By Saurabh Malpani, Shreyash Agrawal
With more than 3 years into GST, the Maharashtra Goods and Services Tax Department (MGSTD) on December 22, issued a trade circular informing that the division is going to initiate audits for chosen registered persons below Section 65 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act).
Since it is the initially time that the GST Department would be conducting audits, the Department in the aforesaid circular has pointed out the objectives, process and scope of GST Audit. It also specifies the rights and duties of the registered particular person. Further, it offers for an indicative list of documents that are expected to be kept prepared or submitted by the assessee for the objective of GST Audit.
The objective of GST Audit is to make sure and market the correctness of turnover declared, taxes paid, refund claimed & input tax credit availed, and to assess the compliance of Registered Taxpayers (RTP) with the provisions of the GST Act and guidelines produced thereunder.
The big takeaways:
- Prior Notice in Form ADT-01 to be issued at least 15 days prior to the date of proposed check out.
- Audit to be performed at the location of small business
- AO can ask for a detailed list of documents ranging from returns, books of accounts, agreements, invoices and so forth, an indicative list of documents is offered in the circular.
- Details of tax payments and returns filed below other acts such as Income Tax, Professional Tax and so forth can also be demanded.
- The registered particular person should provide a self-certified copy of the documents asked for by AO.
- If returns are not filed or are incorrectly filed, then the audit officer will quantify the appropriate liability and enforce recovery.
- AO can use the powers delegated to him by Commissioner below Section 70 of the MGST Act, 2017 i.e. AO can ask for giving affidavit, summoning and enforcing of attendance of any particular person, examination on oath and affirmation, compelling production of documents and so forth.
- AO can also confirm the stock of goods.
- AO on no account shall get rid of or triggered to be removed from the location of small business any books of accounts, other documents, money or stock.
- AO can’t carry out search of the premises
Points to be kept in thoughts:
- At least 15 days should be offered for collection, compilation, preparation and arrangement of documents for audit from receipt of an audit notice
- Adjournment can be sought in case of unavoidable situations
- The registered particular person can submit his say all through the audit proceedings in written type
- The chance of hearing should be offered
- Audit should be completed inside prescribed time limit i.e. 3 months
- Findings of the Audit should be informed inside 30 days of conclusion of audit in Form ADT-02
- In case any non-payment of tax is located out, such tax can be paid prior to issuance of Show Cause Notice along with interest. No penalty can be imposed in such situations.
Preparedness for GST Audit
Since it is the initially time that GST Audit is going to be carried out by the Department, the registered particular person would be clueless about the modus operandi of the Department in analyzing the documents of the registered particular person. In the state of Odisha, the GST division has clarified that it would reconcile facts of GSTR-9 vs. trial balance, ITC reconciliation and so forth. The Department would also carry on trend evaluation and ratio evaluation of unique figures. It was also clarified that the GST Department would also verify apparent weakness in internal handle technique. However, there is no such clarity in the state of Maharashtra. It is anticipated that a uniform way of analyzing documents is followed nation-wide. For this, the Directorate General of Audit below CBIC has issued a detailed GST Audit Manual in 2019 which provide for the detailed manner in which GST Audit would be performed.
It is normally seasoned that the initially audit of any entity types a basis for subsequent audits and demands. Hence, it is of utmost significance that all registered persons are totally ready for the GST audit.
The preparedness involves:
- Making of internal reconciliation statements,
- Ensuring that all relevant documents are present in correct type and
- Most importantly, taking a overview of legal positions taken below GST. A couple of situations in this regard are as below:
- the transactions on which GST has not been discharged (for instance, GST on transactions covered below Schedule – I of the CGST Act (i.e. supplies produced devoid of consideration) may perhaps not have been discharged)
- situations exactly where incorrect/incorrect input tax credit has been availed (for instance, Input tax credit on goods/services covered below Section 17(5) of the CGST Act has been inadvertently availed)
- whether or not input tax credit, wherever expected has been reversed and if reversed, whether or not quantum of reversal is appropriate (for instance reversals of input tax credits to the extent of producing exempted supplies below Rule 42 and 43 of the CGST Rules)
- situations exactly where incorrect advantages below GST have been availed (for instance, claiming refund of IGST paid on exports which are covered below the provisions of Rule 96(10) of the CGST Rules)
Further, an authorized representative of the stated registered particular person (who is conscious of all information and legal positions) should be identified so as to represent just before the GST Department at the time of Audit.
A registered particular person should also be totally conscious of his rights as nicely as the limitations of powers of AO. At occasions AO’s physical exercise powers beyond their jurisdiction taking advantage of the lack of awareness of registered persons.
We advise readers to take the GST Audit with utmost seriousness and devote time to make sure that you are totally ready for the upcoming tornado in type of GST Audit.
(Saurabh Malpani is Principal Associate & Shreyash Agrawal is a Senior Associate at Lakshmikumaran & Sridharan Attorneys. The views expressed by the authors are their personal.)