Author CA. Hemanth Pullanikkat
1. Automated Return Scrutiny Model
1.1. Short and Sweet
A new technology-based Automated Return Scrutiny Module (ARSM), for scrutiny of the GST returns have been introduced from 11-05-2023 and it has commenced with the scrutiny of returns for F.Y 2019-20.
As per the press release of 11-05-2023, this ARSM is for Central Tax Officers to carry out scrutiny of GST returns of the Centre Administered Taxpayers selected on the basis of data analytics and risks identified by the System.
The discrepancies noticed can be communicated by the PO through the GSTN Common Portal in Form ASMT – 10 to seek an explanation of the registered person in Form ASMT – 11 and subsequently to either issue of order in Form ASMT – 12 accepting the reply or issuance of SCN of audit or inspection can be initiated.
1.2. Introduction
The background of this new manner of scrutiny of the returns starts with the direction of the honorable Finance Minister or the Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitaraman while reviewing the performance of the Central Board of Indirect Taxes & Customs (CBIC) on 29- 04-2023.
During the review she asked CBIC to increase the taxpayer (TP) base and to roll out an Automated Return Scrutiny Module (ARSM) for GST returns at the earliest or by next week as per newspaper reports dated 30-04-2023. Based on this direction the Central Board of Indirect Taxes and Customs (CBIC) has introduced the ARSM to scrutinise the GST returns and the related particulars furnished based on the data analytics and risks identified by the System.
As directed, the CBIC has rolled out the ARSM for GST returns in ACES-GST backend application for the Central Tax Officers this week itself.
1.3. How the System Works
The system will carry out all the data analytics and risks identification on behalf of the officers and this will enable the Central Tax Officers to scrutinise the returns of Centre Administered Taxpayers. The discrepancies identified on account of the risk associated with a return are displayed to the tax officers in the module of the application.
Next step is the communication of discrepancies identified by the system to the TP through the GSTN Common Portal by issuing notice in Form ASMT – 10. This communication of discrepancy shall be taken care by the proper officer, in accordance with the workflow provided for interacting with the TPs.
Once the discrepancies are communicated through the GSTN common portal, the TP can furnish his explanation in Form ASMT – 11 along with supporting documents, if any. If the explanation provided by the TP is acceptable to the officer, it will be informed to the TP accordingly by issuing an order in Form ASMT – 12. If no satisfactory explanation has been given, subsequent action being issuance of Show Cause Notice (SCN) or audit or investigation may be initiated.
1.4 Commencement of ARSM
As mentioned in the last paragraph of the document it has commenced with the scrutiny of GST returns for FY 2019-20, and the requisite data for the purpose has already been made available on the officers’ dashboard. Hence the TP must be ready for receiving notices from 2019-20 onwards.
2. Major Highlights of The Release
2.1 Non-intrusive Means of Verification
The second para of the press release starts with the message that this method of scrutiny is a non-intrusive method or in other words this method of compliance verification won’t disrupt or annoy anyone.
Though the method will not be an intrusive one because the system is analysing the data and risk parameters of the returns filed by the registered person, but the author is sure that it will result in issuance of plethora of notices in Form ASMT – 10. Consequently, most of the TP who are not much aware about the rules and regulations of ever-changing GST has to spent significant amount of time and money to provide his explanation in Form ASMT – 11.
Since the system is analysing the data and risk parameters based on the coding or how it has been learnt, it may red flag all the discrepancies even if it has been rectified by the TP in his subsequent returns or by other means being filing of DRC – 03. Now TP have to spend time and cost even to explain corrective measures taken by him, to rectify the error he has done in the earlier returns.
2.2. ACES-GST Backend Application for Central Tax Officers
Another highlighted part is, as per the document released, this ARSM is available only for Central Tax Officers and this method of scrutiny selection is only on the returns of Centre Administered Taxpayers.
This narrative in the released document creates a confusion that is this module is not applicable for State Tax Officers or the GST returns of State Administered Taxpayers. Going forward the author is expecting a circular explaining the use of the application and applicability of this the State tax officers as well. Otherwise, the method of selection of returns for scrutiny will not be uniform.
2.3. Tax Officers are Provided with a Workflow for Interacting with TP
From the plain reading, it is clear that the interaction with the taxpayers will be only through the GSTN common portal, and it can also be interpreted in such a manner that communication will not be through mail or by post. Is this method of service of notice is valid has to be verified with the help of Section 169 of the CGST Act, 2017.
The section deals with “Service of notice in certain circumstances” and sub-section 1 states that any notice or other communication under the Act or Rules made thereunder shall be served by any one of the following methods and one of the methods specified in clause (h) of the subsection is ‘by making it available on the common portal’. Apart from that as per sub-section 2, the date on which the notice is published shall be deemed to be the date of service of the notice.
Combined reading of the above paragraphs makes it necessary for the TP or the person entrusted by TP in this regard to check the ‘Additional Notices and Orders’ tab in the Common Portal of the TP to keep updated about the notices issued, reply filed and its status.
3. Is the Release in Line with GST Law
3.1 Analysis of the Law with Release
As we all may be aware, a specific Section 61 and Rule 99 is engraved in the GST law to deal with scrutiny of the returns filed by the registered person.
As per section 61 read with Rule 99, the proper officer may scrutinise the returns and the related particulars furnished to verify the correctness of the return and inform the registered person of the discrepancies noticed, if any, in Form ASMT – 10 seek his explanation in Form ASMT – 11.
In case the explanation is found acceptable, the registered person shall be informed by issuing order in Form ASMT – 12 and further action shall be taken.
The above two sub sections of section 61 read with Rule 99 justifies that the language of the press release is in line with the provisions of the Section and Rule. Since the ARSM is only for selection of returns for scrutiny and nothing to do with the provisions or contradicting the provisions w.r.t scrutiny of return, the new system of selection is not just acceptable as per law, but it provides an assistance to implement the law in good order.
Conclusion
The intention of the government is clear from the recent changes in GST including the introduction of ARSM that the authorities are equally concerned about all the errors or evasions whether it is intentional to evade tax fraudulently by generating fake invoices or un-intentional errors occurred during filing of the returns.
From the perspective of the professionals are concerned, deep understanding of the provisions is much warranted even to file monthly returns. Continuous generation of notices will also become an annoyance for the TPs and make result in change of the entrusted person.
Reading through the line and in between the line is the only option left to cope-up with the new system of selection of returns for scrutiny as the returns are being submitted before the structured machinery and not before a human being, have feelings and sympathy to understand facts and situations.