After the results of an audit that started earlier this fiscal year came in, the Goods and Services Tax (GST) department started the first full audit since the GST regime was put in place. As a result of the audit findings, the GST department issued approximately 50000 show cause notices to various companies and partnership firms from various industries, including real estate and jewelry. This is a significant move that has significant implications.
The audit has covered the yearly GST returns that companies have submitted during the first two years of the new tax regime, which were 2017–18 and 2018–19. In some instances, the audit has even encompassed 2019–20 and 2020–21. Returns for the year’s Goods and Services Tax (GST) were submitted in December 2021.
In addition to the GST audit that businesses are required to perform, the authorities of the Goods and Services Tax (GST) will examine corporations if the turnover of registered taxpayers in a financial year is at least 2 crore.
According to a government official who was privy to the development, the notices were served after reviewing several documents during the audit in accordance with various Sections of the Central Goods and Services Tax (CGST) Act. This was done depending on the issue that was discovered during the audit.
The notices that were served could have been for a variety of reasons, including a misdeclaration, tax that was not paid, short payment, or erroneously availed of the above. input-tax credit, improper classification of goods/services and export items, mismatch in sale and purchase items, and so on are all examples of potential tax evasion schemes.
According to another source, the problems and the factors behind them are unique to each company. “Up to the month of September, approximately 20,000 notices were delivered to businesses in which anomalies were discovered. After afterwards, more than 30,000 notices were distributed to various individuals.
The process is continuous because audits are often completed within three months for large companies. However, depending on the complexity of the situation, the audit may take up to six months to complete.
The audit of small enterprises will be finished in a few weeks. According to one of the authorities that was referenced in the article, “Such exercises are significant because they help uncover inconsistencies and fix business concerns, and they boost returns.”
The department has acquired the knowledge to appropriately pick them up after having examined around 100,000 auditing records. There are currently 14 million taxpayers who are registered to pay GST, who have GST registered accounts.
Authority said that “When selecting cases for audit, we base our decisions on a number of important criteria. This year, when we got began, we made an effort to cover evasion-prone industries, such as gems and jewellery, real estate, and so on. Authority again said that “we also take into consideration the feedback provided by the commissionerates of tier-1 and tier-2 cities, as one source explained.
During an audit, the auditor will go to the location of the firm and review various documents, such as audited financial statements, income tax returns, stock registers, production records, and details of customers and suppliers.
According to the sources, the assessees have been given between 15 and 30 days to provide explanations and reasons for the issues that have been brought to the attention of the department. They will also be required to hand over specific papers that the authorities have requested.
Following an examination of the supporting arguments and records, the department will issue a complete audit report that includes the observation. In most cases, these remarks bring attention to the problem and stimulate increased demand.
If the taxpayer agrees with the assessment and pays the amount owed in back taxes, the case will be closed. In the event of a dispute, show cause notice will be issued.
According to a source within the business, state GST officials have also begun their audit exercise this July.
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