The CBIC has recently rolled out an automated return scrutiny module for GST returns through the ACES-GST backend application for central tax officers. This module will enable officers to scrutinise the GST returns of GST-registered taxpayers, identified based on data analytics and risk parameters.
What is the automated return scrutiny module?
Recently, the Indian Finance Minister, Smt. Nirmala Sitharaman directed the CBIC to implement automated return scrutiny for GST returns. The automated return scrutiny module is integrated into the ACES-GST backend application and leverages data analytics to identify discrepancies and risks in the GST returns. The module automatically sends out alerts to officers in cases of non-compliance.
The objective of automated return scrutiny is to enhance tax compliance and reduce manual intervention. It is a non-intrusive verification process that enables central tax officers to scrutinise GST returns. The module also streamlines communication and action between tax officers and taxpayers and creates a more efficient and transparent system.
How will the automated return scrutiny module work?
Through this module, any discrepancies due to risks associated with a GST return will be flagged and an automated scrutiny notice will be sent out to the taxpayer in Form ASMT-10.. These discrepancies are also displayed to the tax officers, who are then provided with a workflow to interact with the taxpayer through the GST common portal. Previously, Form ASMT-10 used to be sent out on the GST portal after tax officers manually picked up GST returns for scrutiny. Now, the GST portal will automatically send out Form ASMT-10 to non-compliant taxpayers detected by the system and then send out alerts to the GST officers.
Once intimated in Form ASMT-10, taxpayers may reply using Form ASMT-11 on the GST portal. If the tax officer finds the action taken and response by the taxpayer to be satisfactory, the officer will acknowledge the same in Form ASMT-12. If not, the officer will issue a show cause notice or initiate an audit or investigation.
When will the automated return scrutiny module be implemented?
The automated return scrutiny module has already been rolled out, beginning with the scrutiny of GST returns for the financial year 2019-20. The requisite data for this purpose has been made available on the tax officers’ dashboards.
What are the various risk parameters for GST returns being subjected to scrutiny?
The CBIC released an indicative list of parameters based on which GST returns may be picked up for scrutiny vide SOP/GST instructions.
Here are the situations that could cause taxpayers to be subjected to scrutiny-
- Where the data declared in the following GST returns do not match with the corresponding tables of the summary GST return or the statement of input tax credit.
| Information that will be compared | In the following tables | Condition | The data in the following tables | Indicating |
| Tax liability in respect of outward supplies | Under Table 4 (other than 4B), 5, 6, 7A(1), 7B(1), 11A and 11B of the GSTR-1 (net of amendments in Table 9, 10 and 11(II)) | Is found to be more than | The liability declared under Tables 3.1(a) and 3.1(b) of the GSTR-3B | Short payment of tax |
| Tax liability in respect of RCM supplies | Under Table 3.1(d) of the GSTR-3B | Is found to be less than | The liability declared under Tables 4(A)(2) and 4(A)(3) of the GSTR-3B | ITC availed in excess of the liability discharged on account RCM supplies |
| Tax liability in respect of RCM supplies | Under Table 3.1(d) of the GSTR-3B | Is found to be less than | The ITC available under Tables 3 and 5 of the GSTR-2A (net effect of amendments in Table 4 and Table 6, respectively) | Short payment of tax |
| Tax liability offset in cash pertaining to the RCM supplies | The tax/cess paid in cash as per Column 8 of Table 6.1 of the GSTR-3B | Is found to be less than | The liability declared under Table 3.1(d) of the GSTR-3B | Short payment of tax |
| ITC availed in respect of inward supplies from an Input Service Distributor (ISD) | Under Table 4(A)(4) of the GSTR-3B | Is found to be more than | The ITC available under Table 7 of the GSTR-2A (net of amendments in Table 8)
| Excess/unlawful ITC claimed |
| ITC availed under ‘All other ITC’ | Under Table 4(A)(5) of the GSTR-3B | Is found to be more than | The eligible ITC available under Tables 3 and 5 of the GSTR-2A (net of amendments in Table 4 and 6, respectively) | Excess/unlawful ITC claimed |
| The taxable value on account of outward taxable supplies (other than zero-rated, nil rated and exempted) | Under Table 3.1(a) of the GSTR-3B | Is found to be less than | The net amount liable for TDS and TCS credit under Column 6 of Table 9 of the GSTR-2A | Indicating short payment of tax |
| The liability on account of outward supplies | Under Tables 3.1(a) and 3.1(b) of the GSTR-3B | Is found to be less than | The tax liability as declared in the e-way bills | Indicating short payment of tax |
| ITC availed in regard to the import of goods | Under Table 4(A)(1) of Form GSTR-3B | Is found to be more than | The ITC available under Table 10 and Table 11 of the GSTR-2A or the details available on the ICEGATE portal | Excess/unlawful ITC claimed |
- When ITC is claimed after the effective date of cancellation of registration of a supplier.
