AUGUST 27, 2019

By M G Kodandaram

THE GST regime in India is expected to evolve itself into a good and simple tax system. The ambiguities present in the GST legislations have made the goal appear a distant possibility. Unless immediate steps are taken to simplify the laws, by clearly defining some basic terms, simplify the returns and the filing procedures, and prioritise the exports, it is not possible to reap the full benefits of this transparent, trust based system. One such issue is related to the defining the term 'assessment' in GST Laws, I would like to deliberate, so that the same could be considered during the amendment to the Act to fulfill the needs of the registered person.

The word 'assessment' of a transaction of the registered person is the key to understanding any taxation system. 'Making assessment' of transactions of a registered person, is one of the most important tasks of the tax administrator, wherein the executive is expected to scrutinise/ examine records/ returns prescribed for this purpose, so as to find out whether the taxes paid by the registered person on the transactions are in consonance with the law. For this purpose, the required documents /declarations/ returns are prescribed in the law itself and the duty of finding out that tax discharged is fair and justifiable, is normally left to the discretion and wisdom of the administrator. In the GST regime, as well as in all taxation systems in India [both direct and indirect taxes], at present, the said responsibility has been shifted to the registered person. This is popularly referred to as 'self-assessment' by the registered person.

This measure has been taken so as to allow the much-desired freedom to the registered person to compute his liability and discharge the same on his own. This voluntarily compliance, i.e., assessment and payment by oneself, helps the administrator a ton, as he need not revisit the same in the normal circumstances. This will also avoid undesirable intrusion by the administration in the day to day functioning of the business of such registered person. When such a responsibility is shifted to the assessee, it is equally important to define the said term/ task in clear and unambiguous manner, so that there is better understanding of law and implementation of the same by any registered taxpayer becomes possible and proper.

Present definition of assessment /self assessment

At present, the term"assessment" has been understood to be 'the process of determination of tax liability' under GST Act. Almost all the tax statutes prescribe modes and methods for carrying out assessments, which is basically meant to find out compliance with respect to law and procedure in place, as stipulated under that particular law. The term"assessment" has been defined in Section 2(11) of CGST Act / Section 2(11) of SGST Acts as follows:"Section 2(11) of CGST Act,-"Assessment" means determination of tax liability under this Act and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment;"

The GST law has been enacted to consolidate all indirect taxes under one umbrella and to help the Indian businesses, become globally competitive. To facilitate easy calculation and payment of taxes, GST has provisions such as self-assessment. But what the registered person is expected to do so as to comply with the"assessment" or"self assessment" is not forthcoming on plain reading of this definition. When scores of registered persons encountered me with this question, I took my own time to explain, what the assessment means and impressed them that it is the central part of the decision making in every transaction by them. This I feel could have been eased, if the authorities were to define the term"assessment" in a broader and in an emphatic way, so that voluntary compliance of laws by the registered person becomes much evident and easier.

Section 59 of CGST Act, 2017 stipulates the Self Assessment of Taxes, by 'Every registered person' as 'shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39.' Therefore, the filing of the return by the registered person is nothing but declaring his self-assessment to the department for scrutiny by them. Later the department may take up, if found wanting, based on risk analysis, for re-assessment of the transactions for a particular period. But what are the issues and cares that a registered person should understand to take up this responsibility so as to self-assess are not elucidated in the act or in the rules.

Further, the definition of 'assessment' cited above [Section 2(11) of CGST Act ] is applicable to IGST Act, UTGST Act as well as Goods and Services Tax (Compensation to States) Act, 2017. As per section 20 of the IGST Act 2017, the assessment provisions of CGST Act are applicable to IGST Act (Sl no (xii) - assessment). As per section 21 of the UTGST Act 2017, certain provisions of CGST Act are made applicable to UTGST Act and includes the provision pertaining to assessment (Sl no (xiii)- assessment). Similarly these assessment provisions are equally applicable to Cess levied and collected as per the Goods and Services Tax (Compensation to States) Act, 2017 as the sub-section (1) of section 11 of the said Act stipulates as follows :" The provisions of the Central Goods and Services Tax Act, and the rules made there under, including those relating to assessment, … shall, as far as may be, mutatis mutandis, apply, in relation to the levy and collection of the cess leviable under section 8 on the intra-State supply of goods and services, as they apply in relation to the levy and collection of central tax on such intra-State supplies under the said Act or the rules made there under." Therefore, due to wider ramifications across entire GST Laws in place, there is immediate need to properly define this term as a part of CGST Act.

The proposed amendment

Normally a tax statute is expected to lay down a comprehensive code for assessment which should contain the details such as:

-  The person whose liability is to be recorded i.e. in this case, the registered person.

