If your business is registered for the goods and services tax, you must file monthly and annual returns. This means that you need to calculate the amount of tax your company owes to the government. When you can’t make that calculation on your own, the law allows you to get a provisional assessment in GST to help.
What Is Assessment in GST?
Assessment is the process of figuring out how much tax you owe each month — your tax liability. In most cases, you’ll conduct a self-assessment each time you file a monthly return. At the simplest level, this process involves multiplying the value of the products you sold by the correct tax rate for those times. This information can usually be found on the invoices given to customers.
To complete your assessment, factor in other numbers such as (i) input tax credit, (ii) over-payment of tax for returned merchandize or (iii) underpayment of tax due to a mistake on a previous return. With those numbers, you can file a tax return and deposit the correct amount of tax owed with the government.
What Is a Provisional Assessment?
Sometimes, it’s difficult to assess tax liability on your own. For instance, you might have trouble deciding which invoices need to be included in the value of a supply. Or you might not be sure how to calculate the value. In other cases, you might not be sure which tax rate to choose. When this happens, you can request a provisional assessment under GST from a tax official. That official would help you determine your tax liability so you can make a payment on a provisional basis. Later, the assessment is finalized to complete the process.
How Does a Provisional Assessment Work?
When you can’t figure out your tax liability, you must request a provisional assessment in writing to the assistant commissioner or deputy commissioner of central tax. That request should explain why you need the provisional assessment. Additionally, you must submit an application for a provisional assessment using form GST ASMT-01, as well as any supporting documents to make your case. You can do this on your own, or you can hire a facilitation centre to help.
Once the commissioner reviews your application, they may ask for additional documents using form GST ASMT-02. You can respond using form GST ASMT-03, or appear in person to explain the situation.
When everything is in order, the commissioner has 90 days to provide your provisional tax liability. This order appears in form GST ASMT-04 on the GST portal. To pay this, you execute a bond in form GST ASMT-05. In addition, you need to give a bank guarantee for a security of 25% or less of your tax liability. This amount is also listed on form GST ASMT-04.
The commissioner then has six months to finalize your provisional assessment. If he determines that you didn’t pay enough tax, you must pay the remaining amount, with interest. If he finds that you paid too much, you get a refund, with interest. The Commissioner notifies you using Form GST ASMT-06, and you can pay or claim a refund using Form GST ASMT-07.
How to Get Your Security Released
Once your provisional assessment is finalized, then you can get your security released. To do so, you must apply using form GST ASMT-08. The commissioner has seven days to release the security, which will appear in your online account using form GST ASMT-09.
The provisional assessment process gives you a way to stay compliant with GST law, even when you’re not sure how to calculate the amount you owe. By requesting this assessment early, you can stay on top of your taxes and maintain a high GST compliance rating.