GST and the Faceless Assessment Scheme

GST aims to simplify the complex indirect tax structure and create a common national market for goods and services. GST is a unified tax system that subsumes multiple indirect taxes like excise duty, service tax, VAT, CST, etc. This helps reduce tax cascading or double taxation. It has a dual structure – Central and State GST are levied on the same base. Integrated GST is levied on inter-state supplies.

GST follows a destination-based consumption tax structure, where taxes accrue to the state where the good or service is consumed rather than where it originates. GST aims to enhance tax compliance and make tax administration more efficient by reducing complexities in the system. The introduction of GST in India has been termed one of the most extensive indirect tax reforms that has made fundamental changes in the country’s indirect taxation structure. 

It has subsumed around 17 indirect taxes and 23 cesses earlier levied by the central and state governments. One of the significant changes under GST has been the introduction of the GST faceless assessment scheme. This scheme aims to impart greater efficiency, transparency, and accountability in tax administration.

GST Faceless Assessment

The faceless assessment scheme was introduced under GST in 2020. Under this scheme, the tax assessments are conducted online without physical interfaces between the taxpayer and the tax officer.

Some key aspects of GST faceless assessment include:

• Automated random allocation of cases: Through a computer-based system, teams of tax officers are assigned randomly to the GST returns selected for scrutiny. This removes room for discretion, thus minimizing cases of corruption.
• Anonymity: Throughout the assessment process, both the assessing officer and the taxpayer are anonymous. This helps reduce bias and increases objectivity.
• Geographical restrictions: Reviewing officers are in a separate jurisdiction. This is done to eliminate jurisdictional and local biases.
• Enablers: Assessing officers are supported by facilitation centers and verification units via physical verification, collection of extra information and so forth.
• Timebound completion: Automated review and approval mechanisms complete assessment stipulated in timelines. This improves efficiency.

The benefits expected from GST faceless assessment are:

• An efficient process of tax assessments and better performance.
• More transparency, reducing the interface between people and the authorities’ taxpayers.
• Objectivity improved as a result of removing geographic biases.
• Encourage tax compliance by making tax evasion hard.
• The uniformity of national assessment practices.

Thus, GST faceless assessment aims to make tax administration more transparent, efficient, and impartial while improving voluntary compliance levels.

GST Assessment Online

GST assessment online refers to the process where taxpayers can file their GST returns, make tax payments, claim refunds, and undergo assessments via the online GST portal. The steps involved in GST assessment online are:

• Registration on GST Portal: To start with, one must apply for the GSTIN registration in the common GST portal – www.gst.gov.in. Therefore, it is an entry point for all GST compliances.
• Invoice upload: To all transactions, taxpayers should issue GST-compliant invoices and load the invoice details in the GST portal through returns like GSTR-1.
• Filing GST Returns: Taxpayers should submit monthly (GSTR-1, GSTR-3B) and quarterly (GSTR-2, GSTR-3) returns electronically and declare their tax obligations. Filing of annual returns (GSTR-9) should be done online.
• Payment of GST: Payment of tax liability should be made through internet banking or a prescribed challan—real-time credit of taxes by directly linked bank gateways of GSTN.
• Claim of Input Tax Credit: Taxpayers must claim the eligible input tax credit on their GST returns using invoices uploaded by suppliers. This helps to avoid tax layering.
• Processing of returns: Automated validations tools are used to verify input-output matches, tax payments, and other relevant details for a given taxpayer with the help of the GST portal. Returns get processed after matching.
• Assessment: An automated risk engine might flag some of the returns for further investigation. Faced-online checks will be implemented.
• Audit process: The taxpayer could also get a GST audit periodically, and when they validate their books, it is done online.
• Refund settlement: The GST portal will enable taxpayers to claim back their money after paying excess GST and receiving their refunds without any difficulty.

Thus, GST assessment happens online through a transparent, automated process with minimal physical interventions. This ensures ease of compliance and faster assessment completion.

Table: Month vs. Revenue in 2023

The essential requirements from taxpayers for smooth GST assessment online include:

• Obtaining GST registration
• Maintaining accurate records of transactions
• Issuing proper GST-compliant invoices
• Timely uploading of invoice and return data
• Timely payment of GST liability
• Responding promptly to any clarifications sought

Thus, taxpayers can efficiently undergo the online GST assessment process with suitable diligence and compliance discipline.

