Goods and Services Tax (GST) authorities have started audit of businesses for FY18, the year of the indirect tax reform, indicating that erring assessees will now be held accountable for lapses in tax payment and record keeping. GST audits are being initiated as part of the government’s drive to improve compliance and step up revenue collections amid an economic slowdown.

Central GST authorities have started issuing audit notices to businesses posing a revenue leakage risk, a person aware of the development said on condition of anonymity. All businesses with more than 2 crore annual sales are expected to get their books audited for GST compliance and the authorities order a separate compliance audit only in specific cases where they suspect lapses. GST is a technology-driven tax and its return filing system raises red flags wherever it detects mismatches in transactions reported by businesses in the value chain, allowing officials to profile the businesses based on their compliance track record.

The audit ordered by the authorities seeks to verify the turnover declared, taxes paid, refund claimed and input tax credit availed. It will also assess the business’ compliance with the provisions of GST laws. According to Rajat Mohan, senior partner at chartered accountants firm AMRG & Associates, the audit seeks to check revenue leakage possibilities. It requires businesses to provide a host of documents including income tax returns to convince the auditor that the sales reported in GST filings is the same as that reported in the income tax returns too. “Taxpayers may have a hard time reconciling various data points made available by the GSTN portal, e-way bills portal, the FastTag database, Income tax department and MCA portal,” said Mohan.

The GST Council had extended the due date for filing annual returns and the audit reports for FY18 several times. As per the latest deadline, they have time till 31 January to file their audit reports.

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