1. Is it necessary for a taxpayer to register with the tax authority? Are separate registrations required for corporate income tax and value added tax/sales tax? Yes, Indian Tax Law requires mandatory registration for compliance with the tax law. In India, there are broadly two tax authorities which administers taxes i.e. the Income Tax Department, which administers corporate income tax and Goods & Services Tax Department, which administers the Indian Value Added Tax, known as Goods & Services Tax (GST).

The registration with the Income Tax Department is called Permanent Account Number (PAN) whereas registration with Goods & Services Tax Department is called Goods & Services Tax Number (GSTN). Both the registrations can be obtained through an application, which is completely online. For obtaining a GSTN, taxpayer must already have a valid PAN, as GSTN is based on PAN.

A corporate entity is mandatorily required to avail registration with Income Tax Department if it has an income under the Indian Income-tax. Further, for running day-to-day operations also financial institutions and other stakeholder such as customers, vendors, government institutions require PAN. Similarly, a registration with Goods and Service Tax Department is mandatory for supply of goods or services.

Further, import and export of goods are also regulated by two different authorities. The Customs Department administers imposition of customs duty. Whereas the Directorate General of Foreign Trade (DGFT) regulates international trade. For carrying out import and exports transactions from India an Import Export (IEC) Code is to be obtained from the DGFT. It is to be noted that IEC Code itself is also based on PAN issued by the Income Tax Department.

2. In general terms, when a taxpayer files a tax return, does the tax authority check it and issue a tax assessment – or is there a system of selfassessment where the taxpayer makes their own assessment which stands unless checked?

In India, the tax assessment primarily operates on a selfassessment basis. When a taxpayer files their tax return, they are responsible for calculating their tax liability based on the income, deductions, and applicable tax rates (while filing the Income Tax Return). Post filing of the tax return, the assessment is completed by issuing order accepting the tax declared in the tax return filed or modifying the tax return. However, in certain cases, the tax authorities are allowed to issue notice to the entity seeking information on the disclosure made in tax returns. Basis the information furnished, the tax assessment in framed.

In case, there is modification to the return filed, the taxpayer has the right to represent and appeal before the authorities.

In the context of Indian GST, monthly filing of returns is required where sales, purchases, tax collected on supplies, i.e. output tax, tax paid on purchases, i.e. input tax, etc. are reported. Basis, the filing of tax returns, a taxpayer is liable to discharge the applicable taxes. The GST returns filed are automatically accepted by the authorities and there is no formal assessment orders issued to the taxpayer. However, the GST authorities may issue notices seeking information of transactions undertaken and to audit the financials of the taxpayer. In case of any discrepancies found during audits and tax notices may be issued against the taxpayer.

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