GST Assessment Simplified

GST assessment involves complex procedures for filing returns, claiming input tax 

credits, managing invoices, and calculating tax liability. To ease compliance for small taxpayers, GST provides simplified assessment schemes:

• Composition Scheme: Small taxpayers with annual turnover below Rs 1.5 Cr (75 lakh) can opt for a composition scheme. The key features are:
• Single consolidated tax at a fixed rate of 1% (Manufacturing) or 5% (Restaurants)
• No input tax credits except on inward supplies from registered dealers
• Lower compliance burden in terms of returns and invoices
• Presumptive Taxation Scheme: Taxpayers with annual turnover below Rs 2 Cr (1.5 crore) can pay GST at fixed prescribed rates based on their business category under this scheme.
• Payment of Tax under Notification No. 66/2017: Small service providers can discharge GST liability at a fixed rate of 6% after claiming a common input tax credit.
• Quarterly Returns: Taxpayers with annual turnover below Rs 5 Cr (3.5 crore) must file quarterly returns GSTR-1 and GSTR-2 instead of monthly returns. This reduces the compliance burden.
• Simple GST Returns: Taxpayers with annual turnover up to Rs 5 Cr have the option to file simplified quarterly return SAHAJ in GSTR-3B instead of average returns.
• Payment based on turnover: Taxpayers with turnover up to Rs 1.5 Cr must pay only 1% GST on outward taxable supplies under the composition scheme in the simplified GSTR-3B return form.
• SMS-based filing: Nil return filers can file returns through SMS. Key details are pre-filled, reducing hassle.

Thus, by providing the above simpler schemes and procedures, GST eases the compliance burden for small businesses and traders. This helps them adopt GST more smoothly.

The advantages of GST assessment simplified to taxpayers are:

• Lower tax rates reduce tax costs and increase savings
• Simplified returns and invoicing lowers the compliance burden
• More money remains available for business expansion due to lower payments
• Prevents business disruption that could have been caused by complex compliance

However, taxpayers must assess all the pros and cons before opting for GST-simplified schemes since they also entail limitations like non-availing input tax credits.

GST Impact on Tax Compliance

GST implementation has significantly impacted various aspects related to tax compliance in India. Some of the significant outcomes seen are:

• Widening of tax base: GST has increased the tax net substantially by bringing in more taxpayers from the unorganized sector into the formal economy. The number of taxpayers increased by 50% to about 1.2 crore.
• Increase in tax collection: GST has consistently augmented the government’s tax revenues. Total gross GST collections surpassed Rs 1 lakh crore almost every month in 2019. States’ average tax receipts also rose post-GST rollout.
• Better discipline in return filing and payments: GST has inculcated discipline amongst taxpayers to file monthly and quarterly returns and pay due taxes promptly. The increase in the number of returns filed reflects this compliance culture change.
• Formalization of the economy: GST has motivated several businesses to move from an informal cash-based model to formal accounting, having proper registration and tax reporting.
• Digitalization: The GST ecosystem, such as e-way bills, e-invoicing, online returns, etc., has led to greater digitalization of tax filing, credit tracking and assessment proceedings, improving transparency.
• Reduced tax evasion: GST has cut down avenues of tax evasion by subsuming various indirect taxes, removing checkposts, and enabling better tracking of transactions.

However, GST impact on tax compliance has been impeded by particular challenges like:

• Frequent changes in rules and rates increased complexity and compliance costs.
• Glitches on the GSTN portal caused filing hassles
• The compliance burden increased significantly, even for small businesses
• Lack of clarity in specific procedures and rules
• Ill-equipped taxpayers struggled to adapt to the new system

Thus, while GST has positively affected tax compliance by enhancing reporting and formalization of the economy, persistent efforts are required to smoothen procedures and rationalize rules to facilitate taxpayers in GST adoption. The success of GST hinges on how well the compliance experience for taxpayers shapes up in the coming years.

Conclusion

The introduction of GST has been a landmark tax reform that has integrated the Indian economy into a single market. By subsuming a myriad of indirect taxes and removing tax barriers across states, GST has led to the creation of a unified common national market. The faceless assessment scheme under GST has added an impetus towards improving tax administration by making assessments impartial, transparent and efficient. The absence of a physical interface between taxpayers and tax officers reduces harassment and corruption, leading to greater accountability.

