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February 27, 2021

Faceless assessment proposed under GST

by CA Jessica Nagaonkar in GST

Faceless assessment proposed under GST

Finance Minister Nirmala Sitharaman had announced the e-assessment scheme in her Budget speech on July 5, 2019, which was subsequently inaugurated on October 7, 2019. This was aimed at moving to faceless scrutiny and elimination of human interface in assessment proceedings. The scheme was set to bring in a “paradigm shift” in taxation by eliminating human interface in the income tax assessment system.

Faceless assessment facility was extended to the entire country on 13th August, 2020, ending territorial jurisdiction and individual discretion, where an officer was the whole and sole to the assessee. Scrutiny will be allotted on a random basis. Assessment of a taxpayer in Delhi could well be carried by an officer sitting in Pune. It will put an end to needless litigation.

Now the government is also evaluating the introduction of ‘faceless assessments and faceless appeals’ in the indirect tax regime as well so that exporters’ interaction with GST officials could be eliminated.

The move will be along the lines of faceless assessment under Income Tax and is expected to make adjudication and scrutiny by the tax authorities more transparent. This will reduce the chances of tax evasion.

Whenever GST evasion is detected, the cases get automatically transferred to the I-T authorities and they also look into the cases. As we detect GST evasion or customs, they will also be investigated in income tax. Such concerted action will deter those who are on the fringes of the law.

The faceless assessment and appeals process if introduced under GST will make the tax administration free of any bias and remove any subjectivity that personal interface between the tax payer and officials could introduce in the process.

Introducing faceless assessment under GST will be a big change for GST and discussions for the same within the department are under process. The new system will likely take shape through a portal that will be independent of the existing GST portal and GST network, which acts as facilitation portals for taxpayers.

The whole idea of faceless assessment under GST is that assessment will not be done by one fixed officer who has interacted with the taxpayer in the past at both Centre and State levels. Adoption of faceless assessment in GST would benefit businesses by reducing the time spend on interactions with GST authorities and enable a complete chain of digital transactions. It would also reduce the pressure on GST authorities.

The faceless assessment scheme under Income Tax is stabilized and is working well. Of the 58,000 cases identified for faceless assessment in the first phase, final orders have been passed in more than 24,700 cases completely through faceless system.

In 94% of the 24,700 cases where final orders have been passed, the explanations given by taxpayers to email notices have been accepted and no addition of income or imposition of penalty has been made.

Only in 6% of the cases, which is about 1,500 cases, understatement of income has been observed and necessary addition of income and penalty have been imposed. This demonstrates that the system has stabilized and is working.

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