- Where ITC has been availed in respect of invoices and debit notes issued by suppliers who have not filed their GSTR-3B returns for the relevant tax period.
- When the GSTR-3B for a tax period is filed after the deadline for claiming ITC in respect of any invoice or debit note as per Section 16(4) of the CGST Act. As per Section 16(4), ITC may be claimed only till 30th November of the year following the financial year or the furnishing of the relevant annual return, whichever is earlier. Hence, if the GSTR-3B happens to be filed after the deadline as per Section 16(4), such ITC will be inadmissible.
- Where the taxpayer has not reversed ITC as per the provisions of Rule 42 and Rule 43 of the CGST Rules. It is to be noted that Rule 42 of the CGST Rules lays down the manner of determination of ITC in respect of inputs/input services and reversal thereof, while Rule 43 lays down the manner for determining input tax credit in respect of capital goods and reversals thereof in certain cases.
- Where interest is payable as per Section 50 of the CGST Act, and the same has not been paid.
- Where late fees are payable as per Section 47 of the CGST Act, and the same has not been paid.
How will automated return scrutiny impact GST taxpayers?
Automated return scrutiny will make taxpayers more prone to receiving scrutiny and demand notices from the GSTN as every minute error or discrepancy will now be detected by the system. Earlier, it was up to the discretion of the tax officer to send out a notice. Now, with automated scrutiny and automated notices to taxpayers, all taxpayers that have mismatches in their GST returns that exceed the tolerance limits imposed by the GSTN could receive a scrutiny notice.
Further, it will add an additional burden on taxpayers to prove that there has been no intention to evade tax. Taxpayers must now give utmost importance to regular reconciliations of data sets to avoid discrepancies before the periodic returns are filed. Taxpayers will also need to have the documentation and evidence at hand pertaining to the current year as well as the past four years and a proper audit trail maintained to respond to these notices. Failure to maintain the same would result in hardships in proving that the taxpayer did not intend to evade tax and may result in the taxpayer having to pay unnecessary interest and penalties. Hence it is crucial that taxpayers take action before filing returns to avoid coming under the radar of the automated scrutiny system.
Actions available for taxpayers subjected to scrutiny
The taxpayers receiving the notice in Form ASMT-10 must submit a reply, whether or not they agree to the demand. They should reply in form ASMT-11 within thirty days of being informed in ASMT-10 or as long as the officer allows.
No manual intervention is encouraged under the automated return scrutiny module, as this follows faceless communication between officers and taxpayers. Hence, all documents or statements must be submitted as softcopies on the relevant portal. The taxpayers may accept the difference and pay tax, interest or dues while replying in ASMT-11 within the above time limit. They can make tax payments using DRC-03. The officer will verify and may issue the order to drop proceedings in form ASMT-12 if the reply is found satisfactory. In this case, the taxpayer need not take any further action.
On failure of reply or the reply sent is found unsatisfactory by the officer, they may initiate proceedings by sending a show cause notice under Sections 73/74, as the case may be or may also consider audit/investigations after seeking necessary permissions. In the latter case, the taxpayers may have to cooperate with the officer through the proceedings while fully disclosing information pertaining to such financial year.
For more information, read our page on GST scrutiny.
Checklist for tax filers to avoid automated return scrutiny
With the system of automated return scrutiny in force, tax filers must be more cautious of the procedures and sanity checks followed while filing regular GST returns.
