• Notification Date: 20-12-2022
• Notification No: N/A

GST Dept Issued Around 50,000 Notices to Companies after Audit

The goods and services tax (GST) department has issued around 50,000 show-cause notices (SCN) to several companies and partnership firms across sectors after audit. The companies include real estate and jewellery and other sectors. The department made this significant move following the findings of an audit exercise they started earlier this financial year in the first comprehensive audit exercise since the inception of the GST regime. The audit has covered annual GST returns filed by firms in the first two years of the tax regime- 2017-18, and 2018-19. It has also covered 2019-20 and 2020-21 in some cases. Annual GST returns for 2020-21 were filed in December 2021. 

Audit of companies by the GST authorities is done in addition to the GST audit that firms do if the turnover of registered taxpayers is 2 crore and above in a financial year. The notices have been issued by the GST department after scrutinising several documents during the audit under different Sections of the Central GST (CGST) Act. A government official privy to the development said that the notices have been sent depending on the issues discovered during the audit. The notices served could be for different reasons. The reasons might be misdeclaration, tax not paid, short-payment, wrongly availed input-tax credit, incorrect classification of goods/services and export items, mismatch in sale and purchase of items, and so on. Issues and causes differ from companies to companies, another official said. 

One of the officials cited that around 20,000 notices had been served to firms until September where inconsistencies were found. Over 30,000 notices were issued after that. The exercise is still under process as an audit is done in three months for large businesses. Sometimes it even goes on for six months if there are complexities. Small businesses audit concludes in a few weeks. Such exercises are significant as they help detect irregularities and fix business issues, and improve returns.  

The department is learnt to accordingly picked them up for have scrutinised about 100,000 auditing. GST registered accounts and there are 14 million registered GST taxpayers. 

According to the sources, the GST department follows certain key parameters for selecting cases for audit. As it started this year, the department tried to cover evasion-prone sectors–gems and jewellery, real estate, etc. The department also considered inputs given by the Commissionerate of tier-1, tier- 2 cities. An audit involves visiting the premises of business and inspecting documents, including audited financial statements, income tax returns, filing with the Registrar of Companies (ROC), stock registers, production records, and details of customers and suppliers. According to sources, the assessees have been asked by the authorities to furnish explanations and reasons for the issues being flagged by the department in 15-30 days. They will also have to submit certain documents sought by the authorities. 

After reviewing the reasons and documents, the department will issue a final audit report with the observation. The observations noted by the department will typically highlight the matter and raise demand. The assessee has to go with the observation and pay the tax liability in order to conclude the matter. In case of disagreement, the matter goes to litigation. As per the statement of an industry source, the state GST officials have also started their audit exercise this July amid a revenue deficit as compensation cess by the central government ended on June 30.