Uniform departmental GST audit norms to be implemented in 2023

The governments at the Centre and state/UT levels are in talks to issue uniform guidelines for its tax officers for GST audits. Further, the GST scrutiny will be conducted predictably or transparently for taxpayers, as reported by an anonymous person with knowledge of the development to the press.

The state and central governments will adopt these audit principles, which they will likely finalise in 2023 after the GST Council’s approval. These guidelines will highlight the length and depth at which the officials across India must conduct GST audits. It would outline the authority and responsibilities of the GST auditor from the department or appointed by the department.

These departmental GST audits intend to check the accuracy of sales, Input Tax Credit (ITC) claims, taxes paid and GST refunds based on the GST returns submitted as well as the books of accounts of the taxpayer. Officers or auditors can raise a red flag for any discrepancies or mismatches between the documents.

There has recently been a rise in departmental GST audits focussing on past financial years’ data since the inception of GST in 2017. The primary challenge in GST audits will be the number of tax authorities that could initiate audits. Since businesses are provided separate GST registrations in every state/UT, the Centre or state tax authorities can initiate an audit on its account, which can be inconvenient for taxpayers.  

Keeping one uniform audit approach across the nation will ensure the least disparity in methods used for the audit process keeping it transparent for all taxpayers. Experts opine that this will ensure consistency in how GST audit is conducted in India. Further, the taxpayers get clarity on what they can expect from audits and prepare for the documents well ahead of time. Otherwise, these GST audits can become complicated for taxpayers and the government, causing delays in closure or finalisation.

Not only this, keeping the audit procedure common across jurisdictions will provide much-needed clarity on the steps or process. A typical GST audit covers visits to places of business of the taxpayer with notice, an inspection of documents, audited financial statements, income tax returns, stock registers, production records, and vendor/customer data. 

Tax officials can issue notices for tax demands within the specified timelines. Small taxpayers or MSMEs are exempted from the physical verification. Apart from that, if the taxman can access documents on the system, then such documents need not be separately called from the taxpayers.

Moreover, in a document released by the Directorate General of Taxpayer Services under the finance ministry in November 2022, the CBIC directed its officers to avoid causing any inconvenience or business disruption to taxpayers who have recently been covered under the Central jurisdiction.

A national media report stated that the GST Council secretariat, the CBIC officials and the Ministry of Finance officials are yet to reply to their queries on this matter as of Friday.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@clear.in