Section 60 of the Central Goods and Services Tax Act, 2017 deals with provisional assessment. It provides a mechanism for a taxable person to pay GST on a provisional basis when the person is unable to determine the correct value of goods or services or the applicable rate of tax at the relevant time.
Normally, GST is paid after determining the taxable value and applicable tax rate. However, in certain genuine situations, determining either the value or the rate may not be immediately possible. Section 60 allows the taxable person to approach the proper officer and request permission to pay tax provisionally rather than waiting until the dispute or uncertainty is completely resolved.
The provisional assessment is not a permanent determination of tax liability. It is followed by a final assessment, after which any additional tax becomes payable with applicable interest, or any eligible excess payment may become refundable.
What is Provisional Assessment under GST?
Provisional assessment means determining and paying GST temporarily on a provisional basis where the taxable person cannot presently determine:
- The correct value of the goods or services or both; or
- The correct rate of GST applicable to the supply.
Under Section 60(1), the taxable person may submit a written request to the proper officer, explaining the reasons for seeking provisional assessment. The proper officer may then allow payment of tax on a provisional basis at the rate or on the value specified in the order. The order must be passed within 90 days from the date of receipt of the request.
The important point is that provisional assessment is not an automatic facility. The taxable person has to request it, provide reasons and supporting information, and obtain an order from the proper officer.
Why is Provisional Assessment Required?
In normal GST compliance, a registered person is expected to determine the taxable value and applicable rate and pay the correct amount of tax.
However, there can be situations where the final value or rate cannot be determined immediately.
For example, a manufacturer may supply goods where the final transaction value depends upon a factor that will be determined later. Similarly, a taxpayer may have a genuine difficulty in determining which GST rate applies to a particular supply because the classification or applicable rate requires determination.
In such cases, simply choosing an arbitrary value or rate can create a risk of underpayment or overpayment of GST.
Section 60 provides a statutory mechanism to handle such situations. Instead of leaving the tax liability unresolved, the taxpayer can request the proper officer to permit payment of GST on a provisional basis. The final liability is subsequently determined through the final assessment process.
Section 60 of the CGST Act – Main Provisions
Section 60 contains five sub-sections covering the complete provisional assessment mechanism.
| Provision | What it deals with |
|---|---|
| Section 60(1) | Request for provisional assessment |
| Section 60(2) | Bond and security |
| Section 60(3) | Final assessment |
| Section 60(4) | Interest on additional tax payable |
| Section 60(5) | Interest on refund arising from final assessment |
These provisions should be read together because provisional assessment does not end with the initial order. The final assessment determines the taxpayer’s ultimate liability.
Section 60(1) – Request for Provisional Assessment
Section 60(1) applies where the taxable person is unable to determine either:
- the value of goods or services or both; or
- the rate of tax applicable to the supply.
The taxable person may make a request in writing to the proper officer and must give reasons for requesting payment of tax on a provisional basis.
If the request is accepted, the proper officer passes an order allowing the taxpayer to pay tax provisionally at the rate or on the value specified in the order.
The law provides that the proper officer should pass this order within 90 days from the date of receipt of the request.
Example
Suppose a registered manufacturer is making a particular supply for which the final taxable value cannot be determined immediately because a relevant component of the consideration is subject to later determination.
Instead of waiting indefinitely to determine the final value, the taxpayer may approach the proper officer with supporting documents and reasons.
If provisional assessment is allowed, GST can be paid based on the provisional value specified in the order. The final value will subsequently be determined during finalisation of the assessment.
Section 60(2) – Bond and Security
Provisional payment of tax is subject to safeguards.
Under Section 60(2), provisional assessment may be allowed only when the taxable person executes a bond in the prescribed form.
The bond binds the taxable person to pay the difference between:
- the tax finally assessed; and
- the tax provisionally assessed.
The proper officer may also require surety or security as considered appropriate.
This mechanism protects the revenue because provisional assessment does not mean that the taxpayer is permanently allowed to pay a lower amount of tax.
If the final assessment establishes a higher liability, the taxpayer remains responsible for the difference.
