Provisional Assessment Under GST Section 60: Process, Forms, and Compliance Guide

Section 60 of the CGST Act, 2017, along with Rule 98 of the CGST Rules, provides a structured mechanism for Provisional Assessment under GST, enabling taxpayers facing genuine difficulty in determining the correct value or applicable tax rate on goods or services to pay tax on a provisional basis. This process involves multiple steps, including application submission, bond and security furnishing, and interaction with the proper officer using prescribed forms (ASMT-01 to ASMT-09).

The officer must finalize the assessment within six months (extendable up to four years in stages), and interest implications apply both in cases of underpayment and refunds. Taxpayers must maintain proper documentation, respond promptly to notices, and stay aware of interest liabilities to ensure smooth compliance. Provisional assessment serves as a relief mechanism, but it demands careful adherence to timelines and procedural requirements.

Decoding GST Section 60: Provisional Assessment – A Comprehensive Guide

The Goods and Services Tax (GST) regime in India, which came into force on July 1, 2017, largely operates on a self-assessment model. However, there are instances where a taxable person may face difficulties in accurately determining their tax liability. To address such situations, Section 60 of the CGST Act, 2017, along with Rule 98 of the CGST Rules, 2017, provides for “Provisional Assessment.” This mechanism allows taxpayers to pay tax on a provisional basis, subject to final determination by the proper officer.

When is Provisional Assessment Applicable?

Provisional assessment is a crucial relief mechanism for taxpayers who are genuinely unable to determine:

• The value of goods or services or both: This could arise in complex transactions, new products/services, or where valuation methods are unclear.
• The rate of tax applicable thereto: Ambiguity regarding the correct HSN/SAC code, or classification of goods/services, can lead to uncertainty in the tax rate.

It’s important to note that provisional assessment is specifically for these two scenarios and cannot be sought for other issues like time of supply, admissibility of ITC, or whether a particular activity constitutes a supply.

The Process of Provisional Assessment (Section 60 read with Rule 98):

The procedure for provisional assessment is detailed and involves several steps, utilizing specific forms:

1. Application for Provisional Assessment (FORM GST ASMT-01):
   • The taxable person must initiate the process by submitting a written request to the proper officer.
   • This application, along with supporting documents, must be furnished electronically in FORM GST ASMT-01 on the common portal.
   • The application must clearly state the reasons for seeking provisional assessment.
2. Notice for Additional Information (FORM GST ASMT-02):
   • Upon receiving the application, the proper officer may issue a notice in FORM GST ASMT-02.
   • This notice requests the registered person to provide additional information, clarifications, or documents to support their provisional assessment request.
3. Reply to the Notice (FORM GST ASMT-03):
   • The applicant must file a reply to the notice received in FORM GST ASMT-02 using FORM GST ASMT-03.
   • If desired, the applicant can also appear in person before the proper officer to explain their case.
4. Provisional Assessment Order (FORM GST ASMT-04):
   • Within ninety days from the date of receipt of the request (FORM GST ASMT-01), the proper officer shall pass an order in FORM GST ASMT-04.
   • This order allows payment of tax on a provisional basis, specifying the rate or value (or both) on which the assessment is to be allowed.
   • It also specifies the amount for which a bond is to be executed and security to be furnished.
5. Furnishing of Bond and Security (FORM GST ASMT-05):
   • Before being allowed to pay tax provisionally, the taxable person must execute a bond in FORM GST ASMT-05.
   • This bond binds the taxable person to pay the difference between the finally assessed tax and the provisionally assessed tax.
   • Along with the bond, security must be furnished as deemed fit by the proper officer. The security amount generally does not exceed 25% of the amount covered under the bond. This security can be in the form of a bank guarantee.
   • A bond furnished under the State Goods and Services Tax Act or Integrated Goods and Services Tax Act is deemed valid for this purpose.
6. Notice for Final Assessment (FORM GST ASMT-06):
   • Once the provisional assessment period is nearing completion, the proper officer issues a notice in FORM GST ASMT-06.
   • This notice calls for information and records required for finalizing the assessment.
7. Final Assessment Order (FORM GST ASMT-07):
   • The proper officer must pass the final assessment order within a period not exceeding six months from the date of communication of the provisional assessment order (FORM GST ASMT-04).
   • This order, issued in FORM GST ASMT-07, takes into account all relevant information to finalize the assessment and specifies the amount payable or refundable.
   • Extension of Time Limit for Final Assessment:
     • The six-month period can be extended by the Joint Commissioner or Additional Commissioner for a further period not exceeding six months upon showing sufficient cause and recording reasons in writing.
     • The Commissioner can further extend this period for up to four years under similar conditions.
8. Application for Withdrawal of Security (FORM GST ASMT-08):
   • After the final assessment order is passed, if no further tax is due or any differential tax has been paid, the registered person can apply for withdrawal of the security furnished earlier using FORM GST ASMT-08.
9. Order for Release of Security (FORM GST ASMT-09):
   • The proper officer, after ensuring that the applicant has fulfilled all obligations, will issue an order in FORM GST ASMT-09 for the release of security or rejecting the application, typically within seven working days of receiving the application.

