Maharashtra GST Department issued General Procedure for GST Audit

The Maharashtra GST Department has issued circular regarding the General Procedure for GST under Section 65 of the MGST Act, 2017. The Circular states about the objective of GST Audit, Procedure, scope, Rights and duties of Registered Tax payers and list of documents to be submitted. The Circular is as follows-

GST is based on voluntary compliance of law by Registered Taxpayers (RTP). Audit of RTP is a function under GST Act to verify the correctness of compliance of GST laws by the RTPs. The Maharashtra GST Department is initiating audits under Section 65 of the MGST Act in the case of selected RTPs. The present circular is being issued to clarify certain aspects related to GST Audit under Section 65 of MGST Act, 2017.

A. Objective of GST Audit

MGSTD is initiating audits under Section 65 of the MGST Act in case of selected Registered Taxpayers (“RTPs”) with an object to ensure and promote the correctness of turnover declared, taxed paid, refund claimed & input tax credit availed and to access the compliance RTP with the provisions of GST Law.

GST Audit is a tool with MGSTD to ascertain and ensure compliance of laws that are implemented by MGSTD. Practically, to ascertain the correctness of returns, annual returns & to identify inadequacies in returns, if any. If the returns are not filed or incorrectly filed, then the Audit Officer (“AO”) is expected to quantify the correct liability of RTP & enforce recovery.

Read Also: GST Audit Turnover for FY 2018-19 – GSTR 9 and GSTR 9C

B. Procedure of the Audit

The cases for GST Audit are selected on the basis of certain criteria based on Tax Risk analysis from returns, annual returns filed and other statutory compliances made or not made, and/or simply by random selection of cases for audit. The GST audit is carried out with prior information to the RTP which is the notice of information to the RTP in form ADT – 01. Along with the ADT-01, the AO may also call for certain information which the RTP should keep ready at the time of visit or may send in advance physically or through mail to the Audit Officer.

The audit is to be carried out at the Place of Business (“POB”) of RTP by the officers of MGSTD. In exceptional cases after initial visit at POB, the verification of books of accounts may be done in the office of AO.

In exceptional cases, if the AO is unable to keep the appointment then he will inform the RTP well in advance about postponement of visit which also applies if the RTP is unable to keep the appointment.

C. The Scope of Audit

The AO will verify the books of accounts maintained by the RTP (whether in hard format or soft format) along with sale invoices, purchase invoices i.e. Outward & Inward supplies, sales purchase journals ledger, cashbook, delivery chalan, e-way bills, dispatch proofs, bank statements and every other document or piece of evidence to ascertain the correctness of turnover and the correctness of claims made through returns. The AO may also ask for agreements, purchase / work orders, tender documents, etc, if such documents are required for ascertaining the correctness of returns. The AO is also authorised to ask for the details of filing of returns and payments as required. The RTP shall furnish self-certified copies of documents and statements as required by the AO.

The AO is expressly authorised to make enquiry as to whether the RTP has filed returns and made payments under other allied laws, such as Profession Tax, etc. Depending upon the facts the auditor may also ask for returns or any other information related to Income Tax, and filings under the Companies Act also if it is required for GST related compliances, etc.

Read Also: Points to keep in mind during GST Audit

It will be the RTP’s responsibility to give correct & complete information during the course of an interview conducted by the AO, and he shall ensure that all persons concerned with the accounts, filing of returns. payment of taxes, sales, purchase, production and other business activities are available with information sought by the AO. The object of holding interview is to have better information of the RTP’s business, his accounting system and also to speed up and accelerate the audit process, so that the RTP as well as the MGSTD can save time.

In discharging the function of audit, wherever warranted, the AO can use the powers delegated to him by the Commissioner under Section 70 of the MGST Act. By taking recourse to section 70, the AO can use all the powers of Civil Coon for the purposes of proof of facts by affidavit, summoning and enforcing the attendance of any person and examining on oath of affirmation, compelling production of documents, etc. The powers would be utilised by the AO only in circumstances where use of such powers becomes necessary for achieving the purpose of audit, and wherever the information sought is not coming forward voluntarily.

The AO can verify stock of goods, and ask for clarification if there is any discrepancy. It is however, made clear that the AO on no account shall remove or cause to be removed from the place of business any books of accounts, other documents or any cash or stock. AO on no account can carry out search of premises of RTP.

D. Rights and Duties of the Registered Person

Rights of the Registered Person

To check the identity of each and every member of the audit team.
To get at least 15 days prescribed time limit for collection, compilation, preparation and arrangement of documents for audit from receipt of audit notice.
To engage authorized representative to act and appear on his behalf in audit proceedings.
To seek adjournment of proceeding in unavoidable circumstances for submission of documents keeping in mind the timeline required for completing audit
To submit his say through audit proceeding or through letter or e-mail communication.
To ensure that opportunity of being heard is given properly to him by audit authority. To represent and submit say in case of debatable / disputable issues during audit.
To ensure that the audit is completed by audit team in prescribed time limit as per GST.
To receive findings of audit from the Audit Officer within 30 days of conclusion of audit
To take benefits of the voluntary payment tax, if the audit objections are acceptable, and take advantage of the benefits available under sections 73(6) / 74(6)

E. Indicative List of documents to be submitted / to be kept ready for verification by dealer as per GST-ADT-01

Financial statements and reports- Balance Sheet, Tax Audit Report, Annual Financial Statement, Cost Audit Report, Trial Balance
Inward -Outward supply summary statement
RCM ledger and supportive documents
Inward -Outward supply invoices
Cancelled invoices due to any reason
Goods return (inward and outward supply) register along with credit note/debit note details
Inward supply Register (soft copy)
Outward Supply register ( soft copy)
Zero rated supply register and supportive documents ( commercial invoice, shipping bill, bill of lading, EGM , Bank realization certificate or Inward remittance certificate etc.)
Details of Exempted supply / Supply to SEZ dealer
Refund claim / availment details if any ( export of good and services, inverted duty structure etc. any type of refund claimed by dealer)
TDS payment transactions if any
TRAN-I details ( details regarding credit carried forwarded from previous Act to GST Act)
GSTR 2A-Mismatch, unmatched transactions details
E-way bill transactions month wise summary statement and corresponding register
In case of services, FIRC (Foreign Inward Remittances), corresponding agreements, invoices, Annual Maintenance Contract copies and corresponding invoices if any
Details of advances received and tax payment for the same
Other Income/ misc. income
Reversal/reduction of ITC
Scrap sales
Details of exempted outward supply

The above documents may vary from cast to case.

F. Conclusion

The AO & RTP both shall keep in mind that their efforts are for smooth and timely completion of audit with accurate and appropriate voluntary compliances from RTPs side. Wherever the voluntary compliance falls short, the AO shall point out to RTP the requirement and RTP shall accept it, if found appropriate as per the provisions of laws and shall comply with it immediately.