Section 62 of GST – Assessment of non-filers of returns
(1) Notwithstanding anything to the contrary contained in section 73 or section 74,where a registered taxable person fails to furnish the return under Section 39 or Section 45, even after the service of a notice under Section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgement taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under Section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. (2) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-Section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for the payment of late fee under section 47 shall continue. Related provisions of the Statute
Introduction
This section commences with a non obstante clause, meaning whenever the provisions of section 73 or 74 applies, the provisions of section 62 of the Act cannot be invoked. However, the provisions of section 62 can be invoked only in case of registered taxable persons who have failed to file returns, as required, under section 39 or as the case may be, or final return on cancellation of registration under section 45 of the Act. Issuance of notice under section 46 appears to be a pre-condition for initiating proceedings under Section 62 of the Act. However, Section 62 can not be invoked for non-filing GSTR-1, GSTR-2 and GSTR-9.
Analysis of Provisions
Non-compliance with the notice issued under Section 46 paves the way for initiating the proceedings under this section. If the assessee fails to furnish the return within 15 days of issue of notice under section 46 then the Proper Officer may assess the tax liability in accordance with the provisions of Rule 100 i.e. to the best of his judgment, taking into account all the relevant material available on record, and issue an assessment order. This is also known as ‘best judgment assessment’. It can be completed without giving notice of hearing to the assessee. However best judgment assessment should be made on the basis of material available or material gathered by proper officer. Please note that only returns under 39 and 45 are covered by section 62. In other words, non-filing of GSTR 3 (0r 3B) and GSTR 10 (final return) will attract best judgement assessment. Failure to file GSTR 1 does not attract section 62. Reference may be had to newly enacted section 43A where outward supplies returned will be deemed to be tax payable and attracts recovery actions. Order under section 62 must be issued within a period of five years from the date specified under section 44 for furnishing annual return for the financial year to which the tax not paid relates. Section 44(1) states that due date for furnishing the annual return is on or before 31st December following the end of financial year to which such annual return pertains. However, extension of due date for furnishing the annual return may be considered. Non-issuance of notice under Section 46 closes the door for invoking Section 62 although other provisions are available to recover the tax dues. If, however, a registered person furnishes a ‘valid return’ within 30 days of the service of assessment order, the said assessment order shall be ‘deemed to be withdrawn’. ‘Valid return’ is defined in Section 2(117) to mean a return filed under Section 39(1) of the Act on which self-assessed tax has been paid in full. Valid return may not (or does not necessarily imply to) be perfect in all respects and is, therefore, not barred from containing (inadvertent) errors. In other words, presence of such errors does not render the return ‘defective’ and become non-existent in the eyes of law. Erroneous return is also a valid return. Errors may be of omission or commission. Experts advise that care must be taken to file such valid return free of errors and after order passed under section 62 being vacated, Proper Officer would take up proceedings based on such valid returns under section 61. Section 62 starts with the words ‘notwithstanding anything contrary to section 73 and 74’. Section 73 and 74 mandates issue of SCN and providing opportunity of being heard before passing order for demanding tax. Further, tax can be demanded for the period as prescribed in section 74, if the existence of omissions and commissions, as mentioned u/s 74, are proved. The pre-condition of issuing SCN, providing opportunity of being heard for demanding tax for the period prescribed u/s 74 in the presence of omissions and commissions listed u/s 74 is sought to be overcome by the non-obstante clause u/s 62. The assessment u/s 62 however can be made only upto 5 years from the due date of furnishing of annual return u/s 44. Consequence of late fee under Section 47 and interest under Section 50 will both be applicable in cases of conclusion of best judgement assessment made under this Section, even if the assessment order u/s 62 is withdrawn.
Best Judgement Assessment:
‘Best judgement assessment’ must not be ‘worst’ judgement assessment, that is, the determination of tax liability cannot be aggressive estimation of turnover based on some arbitrary growth rate oblivious of the nature of business activities. Some experts are of the view that where turnover projection is made based on turnover in previous months, there is nothing in section 62 to indicate that possible credits should not be estimated on the premise that claiming credit requires positive action by taxpayer under section 16(2) (d). Best judgement assessment must not be worst judgement and determine high turnover but ignore seasonal downward variations and even benefit of estimate of credits. There is nothing in the law to support view that ‘tax liability’ to be determined on best judgement basis should be ‘gross liability’ and not ‘net tax liability’. Courts will have final say in the matter and when one has failed to file returns, it is scarce that such a taxpayer can find favour of courts in the manner of arriving at best tax liability Another important aspect is, in case an order of best judgement is passed under section 62 and returns are not filed within 30 days, the order becomes final and even if returns are filed subsequently, the order CANNOT be withdrawn. Only remedy will be to file such returns and also prefer appeal under section 107. As section 107 prescribes maximum 3 months days to file appeal before First Appellate Authority who has a further time limit of 1 month to condone explainable delay in filing appeal. Now, if after date of order under section 62, a time of more than 5 months (30 days to file returns after order PLUS 3 months to file appeal PLUS 1 month of delay in filing appeal that may be condoned) has passed, then the demand arising from this best judgement order will be final and payable. And this will be recoverable even if in fact there were no real taxable supplies made during the relevant tax period. Care must be taken to monitor email or portal service of orders under section 62 so as to avoid such irreversible demands due to lapse of time to redress. An order passed under this section shall be communicated to the registered person in FORM GST- ASMT 13 + DRC 7. Since DRC7 will also be issued, best judgement assessment under section 62 proceeds on the understanding that the demand made in order in ASMT13 will lead to recovery of tax assessed. It is for this reason that if a valid return is not filed within 30 days to vacate this order, to set aside this demand will be to file appeal under section 107 is the only remedy.
Comparison with equivalent provisions in other laws
It appears that section 62 of the CGST Act is incorporated predominantly on the basis of provisions contained in the erstwhile State VAT Acts. Section 72 of the Finance Act, 1994 provides for assessment of persons liable to pay service tax, but who has failed to furnish return under section 70, of the Act. However, procedure contained in section 72 requires that every such person shall be given a reasonable opportunity of being heard before the order is passed.
Issues and Concerns
The consequence of non-filing of returns may lead to adverse GST compliance rating which will have an impact on the matters such as claiming of refund. Registered persons who are non-filers of returns will always be under the scanner of the authorities for every activity carried out by such registered person. Further, it also affects the vendor relationship due to non-compliance of the provisions of the GST laws. A non-filer would not have filed his periodic returns and therefore the Annual returns in Form GSTR- 9 and Reconciliation Statement in Form GSTR- 9C would not be possible. However, if they have filed returns for part of the year then Annual returns could be filed considering such filed returns and based on his books of accounts. Recommended Articles –
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