Interest Implications (Section 60(4) and 60(5)):

Provisional assessment carries specific interest implications for both short payment and excess payment of tax:

• Interest on Underpayment of Tax (Section 60(4)):
  • If the finally assessed tax is higher than the provisionally assessed tax, the registered person is liable to pay interest on the differential tax amount.
  • This interest is calculated from the first day after the due date of payment of tax for the said supply (as specified under Section 39(7) or rules made thereunder) until the date of actual payment.
  • The interest rate is as specified under Section 50(1) of the CGST Act (currently 18% per annum). This applies regardless of whether the payment is made before or after the issuance of the final assessment order.
• Interest on Refund (Section 60(5)):
  • If, as a result of the final assessment order, the registered person is entitled to a refund, interest shall be paid on such refund as provided in Section 56 of the CGST Act.
  • This is subject to the provisions of Section 54(8) of the CGST Act (which deals with the principle of unjust enrichment).
  • Generally, if a refund is not provided within 60 days of the application by the proper officer, interest is payable at 6% per annum (from the day following 60 days from the date of receipt of the refund application until the date of refund payment).

Key Takeaways and Compliance Tips:

• Maintain Detailed Records: Keep accurate and comprehensive records to support your provisional assessment request and facilitate the final assessment.
• Clear Justification: Provide thorough and clear reasons in writing for why provisional assessment is necessary.
• Timely Response: Respond promptly and accurately to any notices seeking additional information or clarification.
• Bond and Security: Be prepared to execute the required bond and furnish the stipulated security.
• Proactive Approach: Monitor the status of your provisional assessment and follow up with the proper officer to ensure timely finalization.
• Understand Interest Implications: Be aware of the interest liabilities for both underpayments and the right to interest on refunds.

FAQs on GST Section 60 – Provisional Assessment

What is Provisional Assessment under GST?
Provisional Assessment allows a registered taxpayer to pay GST on a provisional basis when they are unable to determine the correct value or tax rate.

Under which legal provisions is Provisional Assessment covered?
It is governed by Section 60 of the CGST Act, 2017 and Rule 98 of the CGST Rules, 2017.

When can a taxpayer opt for Provisional Assessment?
When there is uncertainty in determining the value of goods/services or the correct rate of tax applicable.

Can Provisional Assessment be used for issues other than value or tax rate?
No, it cannot be used for issues like time of supply, ITC eligibility, or determining if a transaction constitutes a supply.

What is the first step in applying for Provisional Assessment?
The taxpayer must submit FORM GST ASMT-01 electronically on the GST portal along with supporting documents.

What happens after the application is submitted?
The proper officer may issue FORM GST ASMT-02 to request additional information or clarification.

How should the taxpayer respond to the officer’s notice?
By submitting FORM GST ASMT-03 along with the required information or documents.

Is personal appearance allowed during the process?
Yes, the applicant can appear in person before the proper officer to present their case.

Which form is used for the Provisional Assessment order?
FORM GST ASMT-04 is issued by the proper officer to allow provisional assessment.

What is the time limit to issue the Provisional Assessment order?
The proper officer must issue it within 90 days from the date of receipt of the application (ASMT-01).

What must the taxpayer submit before paying tax provisionally?
A bond in FORM GST ASMT-05 and security, usually not exceeding 25% of the bond amount, often in the form of a bank guarantee.

Is the bond furnished under other GST Acts valid for this purpose?
Yes, bonds under SGST or IGST are deemed valid for provisional assessment under CGST.

Which form is issued to call for records for final assessment?
FORM GST ASMT-06 is used by the officer to call for necessary documents for finalization.

How long does the officer have to complete the final assessment?
Within six months from the date of the provisional order (ASMT-04), extendable up to four years under certain conditions.

What form is used for the final assessment order?
FORM GST ASMT-07 is issued for finalizing the assessment.

Who can extend the final assessment period and by how much?
The Joint/Additional Commissioner can extend by 6 months, and the Commissioner can extend it further by up to 4 years.

What happens if the final assessment results in no further tax liability?
The taxpayer can apply for release of the security using FORM GST ASMT-08.

Which form is issued for the release or rejection of the security refund?
FORM GST ASMT-09 is used by the officer for this purpose.

What interest is payable if the final tax exceeds the provisional tax paid?
Interest at 18% per annum is payable from the original due date to the actual date of payment.

What happens if the final assessment leads to a refund?
The taxpayer is entitled to interest at 6% per annum if the refund is delayed beyond 60 days from the refund application date.

Is unjust enrichment applicable in case of a refund?
Yes, Section 54(8) of the CGST Act applies, and refunds may be withheld if unjust enrichment is involved.

What are the compliance tips for taxpayers opting for Provisional Assessment?
Maintain proper documentation, provide clear justifications, respond promptly to notices, monitor progress, and understand interest implications.

Can the taxpayer appeal the final assessment order?
Yes, the taxpayer can appeal the final assessment order under the appellate provisions of the GST Act.

Is Provisional Assessment available for unregistered persons?
No, only registered persons can apply for provisional assessment under GST.

What is the role of the proper officer in Provisional Assessment?
The officer verifies the application, may request further information, issues the provisional and final orders, and ensures compliance.

Does the taxpayer need to self-assess again after the final order?
Yes, if there is any differential tax, it must be paid with applicable interest, or a refund claim may be made if eligible.

Section 60 of the CGST Act provides a crucial mechanism for taxpayers facing genuine uncertainties in determining their GST liability. While it offers flexibility, it comes with a structured process and specific timelines.

Understanding these provisions and adhering to the prescribed procedures is essential for smooth compliance and to avoid potential interest liabilities or delays in refunds. Taxpayers should approach provisional assessment with due diligence, maintaining transparency and providing all necessary information to the tax authorities.