Best Judgment Assessment under Section 62 GST: GSTR-3A Notice & Automatic Withdrawal

A registered person who fails to file GST returns for a prolonged period does not simply accumulate a growing late fee — the department can proceed to assess the tax liability itself, without further input from the taxpayer, under Section 62 of the CGST Act, 2017. This "best judgment assessment" is one of the most consequential GST tools against chronic non-filers, and understanding both how it is triggered and how it can be reversed is essential for any business that has fallen behind on returns.

1. The Trigger: Form GSTR-3A Notice

Before a Section 62 assessment can be made, the proper officer must first issue a notice in Form GSTR-3A, directing the registered person to furnish the pending return within 15 days of the notice. This is a statutory pre-condition — an assessment order passed without a prior GSTR-3A notice is procedurally defective and can be challenged on that ground alone.

If the taxpayer files the return within those 15 days, no assessment order is passed and the matter closes with only the applicable late fee and interest.

2. The Best Judgment Assessment Order

If the return is still not filed after the GSTR-3A notice period lapses, the proper officer proceeds to assess the tax liability to the best of their judgment, based on whatever material is available — GSTR-1 outward supply data (if filed), GSTR-2B auto-populated ITC data, e-way bill records, prior period filings, and any other information gathered. The officer issues the assessment order in Form GST ASMT-13, along with a summary in Form GST DRC-07, which is treated as a recovery-ready demand.

Time limit for passing the order: The proper officer must issue the best judgment assessment order under Section 62 within five years from the due date for furnishing the annual return for the relevant financial year — a materially longer window than most other assessment provisions, reflecting how long a chronic non-filer's liability can remain open.

3. The Deemed Withdrawal Mechanism — the Taxpayer's Way Out

Section 62(2) provides a powerful and taxpayer-friendly reversal mechanism: if the registered person furnishes a valid return (a return under Section 39(1) with the self-assessed tax paid in full) within a prescribed window after the assessment order, the assessment order is deemed to have been withdrawn — automatically, without a separate application or hearing.

Critical Nuance: "Deemed withdrawal" of the assessment order does not waive the taxpayer's liability for interest under Section 50 and the applicable late fee for the delayed original return — both continue to apply. What is withdrawn is only the best-judgment estimated demand itself, once the taxpayer's own self-assessed, correctly-filed return supersedes it.

4. Practical Strategy for a Business That Has Received a Section 62 Order

1. File the pending return immediately, correctly, and in full — do not delay to "negotiate" or dispute the estimated figure first. The moment a valid Section 39(1) return with full self-assessed tax payment is filed within the window, withdrawal is automatic by operation of law; there is no discretion for the officer to refuse it.
2. If the 60-day window has lapsed but 120 days have not, file immediately and pay the ₹100/day additional late fee for the extended period — this is still far better than leaving the estimated best-judgment demand standing, since that figure is typically inflated relative to actual liability (the officer has no incentive, and often no accurate data, to estimate conservatively).
3. If the 120-day window has also lapsed, deemed withdrawal is no longer available, and the assessment order stands as a formal demand. The remaining remedy is a statutory appeal under Section 107 to the Appellate Authority within three months of the order (extendable by one month for sufficient cause), on the merits of the assessment.
4. Reconcile the estimated figures against actual books before or immediately after filing, since the department's best-judgment estimate frequently overstates turnover (particularly where it extrapolates from a single prior filed period or uses conservative industry averages) — this reconciliation is essential evidence if the matter proceeds to appeal.

5. Why Businesses End Up Here — and How to Avoid It

In practice, most Section 62 situations arise not from deliberate evasion but from: a change in the accountant/consultant handling filings without a clean handover, cash-flow stress causing a business to defer return filing (mistakenly believing this avoids the tax liability, when in fact GSTR-3B non-filing accrues both liability and interest regardless), or a dormant/near-closed business that never formally applied for GST cancellation. A GSTIN with no filing activity for six consecutive tax periods is also independently at risk of suo motu cancellation under Rule 21 — a separate and additional consequence layered on top of any Section 62 exposure.

Related Advisory Services & Practice Guides

• Access expert statutory assistance for GST notices & appeals with our senior Chartered Accountants.
• Access expert statutory assistance for GST return filing with our senior Chartered Accountants.