GST assessment online enables completely automated scrutiny of returns, payments and refunds through the GSTN portal with minimal human intervention. This eliminates discretion, reduces errors and improves turnaround time. However, taxpayers need to be compliant in return filing, invoicing and tax payment to ensure smooth online assessment. By introducing simplified schemes, GST eases the compliance burden for small taxpayers through measures like lower rates, relaxed returns, composition levies, SMS-based filing, etc. This prevents business disruption for small entities.

Overall, GST has positively influenced tax compliance culture, leading to a substantial increase in registered taxpayers, tax collections, return filings and formalization of the economy. However, persistent efforts are needed to stabilize GST by rationalizing tax slabs, removing glitches and clarifying ambiguous rules to maximize its compliance and revenue impact.

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FAQs

• What is GST? 

GST, or Goods and Services Tax, is an indirect tax system introduced in India on July 1, 2017. It aims to subsume all indirect taxes levied on goods and services by the Indian central and state governments. GST brings uniformity by replacing taxes like central excise duty, services tax, additional customs duty, surcharges, state-level value-added tax and Octroi. The GST regime follows a unified tax structure across India.

• What are the GST tax slabs? 

Four tax slabs under GST are 5%, 12%, 18% and 28%. In addition to these slabs, certain goods like petroleum products, alcohol, stamp duty, electricity, real estate, etc, continue to be taxed separately by the state and central governments as per existing taxation rules. Service providers with a turnover of less than Rs.20 lakhs can opt for a composition scheme with a flat tax rate.

• What is meant by faceless assessment? 

Faceless assessment refers to an evaluation carried out electronically without requiring the taxpayer to physically visit the tax office or meet the assessing officer in person. The entire process, from application to passing of order, is done on the GST portal through virtual channels. The identity of the assessing officer remains unknown to the taxpayer throughout the process, hence the term ‘faceless’.

• How does faceless assessment help under GST? 

The faceless assessment process brings transparency, efficiency and standardization to GST assessments. Assessments are randomly allotted through an automated system, eliminating discretion. This reduces harassment, corruption and costs for taxpayers. The anonymity of tax officers results in unbiased assessments. Overall, it improves the ease of doing business.

• What is the process of faceless assessment under GST? 

The key steps are – the taxpayer applies online, the tax officer verifies documents electronically, the assessment unit initiates scrutiny, clarifications are sought via the portal, a draft assessment order is issued, a review unit examines it, and finally, the final assessment order is printed and communicated via the portal.

• What are the benefits of a faceless assessment? 

Significant benefits are – reduced compliance cost and time for the taxpayer, no physical interface with tax officers, uniformity in assessment, transparency, speed, efficiency, anonymity and convenience for taxpayers, and minimized harassment and corruption.

• What resources are available if the taxpayer is aggrieved with the order? 

If the taxpayer is unsatisfied with the final assessment order, they can first apply for rectification of mistakes apparent on the record. If unsatisfied, the taxpayer can file an appeal with the Appellate Authority against the assessment order within three months of communication. The Commissioner of Appeals will then hear the case.

• Can a personal hearing be requested under faceless assessment? 

The taxpayer can request a personal hearing through video conferencing when the tax officer has issued a show cause notice. The Chief Commissioner has the authority to approve the rejection or acceptance of the hearing request after examining if the personal hearing is necessary or justified.

• Is there a timeline for completing faceless assessments? 

As per GST law, faceless assessment must be completed by the tax officer within nine months from the end of the financial year in which the tax period to be assessed falls. For example – for FY 2019-20, the assessment should be completed by December 31, 2020.

• What is the monetary limit for cases covered under faceless assessment? 

Currently, cases where the tax liability is more than Rs. 5 crore fall under the ambit of faceless assessment. This limit is expected to gradually reduce over time to cover many more cases through the faceless route.

Aaryan Singh

B.Com degree with finance and accounting Specialisation in Goods and Service Tax (GST) and taxation system Completed certification course on GST from ICAI in 2022 Online GST practitioner course completed in 2023 from Indian Institute of Skill Development and Training.

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