to pay the amounts, the officer may take appropriate action under Section 73 or 74 of the CGST Act, adhering to the monetary limits specified in Circular No. 31/05/2018-GST. In cases where further audit or investigation is necessary, the officer can seek approval from the jurisdictional Principal Commissioner/Commissioner to refer the matter to the Audit Commissionerate or anti-evasion wing.

• Process of scrutiny

•  During the scrutiny process, the officer meticulously reviews the returns and related details provided by the taxpayer to ensure their accuracy. They rely on system data, various returns and statements, and information from different sources. The officer receives risk parameters and quantified tax discrepancies to facilitate the scrutiny, and they may consider additional parameters as well.
• To minimize direct interaction, the officer aims to avoid requesting documents or records from the taxpayer before issuing a notice in GST ASMT-10. The notice is communicated through the common portal and specifies the identified discrepancies, along with quantified tax, interest, or other payable amounts. It provides specific details of the discrepancies, avoiding vagueness.
• If the taxpayer has already made additional payments of tax, cess, interest, etc., after filing returns through DRC-03, those payments are taken into account when communicating the discrepancies to the taxpayer.
• The notice, along with parameter-wise discrepancy details, is communicated through the common portal, eliminating the need for manual communication. Supporting documents and worksheets may be uploaded if necessary. A consolidated notice in GST ASMT-10 may be issued for all returns of the financial year.
• If the taxpayer accepts the discrepancies and pays the required amounts, including tax, interest, and other charges, the proceedings are concluded. However, if a satisfactory explanation is not provided or the taxpayer fails to pay the required amounts, the officer may initiate appropriate action under Section 73 or 74 of the CGST Act. It is crucial to ensure that the necessary notices and orders are issued within the prescribed time limits specified in the respective sections for the identified returns under scrutiny.

Reporting and Monitoring

• The officer assigned GSTINs for scrutiny will have access to two MIS reports on the ACES-GST application. The “Monthly Scrutiny Progress Report” provides a summary of the scrutiny status for the selected month and formation. The “Scrutiny Register” offers GSTIN-wise details of the actions taken in the scrutiny of allocated GSTINs.
• Starting from the financial year 2019-20, there is no longer a requirement for CGST zones to compile and send the “Monthly Scrutiny Progress Report” to the Directorate General of Goods and Services Tax (DGGST) as per the previous instruction.
• The Principal Commissioner/Commissioner will monitor the progress of the scrutiny exercise on a monthly basis.
• However, it’s important to note that the earlier Instruction No. 02/2022 – GST still applies to the scrutiny of returns for the financial years 2017-18 and 2018-19.

2- CBIC has issued guidelines pertaining to the processing of applications for registration under GST.

• CBIC had issued guidelines in the form of Instruction No. 01/2023–GST to conduct field verifications of the place of business as a part of a Special All-India Drive aimed at tackling fake registrations obtained with the intention of defrauding the Government exchequer.

Taking into consideration the aforementioned concerns, CBIC has recently released guidelines to enhance the scrutiny and verification process of registration applications. The procedure encompasses the following, among other aspects:

• In order to ensure the thoroughness and accuracy of address information, CBIC has implemented a close scrutiny of the details of places of business and the accompanying documents uploaded, with the aim of verifying their completeness and correctness.
• Special emphasis will be placed on cases where an application has been assigned a “High” risk rating by the Directorate General of Analytics and Risk Management, utilizing data analytics and risk parameters.
• If the applicant has either not undergone Aadhaar number authentication or chosen not to do so, the designated officer will initiate the procedure for physical verification of the place of business.
• The designated officer is responsible for ensuring that the entire registration process is completed within the specified timeline. No application should be approved on a deemed basis due to delays on the part of tax officers.
• In instances where registration is granted without the physical verification of the place of business, the jurisdictional Commissionerate will conduct the necessary verification within 15 days of registration.

RNM Comments

CBIC has established a well-defined and inclusive framework for the verification process of applications for GST registration. Individuals, who are applying for new registration under GST should ensure compliance with all parameters specified by CBIC, particularly regarding proper documentation and fulfilling requirements related to the place of business. This would streamline the registration process and ensure adherence to the guidelines provided by CBIC.

3- The Bombay High Court has recently issued its final order, affirming the constitutional validity of the Place of Supply (PoS) provisions for intermediary services under the Goods and Services Tax (GST) framework.

• In the final judgment, the Division Bench of the Bombay High Court has upheld the constitutional validity of Section 13(8)(b) and Section 8(2) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). These provisions relate to the place of supply of intermediary services provided to overseas recipients, where the location of the supplier is considered as the place of supply. As a result, export benefits were previously denied to such suppliers.
• Initially, the writ petitions challenging these provisions were heard by the Division Bench, where the first judge deemed Section 13(8)(b) as ultra vires the IGST Act and the Constitution. However, the second judge held a dissenting view and upheld the validity of the provision. Consequently, the matter was referred to a third judge.
• The third judge determined that Section 13(8)(b) and Section 8(2) of the IGST Act are constitutionally valid but emphasized that their operation should be limited to the IGST Act. Subsequently, the matter was once again presented before the Division Bench for the final judgment.
• In its final ruling, the Division Bench considered the opinions of the second and third judges and affirmed that Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid, and constitutional. Consequently, the writ petitions filed by the assessees were dismissed without any costs.

RNM Comments

• The recent judgment by the Bombay High Court is consistent with the previous ruling of the Gujarat High Court, which also upheld the constitutional validity of Section 13(8)(b) and treated intermediary services provided to overseas customers as taxable in India.
• It is important to note that there is no explicit mention in the final judgment of the Bombay High Court regarding the confinement of the provisions only to the IGST Act, as stated by the third judge while upholding their constitutional validity. This lack of mention is likely to remove the ambiguity surrounding the treatment of intermediary services as either inter-state or intra-state transactions and their taxability.

Check these links to Learn More About: Financial Consultancy Firm in India | Top audit firms in India | GST Service Provider