Example
Assume:
- Provisional taxable value = ₹10 lakh
- GST provisionally paid = ₹1.8 lakh
- Final taxable value determined later = ₹12 lakh
- GST finally determined = ₹2.16 lakh
The additional tax liability would be:
₹2.16 lakh − ₹1.80 lakh = ₹36,000
The bond ensures that the taxpayer remains bound to pay the additional amount determined through final assessment.
Rule 98 – Procedure for Provisional Assessment
Section 60 provides the statutory framework, while Rule 98 of the CGST Rules, 2017 provides the procedural mechanism.
A registered person requesting provisional assessment has to submit FORM GST ASMT-01 electronically, along with documents supporting the request. The application can be filed directly through the common portal or through a notified Facilitation Centre.
Information in FORM GST ASMT-01
The form includes information such as:
- GSTIN;
- name and address;
- details of the commodity or service;
- HSN, where applicable;
- proposed tax rate;
- central tax;
- State/UT tax;
- integrated tax;
- cess;
- valuation details;
- average monthly turnover; and
- reason for seeking provisional assessment.
The applicant also has to provide details of the documents submitted in support of the request.
FORM GST ASMT-02 – Notice for Additional Information
After receiving the provisional assessment application, the proper officer may require additional information or documents.
For this purpose, the officer may issue FORM GST ASMT-02.
The taxpayer is required to respond through FORM GST ASMT-03. The applicant may also appear personally before the officer if desired.
This stage allows the proper officer to understand why the taxpayer cannot determine the value or applicable tax rate and to examine the documents supporting the request.
FORM GST ASMT-04 – Provisional Assessment Order
After considering the application and supporting information, the proper officer issues FORM GST ASMT-04.
The officer may:
- allow payment of tax on a provisional basis; or
- reject the application by stating the reasons for rejection.
Where provisional assessment is allowed, the order specifies the value or rate, or both, on which provisional assessment will be made.
The order also specifies the amount for which the bond is required and the security to be furnished. Under Rule 98, the security is not to exceed 25% of the amount covered under the bond.
Important point
The 25% figure relates to the security requirement under Rule 98. It does not mean that GST liability is limited to 25% or that only 25% of the tax has to be paid.
The taxpayer remains liable for the final tax determined under Section 60.
FORM GST ASMT-05 – Bond and Security
Once provisional assessment is permitted, the registered person has to execute the required bond in FORM GST ASMT-05, along with the security in the form of a bank guarantee for the amount determined under Rule 98.
Rule 98 also provides that a bond furnished to the proper officer under the CGST Act, SGST Act or IGST Act may be treated as a bond furnished under the relevant Act and rules.
The purpose of this bond and security is to ensure that any difference between the provisional and final tax liability can be recovered.
Finalisation of Provisional Assessment under Section 60(3)
Provisional assessment is only a temporary arrangement. The next important step is final assessment.
Under Section 60(3), the proper officer has to pass the final assessment order within a period of six months from the date of communication of the provisional assessment order.
The final assessment is made after taking into account the information required for finalising the assessment.
Extension of the six-month period
The law also permits extension in appropriate circumstances.
The initial six-month period may be extended:
- by the Joint Commissioner or Additional Commissioner for a further period not exceeding six months; and
- by the Commissioner for such further period not exceeding four years.
The extension requires sufficient cause to be shown and reasons must be recorded in writing.
Therefore, the six-month period is the normal statutory period for finalisation, but the law contains a mechanism for extending it where the prescribed conditions are satisfied.
FORM GST ASMT-06 – Notice for Finalisation
Under Rule 98, before finalising the provisional assessment, the proper officer issues FORM GST ASMT-06 to call for information and records required for finalisation.
The taxpayer may therefore be required to provide additional records, documents, calculations or other information necessary to determine the final tax liability.
After considering the relevant information, the proper officer issues the final assessment order.
FORM GST ASMT-07 – Final Assessment Order
The final assessment order is issued in FORM GST ASMT-07.
This order specifies:
- the final amount of tax payable by the registered person; or
- the amount refundable, where applicable.
The final assessment therefore brings the provisional assessment process to its conclusion.
