CBIC has issued the standard operating procedure (SOP) for selection or identification of returns for FY 2017-18 and 2018-19 for scrutiny and its methodology, as part of a plan to plug leakages and shore up collections as an interim measure till the time module for online scrutiny of returns is made available.
Directorate General of Analytics and Risk Management (DGARM) shall select GSTIN (registered with Central Tax authorities) for scrutiny based on specific risk parameters and present the likely revenue implications based on data available at a particular time.
The scrutiny shall include all returns pertaining to a financial year of the particular GSTIN based on the information available with the tax department through statements furnished by the registered person, and data/details made available through various sources such as DGARM, ADVAIT (Advanced Analytics in Indirect Taxation), GSTN, e-Way bill portal, etc. with an emphasis on identifying excess or fraudulent claims of input tax credits.
An indicative list of parameters for scrutiny is summarized below:
Comparison of tax liabilities as per GSTR-3B with the following:
- Tax liabilities as per invoices reported in GSTR-1,
- Net amount liable for TCS and TDS as per GSTR-2A,
- e-Way bills generated for the supply of goods.
Comparison of the tax liabilities under reverse charge declared in GSTR-3B with the following:
- ITC availed for the tax paid under reverse charge,
- Liabilities under reverse charge as per GSTR-2A for purchases from registered persons under section 9(3).
Comparison of the ITC availed in GSTR-3B with the following:
- ITC received from ISD through distribution as per GSTR-2A,
- ITC on domestic purchases from registered persons as available in GSTR-2A,
- ITC on import of goods as per GSTR-2A / ICEGATE data.
Cases where ITC claims maybe further scrutinized:
- ITC claimed on supplies from vendors whose registration was canceled retrospectively,
- ITC in respect of invoices uploaded by vendors in GSTR-1 but GSTR-3B for the corresponding period was not filed,
- Availment of ITC beyond the prescribed time limits.
Reversals and payment of interest, late fees:
- Reversals of ITC in respect of common inputs, input services, and capital goods.
- Payment of interest in respect of delayed payment of tax.
- Payment of late fees for delayed filing of returns.
The scrutiny shall be based on the information already available with the tax department and without the need for seeking additional documents or interaction with the taxpayer before issuance of show cause notice in case of discrepancies.
The risk parameters identified by the tax department primarily focus on identifying the discrepancies between the tax liabilities as per GSTR-1 and tax liabilities paid at the time of filing GSTR-3B, the claim of ITC, and the ITC available to the taxpayer. Thus, robust reconciliations on the purchase as well as sales side, including the e-way bills (and e-Invoices for the scrutinizes going forward) would be essential to identify and rectify any inadvertent non-compliances. This re-emphasizes the need for a GST compliance platform with inbuild analytics and reports to help in the analysis.