Section 60 of GST – Provisional assessment

Section 60 of GST – Provisional assessment. Check Details for GST Section 60 In this section you may find all details for Provisional assessment as per GST Act 2017Detailed Analysis of GST Section 60 of GST Act 2017.

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Section 60 of GST – Provisional assessment

(1) Subject to the provision 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/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 subsection (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.

Related provisions of the Statute

Ection Or RuleDescription
Section 2(11)Definition of assessment
Section 39Furnishing of returns
Section 50Interest on delayed payment of tax
Section 54Refund of Tax
Section 56Interest on delayed refunds

Introduction

Provisional assessment can be resorted to in the following situations:

  • At the outside, “unable to determine” does not mean “difficult”. Inability due to unavailability of facts relevant for determination of tax liability. For eg. if rate of tax was dependent on ‘percentage of copper content’, then unless this fact (percentage of copper content) is determined by a laboratory, neither taxpayer nor tax administration can arrive at the applicable rate of tax. This is just one example and there are others. Provisional assessment cannot be treated to be a substitute for Advance Ruling.
  • It would be abdication of self-assessment responsibility by taxpayers to ‘claim’ inability to determine tax liability and remarkably place that responsibility before the Proper Officer. Except for facts, inability to determine tax liability on account of interpretation of law does not come within the operation of section 60.
  • When a taxable person is unable to determine the value of goods and/or services – viz, there is a difficulty in ascertaining:
    •  Facts affecting transaction value to be adopted for determination of tax payable; e.g. open market value to be determined, where consideration is not wholly in money or where supplier enters into cost plus contract with the buyer.
    • Facts affecting inclusion or exclusion of any amounts in the value of supply; e.g. as per pre existing agreement certain percentage of discount to be allowed to buyer depending upon the buying targets achieved by them.
    • Facts affecting existence of any circumstance causing failure of transaction value declared e.g. where the supplier is concerned whether the price of the supply can be regarded as the sole consideration for the supply, if the supply has been effected based on a certain promise made by the recipient, for which the monetary value is indeterminable.
  • Rate of tax applicable on the supply cannot be determined by the taxable person, viz there is difficulty in ascertaining:
    •  Facts affecting classification of the goods and / or services;
    •  Facts affecting eligibility to any exemption notification u/s 11 or compliance with conditions associated with such exemption.
    • Facts affecting applicability of any abatement/deduction in rate of tax to the assesse u/s 9 or compliance of conditions associated with such abatement.

Analysis

The facility of provisional assessment is available only in the cases of Valuation and determination of rate of tax. The provisions of this section cannot be extended for any other purposes or subject matter. 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”, [determination of mixed or composite supply is a rate dispute], admissibility of ITC, quantum of reversal of IT, whether a particular action is supply or not. In the aforesaid kind or classes of cases, recourse is not available to provisional assessment.

Procedure

  • In terms of Rule 98(1), the process of provisional assessment commences on furnishing of an application by the registered person along with the necessary supporting documents in FORM GST ASMT-01, electronically through the common portal. The provisional assessment cannot be resorted to by the proper officer on suo-motu basis.
  • The proper officer will thereafter issue a notice in FORM GST ASMT-02. As per ASMT2, reply is required to be given within 15 days to the registered person and if required seek additional information or documents. At this stage the proceedings are deemed to have commenced and the applicant is required to file his objections / make submissions in FORM GST ASMT – 03. The registered person can also appear in person and be heard provided he makes a specific request for a personal hearing.
  • On due consideration of the reply so filed, and after providing a reasonable opportunity of being heard, the proper officer must issue an order in FORM GST ASMT-04, by allowing payment of tax on provisional basis, indicating the value or rate or both on the basis of which assessment is allowed on a provisional basis The proper officer, in the normal course, cannot pass an order rejecting the application of provisional assessment. Since section 60(1) employs the term ‘shall’ pass order ‘allowing’ payment of tax provisionally. The word “shall” in this circumstance cannot be construed as “may”.
  • The order so passed should also indicate the amount for which bond has to be executed in Form GST ASMT – 05 by the applicant. The security has to be furnished in the form of bank guarantee not exceeding 25% of the bond ‘amount’ which shall include IGST, CGST, SGST or UTGST and cess (if any) payable in respect of the transaction. A bond furnished to the proper officer under State Goods and Services Tax Act or Integrated Goods and Services Tax Act shall be deemed to be a bond furnished under the provisions of Central Goods and Services Tax Act and the rules made thereunder.

