GST audits won’t be a burden for biz: Johri

NEW DELHI: The CBIC will ensure that the growing number of GST audits meant to improve the quality of GST returns filed does not become burdensome to businesses, said its chairman Vivek Johri. Audit of the books of accounts and other key documents of businesses under GST law has picked up momentum, with the CBIC gearing up its compliance management efforts, after having given extra time for filing annual returns during the covid period and liberalizing the norms relating to annual returns and reconciliation statements for small businesses.

In an interview, the CBIC chairman said with GST about to complete five years, the effort is to get departmental audit completed for the initial period. “We have to complete the audits for the first two years (of GST) as quickly as possible as a compliance management strategy,” Johri said, adding that GST return filing has improved significantly and that audits are meant to ensure the quality of the data reported.

“We will make sure that audits are not burdensome to taxpayers in terms of submission of documents etc. We will be mindful of this, and if need be, more instructions will be issued,” Johri explained.

Audit of companies by the GST authorities is in addition to the GST audit that companies, barring the small ones, do and is a key element of the tax authority’s tool kit. In recent months, tax professionals reported an increase in the number of businesses seeking advice on issues arising from departmental audits. They said in many cases, an audit is triggered by the mismatch between the automatically generated return of purchases of raw materials and services and the tax return showing a summary of transactions based on which tax is paid by a firm.

GST audits are deeper than scrutiny, a desk job which entails seeking information and documents. An audit involves visiting the premises of the business after giving sufficient notice and inspecting documents, including audited financial statements, income tax returns, stock registers, production records, and details of customers and suppliers. If the audit leads to the detection of any short payment of tax, a recovery notice can be issued, but it has to be served within a specified time, depending on circumstances.

“There is a general rise in the GST audits being conducted throughout the industry. Currently, the audits are focussed on the verification of credit that was transitioned from previous regimes. However, some audits are also picking up interpretational issues such as classification and the applicable rate of duty, input tax credit admissibility, etc.,” said Charanya Lakshmikumaran, partner at law firm Lakshmikumaran & Sridharan Attorneys.

“Although any business can be picked up for audit as per law, the department will rely on parameters of risk of revenue leakage as auditing every business will neither be feasible nor justify the cost of carrying out such audit,” said Rajat Mohan, senior partner with AMRG & Associates, an accounting firm.