GST
Exempt and non-GST supplies flagged as unpaid tax
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Facts
Scrutiny systems sometimes treat exempt, nil-rated or non-GST supplies as taxable if they are not reported correctly. Proper classification with HSN or SAC and the exemption notification entry answers this.
Provisions and law
- Sec 61, CGST Act 2017Proper officer may scrutinise returns, inform discrepancies and seek an explanation
- Sec 11, CGST Act 2017Government may exempt supplies by notification
Analysis
Check whether exempt sales were reported in GSTR-1 Table 8 and GSTR-3B Table 3.1(c) or (e). Example: a dealer of fresh vegetables and packaged goods shows Rs 40 lakh exempt sales; if they were wrongly reported as taxable, the system sees short tax. Give the HSN, the exemption notification entry and invoices, and explain the reporting error.
Conclusion
- Identify the supplies the officer treated as taxable
- Show HSN or SAC and the exemption entry
- Explain any reporting error in the returns
- Attach sample invoices and the reconciliation
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Scrutiny of returns
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