-  The person who is empowered / authorised to undertake such determination – self-assessment by the registered person himself, in the GST regime.

-  The manner in which the tax liabilities are to be determined - not defined with the term 'assessment' in GST Law;and

-  The procedure to be followed for recording the tax liability.

Among others, this leads to the issue – what is assessment and what are the issues that one has to take care to carry out the proper assessment. Unless this is spelt out in clear terms, the assessment by the assessee remains an ambiguous task, both in terms of law and decision making.

Normally 'Self Assessment' means determination of the liability of taxes to be paid, for a given tax period and declare the same, after requisite payment of taxes, at regular intervals as prescribed under law, by the registered person. Such registered person, as she / he is in possession of the records / documents, facts / information and circumstances of his transactions and expected to be fully aware of the legal requirements will be in better position to make decisions. This is a positive approach followed in all tax administrations, wherein the assessee is provided with detailed steps to determine and assess his tax liability and comply with the same voluntarily. This is a trust based initiative wherein the registered person is treated as a stake holder in mobilizing revenue to the exchequer.

When we examine the definition of the 'assessment' in the erstwhile Central Excise and Service Tax regimes, it seems that the same have been borrowed to the GST regime. The Central Excise Act, 1944 did not define the term assessment. However the Central Excise Rules, 2017 defined the said term in Rule 2(b) as follows:

'Rule 2 (b)      "assessment" includes self-assessment of duty made by the assessee under Rule 6 and provisional assessment under rule 7;' The RULE 6 of the Central Excise Rules, 2017, read as follows:   "RULE 6 - Assessment of duty. - the assessee shall himself assess the duty payable on any excisable goods: Provided that in case of cigarettes, the Superintendent or Inspector of Central Excise shall assess the duty payable before removal by the assessee." But in none of enactments, the term assessment has been clearly defined.

Similarly, in Service Tax, vide rules made under Chapter V of the Finance Act, 1994 [As on 1-4-2017], the Rule 2 (b) defined"assessment" so as to 'include self-assessment of service tax by the assessee, reassessment, provisional assessment, best judgment assessment and any order of assessment in which the tax assessed is nil;determination of the interest on the tax assessed or reassessed;' here again it is full of ambiguity and fails to explain how the registered person should satisfy that he has positively complied with the requirements of an assessment.

On the same lines The Karnataka Value Added Tax Act, 2003 in Section 2 (5) defined' Assessment' as follows:' means an assessment made or deemed to have been made under this Act and includes a re-assessment'. The Tamil Nadu Value Added Tax Act, 2006 in Section 2 (4-A) defined"Assessment" as"means an assessment made or deemed to have been made under this Act and includes a reassessment or revision of assessment." In other words none of the taxing statutes in the earlier regime too made any attempt to remove the ambiguity hovering around the term 'assessment'.

Even the other central indirect tax act viz., the Customs Act, 1962, prior to 29.3.2018, defined the said term in 'section 2(2) as 'includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil;' Therefore the term"assessment", did not have an apt definition in customs law also.

But the said definition has now been amended [to be effective from 29.3.2018] as follows:

'Section 2 (2)"assessment" means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference to-

(a) the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act;

(b) the value of such goods as determined in accordance with the provisions of this Act and the Customs Tariff Act;

(c) exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued thereof under this Act or under the Customs Tariff Act or under any other law for the time being in force;

(d) the quantity, weight, volume, measurement or other specifics where such duty, tax, cess or any other sum is leviable on the basis of the quantity, weight, volume, measurement or other specifics of such goods;

(e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods;

(f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods,

..and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil;'

The above definition is more specific and explains the requirement to be met by such person to determine the assessment of his transaction. It directs him to examine with regard to (a) the tariff classification;(b) the value;(c) the exemption or concession of duty, tax, cess or any other sum, consequent upon any notification;(d) the quantity, weight, volume, measurement or other specifics where such duty etc., leviable on the basis of such parameter;(e) the origin of such goods;(f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods. It goes further as:"includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil;"

Conclusions

The author feels that the above definition, with appropriate changes, if adapted to CGST Act, will enable to clear the ambiguity existing in the GST Laws. It is requested that this suggestion may be considered by the GST council in its 37th meeting. This will ease the decision making process of assessment by the assessee. There is also need of simplifying the returns procedure and process, which is in evaluation stage by the Council. Unless these measures are taken up on priority, the business and the economy would continue to be impacted by the negative impact of the new tax regime.

(The author is IRS, Assistant Director (Retd), NACIN, ADVOCATE and CONSULTANT. The views expressed are strictly personal.)