As per Form GST ASMT-5, if the bond and security is not provided with in period specified in notice, the provisional assessment shall lapse.

Finalization of provisional assessment

Once the above process is complete the proper officer by issue of a notice in FORM GST ASMT-06, will call for information and records required for finalization of assessment. On conclusion of the due process of hearing, a final assessment order shall be passed by the proper officer in FORM GST ASMT-07, specifying the amount payable or refundable to the registered person 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 CommissionerMaximum of 6 months
CommissionerMaximum 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.

Further, CBIC vide Circular No. 122/41/2019-GST dated 5th November, 2019 clarified the implementation of the electronic generation of Document Identification Number (DIN) for all communications sent by its offices to taxpayers. Therefore, no communication of provisional assessment order is made without a computer- generated Document Identification Number, on or after 8th November, 2019.

Interest liability

 If the amount of tax determined to be payable under final assessment order, is more than the tax which is already paid along with the return filed in terms of 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 [i.e. @18%], from the first day after due date of payment of tax in respect of the said goods and/or services or both, till the date of actual payment, irrespective of whether such shortfall is paid before or after the issuance of order for final assessment1 . 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 proviso to Section 56 @ 9% because refund is arising out of order of adjudicating authority. The interest on refund shall run from 61st date from the date of receipt of application for refund till the date of refund.

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 would be processed in accordance with Section 54 (refund provision) and is subject to the concept of “unjust enrichment u/s 54(8)(e). Hence if where the registered person has not borne the incidence of tax and has passed on the burden to some other person, then instead of granting refund to the applicant, it shall be credited to consumer welfare fund. Except for authorizing refund, this section does not by itself sanction refund. The application for refund is required to be made within 2 years from the relevant date defined in clause (f) of Explanation 2 to Section 54 i.e. within 2 years from the date of adjustment of tax after the final assessment.

Release of Security consequent to Finalization

On conclusion of the final assessment order, the applicant can file an application under Rule 98(6) in FORM GST ASMT- 08 for release of security furnished. On receipt of such application, the proper officer ought to release the security furnished, after ensuring that the payment of the amount specified in the final assessment order and issue an order in FORM GST ASMT–09. This order has to be issued within a period of 7 working days from the date of receipt of the application for release of security

Rejection of Application

If taxpayer’s application seeking provisional assessment FAILS to establish the ‘facts affecting’ the determination of tax liability, then Proper Officer is welcome to reject the application. In all other cases, since the taxpayer is imperilled by interest liability, Proper Officer would not reject the application.

60.3 Comparison with equivalent provisions under other laws:

Section 60 of the CGST Act is broadly drafted on the lines of the erstwhile provisions of Central Excise and Service Tax law. A provisional assessment is permitted under Central Excise Act and 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.

60.4 Issues and Concerns

The provisional assessment provides a discretionary power to Joint Commissioner or Additional commissioner and Commissioner to extend the proceedings or pass the order or decree upto 6 months or 4 years. If for any reasons, the time limit stands extended till the 4th year, the registered person shall have to pay interest from the due date of original return filed under Section 39(7) of the CGST Act, inspire of the taxable person paying tax as per provisional order passed by proper officer.

Frequently Asked Questions

When is a taxable person permitted to pay tax on a provisional basis?

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.

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

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.

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