Scrutiny of Returns – Section 61 of GST

The CGST Act, 2017, is a cornerstone of India’s indirect tax system, ensuring transparency and compliance among registered taxpayers. One of the key mechanisms for verifying the accuracy of tax filings is outlined under Section 61: Scrutiny of Returns. This provision empowers the proper officer to assess the accuracy of returns submitted by registered persons. Let’s explore this section in detail to understand its implications for businesses and taxpayers.

What is Section 61 of the CGST Act?

Section 61 of the CGST Act deals with the scrutiny of returns filed by registered taxpayers. This section allows the proper officer to verify the correctness of the information submitted in the returns and ensure there are no discrepancies that might lead to revenue loss.

Key Provisions of Section 61

1. Scrutiny by the Proper Officer (Sub-section 1)

The proper officer has the authority to scrutinize returns and associated documents submitted by a registered person. If any discrepancies are found during the scrutiny, the officer is required to inform the taxpayer in the prescribed manner and seek a proper explanation.

2. Satisfactory Explanation (Sub-section 2)

If the registered person furnishes a satisfactory explanation regarding the discrepancies, the officer will accept the response, and no further action will be taken.

3. Failure to Explain or Take Corrective Action (Sub-section 3)

If the taxpayer:

• Fails to provide a satisfactory explanation within 30 days (or an extended period as allowed), or

• Accepts the discrepancies but does not correct them in the return of the relevant month,

then the proper officer can initiate further proceedings. These may include:

• Audit under Section 65 of the CGST Act

• Special audit under Section 66 of the CGST Act

• Inspection, search, and seizure under Section 67 of the CGST Act

• Determination of tax and dues under Section 73, 74, or newly inserted Section 74A of the CGST Act

Note: The amendment to include Section 74A was made by Section 129 of The Finance (No. 2) Act, 2024, effective from 16th August 2024.

Objective and Importance of Section 61

Section 61 acts as a preventive compliance mechanism. It enables tax authorities to:

• Ensure timely detection and correction of errors.

• Minimize instances of tax evasion.

• Encourage voluntary compliance by giving taxpayers an opportunity to rectify genuine mistakes.

This approach balances enforcement with facilitation, making it a non-adversarial tool in the hands of the tax administration.

Implications for Taxpayers

For registered persons under GST, understanding and complying with Section 61 is critical. Here’s what businesses should keep in mind:

• Maintain accurate records and reconcile returns regularly.

• Respond promptly to scrutiny notices and provide supporting documents.

• Take corrective measures proactively if any discrepancies are acknowledged.

Ignoring notices or failing to act on them could lead to serious actions like audits, inspections, or even demand orders under other sections.

Conclusion

Section 61 of the CGST Act plays a vital role in maintaining the integrity of the GST system. By enabling scrutiny of returns and allowing taxpayers the opportunity to explain or correct errors, it promotes a fair and transparent tax environment. Businesses must stay vigilant and ensure their returns are accurate, timely, and in full compliance with GST norms to avoid potential legal and financial consequences.

Stay compliant. Stay informed. For professional guidance on GST return filing and scrutiny handling, consult with a certified chartered accountant like us at +91 9769647582.