CBIC has identified 35,000 GST returns to mismatches on liability, input tax credit

The Central Board of Indirect Taxes and Customs has identified 35,000 GST returns pertaining to fiscal 2017-18 to scrutinise for discrepancies and mismatches on liability, input tax credit and such, a senior tax official told BloombergQuint.

The cases were selected for scrutiny based on “specific risk parameters” as directed in a department notice in March. The notice laid down standard operating guidelines for such scrutiny.

FY18 was the first year the GST was levied in India — in fact, for only nine months as it was introduced in July 2017. The time for issuing demand notices for filings in this period is short as these returns will get time-barred by November 2022.

It does not mean that all the cases under scrutiny are evasions, they could be filing errors, some as small as spelling errors, the tax official said. The scrutiny process is expected to take six months and should not be presumed to add to revenue, the official said on the condition of anonymity as details are not public yet.

Given it was the first year of the GST filing, SR Patnaik, head of taxation at law firm Cyril Amarchand Mangaldas, is hopeful that field authorities will go easy on the taxpayers during the process and give them the benefit of doubt.

“The GST is a fairly complex regulation where they have combined many legislations into one GST. Since it was introduced in July 2017, there have also been numerous changes and amendments that have taken place. One hopes that the department would be sympathetic to the taxpayer and not take any serious action in the event of smaller technical errors,” he told BloombergQuint.

Patnaik said this scrutiny process will be a test of how litigation-free GST compliance will be as this would turn the spotlight on how the field officers interpret and implement the agenda of the government to keep legal disputes to a minimum.

GST compliance has improved in recent months as the department has sought to plug loopholes that allowed fraudulent claims of input tax credit. This has helped boost revenue. The GST collection for February touched an all-time high of Rs 1.4 lakh crore, according to March data.

“Compliance has definitely gone up. As people are being questioned more regularly, the taxes have gone up too as we can see,” said Bipin Sapra, partner at consulting firm EY. Regarding the cases being taken up for scrutiny, speedy resolution is key, Sapra told BloombergQuint.

“There needs to be a clear and time-bound manner of resolution. Clarity in the minds of field officers and accepting genuine errors is important as often the individual’s responses are referred to the originating authorities, leaving the issue open for long.”

In its March notice, the CBIC has detailed instructions “to ensure uniformity in selection/identification of returns for scrutiny, methodology of scrutiny of such returns and other related procedures”.

The process requires field officers to verify the correctness of the returns filed, inform the taxpayer of a discrepancy, if any. In the absence of a satisfactory explanation within 30 days, or more if allowed by the officer, appropriate action may be initiated. Timelines have been specified for the rest of the process.