GST authorities in Kerala use data analytics and technology for GST investigations

The Kerala GST Commissioner has issued guidelines for November 2021. The directives pertain to the security process that the tax officials must follow. The process is backed by the use of data analytics and technology. 

Tax officials must apply these directives to taxpayers who file the GST returns in Kerala before issuing the notice. The directive pointed out that some investigators may not have followed the procedure in the past.

The guidelines read as follows- “Specific instances were found wherein defined procedures have not been followed during the return scrutiny. Hence, to ensure uniformity in the return scrutiny across the field formations, prioritise and dispose of all the initiated cases at the assessment vertical by following these instructions or guidelines”.

The Commissioner of State GST has detailed out the risk factors, red flags, and scrutiny procedures. The directive also provides a step-by-step process of how the data analytics systems work. 

The following are the risk parameters flagged when GST returns are scrutinised-

• Input Tax Credit (ITC) is utilised more than five times the cash payment.
• Form ASMT-13 – Return on or before the passing of 30 days.
• Turnover is more than 60%.
• Turnover is more than Rs.1 crore with nil cash.
• Variances in ITC upon comparing GSTR-2A and GSTR-3B.
• Mismatches upon comparing GSTR-1 and GSTR-3B.
• ITC is claimed after the due date.
• ITC claims on capital goods purchased versus exempted turnover.
• Value of e-way bills generated versus value reported in GSTR-3B.
• Turnover below the value of TDS and TCS reported by the taxpayer.
• Where differences are found in the figure reported in Table 8D of the GSTR-9.

The system flags off variances on any risk factors and will be the first layer of checks. The tax officials get a fair idea of investigating once this system reports discrepancies in the GST return filings. The first four parameters listed cannot be concluded without enquiry or investigation. The guidelines also stated the risk parameters signalled in the back-office system for the GST return scrutiny. The latter part of the guidelines focuses on risk factors to determine ITC mismatches for taxpayer companies.

The GST law allows companies to offset part of their tax payable using ITC from GST paid on the raw materials purchased from suppliers. Industry experts predict that apart from Kerala, other states could soon adopt similar procedures to trace anomalies in filings to issue GST notices. These guidelines are crucial for taxpayers since it cautions them about the process authorities follow before issuing GST notices.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in