‘Ensure depiction of every transaction in GST portal’
In his much celebrated book, The Seven Habits of Highly Effective People, author Steven Covey has stated the seventh habit as “Think of the End in the Beginning”. The application of this principle to GST means that it is necessary to think of how audits and assessments happen even before commencement of the new indirect tax regime from July 1.
In the present indirect tax regime businesses are plagued with multiplicity of audits, frequent enquiries, prolonged duration of audits, inconclusive enquiries etc. Hopefully these issues are addressed in the GST era.
While multiple audits by various tax authorities become a thing of the past, there are broadly two types of audits that are contemplated in GST. The audit by the tax authorities is envisaged under Section 65 of the Central GST Act and a special audit in specified cases is contemplated by Section 66. There are a few safeguards that have been inbuilt, including an audit intimation process, a timeline for completion of audit etc.
At a broad level, businesses should ensure that every transaction involving a supply of either goods or services, including self-supplies, is properly depicted in the GST portal. Since the portal would have information submitted by both the buyer and the seller, it must be ensured that all transactions are reported in time. In addition, it is essential to match the transactions to avail the credits. It is necessary to instruct vendors to accurately report all transactions with appropriate classification and valuation. This will ensure that several issues that would normally come up during assessments and audits are addressed well in advance.
Since GST functions within a compliance rating framework, it is advisable to ascertain a vendor’s compliance rating before commencing transactions and proceed only if the vendor has a high rating. In case of existing vendors with a low rating, it is essential to instruct them to improve the rating on priority basis in order to continue the business relationship. This ensures even if there are a few issues detected during the audit, the businesses have a good case for pleading that there was no wrong-doing as the vendor had a high rating.