What Happens if Final Tax is Higher Than Provisional Tax?
One of the most important consequences of provisional assessment arises when the final tax liability is higher than the amount provisionally paid.
For example:
- Provisional GST paid = ₹2,00,000
- Final GST liability = ₹2,50,000
- Additional tax = ₹50,000
The taxpayer becomes liable to pay the additional ₹50,000.
Section 60(4) specifically provides for interest on tax payable under provisional assessment that was not paid by the applicable due date. The interest applies from the day after the due date until the date of actual payment, whether the additional amount is paid before or after the final assessment order. The rate is the rate specified under Section 50(1).
Why is interest important?
Provisional assessment does not postpone the original tax-payment obligation indefinitely.
If the final assessment establishes that more tax was payable, the taxpayer may have an interest liability for the period during which the additional tax remained unpaid.
What Happens if Final Tax is Lower Than Provisional Tax?
The result can also go in the opposite direction.
Suppose:
- Provisional GST paid = ₹3,00,000
- Final GST liability = ₹2,50,000
- Excess tax paid = ₹50,000
The taxpayer may become entitled to a refund of the excess amount, subject to the applicable provisions of the GST law.
Section 60(5) provides that where a registered person becomes entitled to a refund as a consequence of the final assessment order, interest on that refund is payable in accordance with Section 56, subject to Section 54(8).
The refund mechanism therefore has to be considered together with the general refund provisions of Section 54.
FORM GST ASMT-08 – Release of Security
After the final assessment order has been issued, the applicant may apply for release of the security furnished during provisional assessment.
For this purpose, FORM GST ASMT-08 is prescribed.
The application is made after the final assessment order under Rule 98(5).
FORM GST ASMT-09 – Release of Security
The proper officer releases the security after ensuring that the amount specified in the final assessment order has been paid, where payment is required.
The order for release of security is issued in FORM GST ASMT-09.
Rule 98 provides that the proper officer shall issue the release order within seven working days from the date of receipt of the application in FORM GST ASMT-08, after satisfying the prescribed conditions.
Complete Procedure for Provisional Assessment under GST
The complete process can be understood through the following sequence:
Step 1: Taxpayer faces difficulty in determining the taxable value or applicable GST rate.
Step 2: Taxpayer prepares a written request explaining the reasons for provisional assessment.
Step 3: Application is filed electronically in FORM GST ASMT-01 with supporting documents.
Step 4: Proper officer examines the application.
Step 5: If additional information is required, the officer issues FORM GST ASMT-02.
Step 6: Taxpayer submits the response through FORM GST ASMT-03 and may appear before the officer if desired.
Step 7: Proper officer issues FORM GST ASMT-04, either allowing or rejecting the request.
Step 8: If allowed, the taxpayer executes the required bond in FORM GST ASMT-05 and furnishes the required security.
Step 9: Tax is paid on a provisional basis according to the value or rate specified in the order.
Step 10: For finalisation, the officer may issue FORM GST ASMT-06 seeking information and records.
Step 11: Proper officer passes the final assessment order in FORM GST ASMT-07.
Step 12: If additional tax is payable, the taxpayer pays it along with applicable interest.
Step 13: If a refund becomes due, the taxpayer may claim the eligible refund under the applicable provisions.
Step 14: After finalisation and payment of the amount due, the taxpayer can apply for release of security through FORM GST ASMT-08.
Step 15: The officer releases the security through FORM GST ASMT-09, subject to the conditions prescribed under Rule 98.
Forms Used in Provisional Assessment
| Form | Purpose |
|---|---|
| GST ASMT-01 | Application for provisional assessment |
| GST ASMT-02 | Notice seeking additional information/documents |
| GST ASMT-03 | Reply to ASMT-02 |
| GST ASMT-04 | Order allowing or rejecting provisional assessment |
| GST ASMT-05 | Bond and security |
| GST ASMT-06 | Notice for finalisation of assessment |
| GST ASMT-07 | Final assessment order |
| GST ASMT-08 | Application for release of security |
| GST ASMT-09 | Order for release of security |
These forms are prescribed under Rule 98 of the CGST Rules for administering the provisional assessment procedure.