Ensure that the following checklist is followed at all times while filing GST returns-
- The tax liability in Tables 3.1(a) and (b) of GSTR-3B must match with tax liability in Tables 4,5,6,7A(1),7B(1),11A and 11B of GSTR-1 (net of amendments in Tables 9,10, and 11(II)).
- Advances adjusted are accurately reflected by reporting the same in Table 11B and Tables 4, 5, 6 and 7 of GSTR-1.
- Reporting and paying in cash the exact tax liability under the reverse charge mechanism using Tables 3.1(d) for tax liability and 4(A)(2) and 4(A)(3) for ITC claimed on it in GSTR-3B. Ensure that the value in GSTR-3B is more than the eligible ITC in Tables 3,4,5, and 6 of GSTR-2A.
- ITC claimed in Table 4(A)(4) of GSTR-3B must match with amounts marked as eligible ITC in Table 7 of GSTR-2A (net of amendments in Table 8).
- Sales subject to TCS or TDS under GST in GSTR-3B must match the TDS and TCS credit reflected under Column 6 of Table 9 of the GSTR-2A.
- In Tables 3.1(a) and (b) of the GSTR-3B, the tax liability should match the corresponding e-way bills.
- ITC is ineligible for claims for the period after the effective date of cancellation of the suppliers’ GST registrations, especially in case of retrospective cancellation of GST registrations.
- The GSTR-3B filing status of respective vendors must not be ‘No’ while claiming ITC of such invoice or debit note in the GST returns, despite it appearing in the GSTR-2A.
- Do not claim such ITC if the relevant period’s GSTR-3B is filed after the last date allowed under Section 16(4) of the CGST Act, i.e., 30th November of the year following the financial year in which such invoice/debit note is raised or date of filing annual returns, whichever is earlier.
- ITC on import of goods in Table 4(A)(1) of GSTR-3B must match with amounts in Tables 10 and 11 of GSTR-2A and data on ICEGATE.
- Adhere to CGST Rules 42 and 43 for accurate reversals of ITC in Table 4(B) of GSTR-3B.
- Do not miss computing and making late fee/interest payments as per Sections 47 and 50 of the CGST Act wherever return filing/tax payment is delayed.
- Reconcile the Sales Register with General Ledger (GL), i.e., Revenue GL with the sales register and output tax GL with the sales register. Ignore transactions under the same PAN, pure agent. Note that for positive tax figures in the sales register, the amount in tax GL will have negative figures and vice versa.
- Reconcile the e-invoices from the IRP vis à vis the draft GSTR-1 and sales register to not miss out on e-invoicing and invoice reporting in returns.
Please note that this checklist is not exhaustive and may have more depending on the industry in which the business operates.
How does the Clear GST Solution help?
Our hyper-automated Clear GST solution is the best choice to address the adversities of GST Automated Return Scrutiny more proactively! You can enjoy a notice-free return filing journey on the cloud-based solution. Here’re some of the quintessential features that help you beat automated return scrutiny through Clear’s automation!
- Save time and avoid errors using PAN-level, end-to-end GSTR-1 & GSTR-3B filing functions.
- Minimise manual errors with the single file import of all docs for preparing sales and purchase data.
- Enable proactive error correction with our smart error correction on UI, such as the ingestion duplicate warning layer, mismatch in tax rate vs tax amount, and invalid customer GSTINs.
- Save time and effort with PAN/GSTIN-level reconciliation of e-invoice (GSTR-1) vs Sales Register.
- Pre-upload GSTR-1 and GSTR-3B validations such as GSTR-1 vs GSTR-3B validation, past GSTR-3B validation, and GSTR-2B vs purchase reconciliation checks.
- Prevent discrepancies with a comprehensive reporting dashboard for GSTR-1 vs GSTR-3B vs SR & GSTR-2B vs GSTR-3B vs PR.
- Claim only accurate ITC with Table 4 automation as per the latest GSTR-3B and ITC claim norms.
- Enjoy faster resolution of discrepancies with effective 2-way vendor communication.
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