Calculating your small business’ GST liability is a very important step in being GST-compliant. The process of determining a taxpayer’s tax liability is known as Assessment under GST. To make this simple, the Indian government has provided five ways to calculate GST liability.
You can find them in Chapter XII, Sections 59 through 64 of the tax act.
Self-assessing your GST liability allows you to assess your taxes due without outside assistance from tax authorities or private agencies.
This provision allows you to file taxes monthly, although due dates may vary. You’re solely responsible for filing your GST returns. Hence, you can fall into trouble with the tax authorities in case you miss a filing,
2. Provisional Assessment
Self-assessment of your GST liability may be difficult at times. You may not be able to determine the value of goods and services you offer.
This is due to bad record keeping and not knowing which receipts to include. Moreover, tax rates may also seem unclear.
Therefore a provisional assessment of your GST liability will help you immensely, in case you believe the above reasons hinder your compliance .
You simply have to submit a written request to the assessing GST officer, in order to enjoy the benefits of a provisional assessment.
The request is made stating the exact reason for not being able to calculate your GST liability on your own. The officer will assess and calculate your total tax payable, upon receiving this request. Eventually, he will allow you to make a provisional payment, based on this total amount.
The GST officer is bound to complete this process within 90 days from the date of your request. Additionally, you’re expected to execute a bond as an assurance that you’ll pay your remaining taxes before the due date.
This amount is usually mentioned in the final tax order that’s processed by the GST officer. Such an order is processed within six months of granting the provisional payment.
You can be liable for paying interest up to 18% if you fail to pay your provisional and final taxes within the due dates. You’re entitled to a refund of the excess taxes already paid. But if the final assessment tax is lower than the provisional tax. And the rate of interest will be a maximum of 6%.
3. Scrutiny Assessment
Scrutiny assessment doesn’t particularly calculate GST liability, In fact, it is a crucial provision in place to ensure all filings of GST returns are in order. A GST officer can scrutinize an already-filed GST return if he feels that something is amiss with the records.
Under this provision, he can request an explanation on the discrepancy he finds. If you’re able to explain your reasoning, no further action will be taken. But if you cannot make a satisfactory explanation within 30 days from issuance of the order, the officer can organize an audit against you.
Such an officer may also order an inspection of your business location or execute demand and recovery provisions.
4. Best Judgement Assessment
The execution of a best judgement assessment is at the sole discretion of a GST officer. Under this provision, an assessment can be ordered against two types of people: non-filers and unregistered individuals.
In both cases, an assessing officer can use the information available to compute liable taxes.
- Assessment of non-filers: Non-filers are initially sent a warning notice pertaining to their returns. If returns are not filed despite this warning, a GST officer can assess the individual’s tax liability based on the information available.
- Assessment of unregistered individuals: An individual will receive a notice and a hearing to present his case if he is not registered for GST, although he is liable to. If the individual is found guilty of tax evasion, the officer will initiate demand and recovery of unpaid taxes and penalties.
5. Summary Assessment
A GST officer can invoke a summary assessment against a person. The officer does so if he finds any indication of tax liability.
Moreover, the officer has enough reasons to believe that not revealing the tax liability can harmfully affect the interest of revenue. For this, the officer should first present the case to the additional or joint commissioner for permission to proceed.
The execution of a summary assessment on the filed GST return is handled quickly. It can be done without your presence or knowledge. If you feel the summary assessment order is a mistake, you can apply for a withdrawal of the order.
You can do so by providing valid reasons within 30 days from the date of the order. The order will be cancelled if you’re able to prove your case to the additional or joint commissioner .
Assessing your GST liability is the simplest when done via self-assessment. Paying your taxes on time and keeping your papers in order will help you prevent assessments from tax authorities and possible penalties.
If you feel that self-assessment is the right path but are still finding it difficult, accounting software such as QuickBooks can simplify the job for you. The apps and tools in the QuickBooks suite can break down the complexities of determining your GST liability and make filing your returns a breeze.