Example of Provisional Assessment
Consider a company supplying specialised machinery.
The company receives consideration containing a component whose final value cannot be determined at the time of supply. Because the final taxable value is uncertain, the company is unable to determine its exact GST liability.
Instead of arbitrarily selecting a final value, the company approaches the proper officer for provisional assessment.
Suppose the provisional assessment permits GST to be paid based on a taxable value of ₹50 lakh.
At an assumed GST rate of 18%, the provisional tax would be:
₹50,00,000 × 18% = ₹9,00,000
The taxpayer pays ₹9 lakh provisionally after complying with the bond and security requirements.
Later, the final taxable value is determined to be ₹55 lakh.
Final GST liability:
₹55,00,000 × 18% = ₹9,90,000
Additional tax:
₹9,90,000 − ₹9,00,000 = ₹90,000
The taxpayer must pay the additional ₹90,000, together with applicable interest under Section 60(4), where required.
If instead the final taxable value had been ₹47 lakh, the final GST liability would have been lower than the provisional payment. The resulting excess could be dealt with through the applicable refund provisions, and interest on the eligible refund would be governed by Section 60(5) read with Section 56 and the applicable provisions of Section 54.
Provisional Assessment Does Not Mean Tax Exemption
A common misunderstanding is that provisional assessment allows a taxpayer to avoid or reduce GST.
That is not the purpose of Section 60.
Provisional assessment only provides a mechanism for determining and paying tax temporarily when the value or applicable rate cannot be determined with certainty.
The taxpayer remains bound by the final assessment. If the final tax liability is higher, the difference has to be paid. The statutory framework also provides for interest on unpaid additional tax and for refund with applicable interest where excess payment results from finalisation.
Difference Between Provisional Assessment and Self-Assessment
Section 59 deals with self-assessment, while Section 60 deals with provisional assessment.
| Basis | Self-Assessment | Provisional Assessment |
|---|---|---|
| Relevant section | Section 59 | Section 60 |
| Basic approach | Taxpayer determines tax payable | Tax is temporarily determined on an approved provisional basis |
| Applicability | Normal GST compliance | Where value or tax rate cannot be determined |
| Officer’s order | Normally not required merely for self-assessment | Required for provisional assessment |
| Finalisation | No separate provisional finalisation | Final assessment is required |
| Bond/security | Not a general requirement | Required as prescribed |
| Additional tax | Paid through normal compliance where applicable | Difference may arise after final assessment |
| Refund | General refund provisions apply | Excess arising from final assessment may be refundable |
Section 59 requires every registered person to self-assess the tax payable and furnish the relevant return. Section 60 provides a special mechanism where the taxable person cannot determine the value or applicable rate.
Difference Between Provisional Assessment and Advance Ruling
Provisional assessment should also not be confused with an advance ruling.
The two mechanisms serve different purposes.
A provisional assessment under Section 60 is concerned with payment of tax on a provisional basis when the value or rate cannot be determined.
An advance ruling is a separate statutory mechanism for obtaining a ruling on specified questions under the GST law.
Therefore, a taxpayer should not assume that filing a provisional assessment application is equivalent to obtaining an advance ruling.
Difference Between Provisional Assessment and Scrutiny of Returns
Section 60 is also different from scrutiny of returns under Section 61.
Under Section 60, the taxpayer requests provisional assessment because of uncertainty concerning the value or applicable tax rate.
Under Section 61, the proper officer scrutinises a return and related particulars to verify their correctness and may communicate discrepancies to the registered person.
Thus, Section 60 is primarily a mechanism for dealing with uncertainty before final determination, whereas Section 61 concerns verification of information already furnished in returns.
Key Time Limits under Section 60
The principal statutory and procedural time periods are important for taxpayers.
| Action | Time limit |
|---|---|
| Proper officer to pass provisional assessment order | Within 90 days from receipt of request |
| Normal period for final assessment | Within 6 months from communication of provisional assessment order |
| Extension by Joint/Additional Commissioner | Further period up to 6 months |
| Further extension by Commissioner | Up to 4 years, subject to statutory conditions |
| Release of security after ASMT-08 | Within 7 working days under Rule 98, after prescribed conditions are satisfied |
The 90-day period relates to the initial provisional assessment order, while the six-month period relates to finalisation after communication of that order. These periods should not be confused with each other.
Interest under Section 60
Interest is an important part of provisional assessment.
If the final assessment determines that additional tax was payable and that tax was not paid by the applicable due date, Section 60(4) makes the registered person liable to interest at the rate specified under Section 50(1).
The interest period begins from the day after the applicable due date for payment of tax and continues until the date of actual payment. This applies whether the additional tax is paid before or after the final assessment order.
Therefore, a taxpayer should not treat provisional assessment as a mechanism for postponing tax payment without consequences.
Refund and Interest under Section 60(5)
If finalisation results in a lower tax liability than the amount provisionally paid, the registered person may become entitled to a refund.
Section 60(5) specifically connects such a refund with Section 56, which governs interest on delayed refunds, subject to Section 54(8).
The actual refund process therefore needs to be considered with the general refund provisions rather than treating the final assessment order itself as automatically resulting in money being credited to the taxpayer.
Important Compliance Points for Taxpayers
Businesses using provisional assessment should maintain complete documentation supporting the request.
Important records may include:
- agreements with customers;
- valuation working papers;
- contracts and commercial terms;
- correspondence relevant to valuation;
- classification or rate-related documents;
- invoices;
- calculations supporting the provisional value;
- copies of applications and replies;
- provisional assessment orders;
- bond and bank guarantee documents;
- records used for final assessment; and
- evidence of payment of additional tax, where applicable.
The taxpayer should also monitor the finalisation process and respond promptly when information is requested through the prescribed procedure.
What Happens After Final Assessment?
The final assessment can generally result in one of two broad outcomes.
1. Additional tax becomes payable
If the final tax liability is greater than the amount provisionally paid, the taxpayer must pay the difference. Applicable interest under Section 60(4) also needs to be considered.
2. Excess tax has been paid
If the final liability is lower than the amount provisionally paid, the taxpayer may become entitled to a refund, subject to the provisions governing refunds under GST. Interest on the eligible delayed refund is governed by Section 56 as referred to in Section 60(5).
Important Points to Remember about Section 60
The most important points of Section 60 can be summarised as follows:
- Section 60 deals with provisional assessment.
- It applies where the taxable person cannot determine the value or applicable rate of tax.
- The taxpayer must make a written request to the proper officer with reasons.
- The proper officer is required to pass the provisional assessment order within 90 days from receipt of the request.
- A bond is required for provisional assessment.
- Security may also be required as prescribed.
- Rule 98 provides the detailed procedure and prescribed forms.
- FORM GST ASMT-01 is used for the initial application.
- FORM GST ASMT-04 is the provisional assessment order.
- FORM GST ASMT-05 relates to the bond and security.
- The normal period for final assessment is six months from communication of the provisional assessment order.
- The law permits extensions in specified circumstances.
- FORM GST ASMT-07 is used for the final assessment order.
- Additional tax determined on finalisation may attract interest under Section 60(4).
- Excess tax resulting from final assessment may be refundable subject to the applicable refund provisions.
- FORM GST ASMT-08 is used for release of security.
- FORM GST ASMT-09 is used for the order releasing security.
- Provisional assessment does not permanently determine the taxpayer’s final GST liability.
Conclusion
Section 60 of the CGST Act, 2017 provides a structured mechanism for taxpayers who cannot determine the correct taxable value or applicable GST rate at the relevant time. Instead of leaving the tax liability uncertain, the taxpayer can approach the proper officer and request permission to pay tax provisionally.
The process involves an application, supporting documents, examination by the proper officer, a provisional assessment order, execution of the prescribed bond and security, and subsequent finalisation of the assessment. Rule 98 provides the detailed procedural framework and the relevant GST ASMT forms.
The provisional assessment is ultimately settled through a final assessment order. If the final liability is higher, the taxpayer has to pay the additional tax and applicable interest. If the final liability is lower, the taxpayer may become entitled to a refund subject to the applicable provisions of the GST law.
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