GST Audit Assessment

Ensuring Financial Compliance: A Dive into GST Audit Strategies

GST procedure defines the procedure involved in implementing and managing the Goods and Services Tax system. These include GST registration, invoicing, filing returns, claiming an input tax credit, paying GST, conducting audits and assessments, and facilitating refunds. Replacing numerous indirect taxes with a single tax simplifies the indirect taxation structure while ensuring compliance and supporting the efficient operation of the GST system. The Goods and Service Tax (GST) framework allows for effective revenue collection, decreased corruption, simple interstate trade in goods, and many other benefits. However, self-assessment is a feature of the GST Law that makes tax compliance and payment simple. The notices, demands, and recovery laws that apply to unpaid, underpaid, and unfiled taxes are also explained.

What is an Audit and its requirement?

According to Section 2 (13) of the GST Act, an "audit" entails verifying the legitimacy of the business's records and Paper works. Additionally, 'audit' verifies the accuracy of the company's claimed turnover, GST paid, and refunds. Additionally, it is possible to determine whether or not the company has complied with GST regulations.

Under GST, the assessor evaluates returns and determines tax liabilities. No tax official would step in to intervene in GST regulation. As a result, GST is a trust-based tax system. Audits are necessary to review and verify the tax liability determined by the assessment and to see if the tax laws have been obeyed because self-assessment is prone to errors and fraud. The tax authorities can conduct audits following the CGST Act 2017 under Section 65 GST Audit by the Department and Section 66 Special Audit by C&AG.

What are the kinds of GST Audits?

GST Audits can be of the following types –

Registered enterprises with annual revenues over INR 2 crore must have their accounts audited by Chartered or Cost Accountants.

• Departmental audit

  : It is the typical type of audit in which the commissioner or another authorised person can examine any registered business at any time and in any manner specified by law; a copy of the audited accounts and a reconciliation statement should be certified and provided.

• Special Audit

  : During special audits, requesting the registered business's records and books of accounts may be necessary. A cost or chartered accountant would review and audit such records as needed.

• Turnover-based Audit under Section 35(5) of CGST Act:

  A registered taxpayer must have his accounts annually audited by a Chartered or Cost Accountant if his annual revenue exceeds Rs. 2 crores in a fiscal year. A financial year comprises the twelve months that stretch from April of one calendar year to March of the following.

What is the meaning of term 'Assessment’?

'Assessment 'generally refers to assessing the tax liability and the process for collecting or recovering the same. The tax laws issued by the Indian Union (for example, the Central Excise Act of 1944, the Finance Act of 1994, etc.), as well as the State Governments (for example, the Karnataka Value Added Tax Act of 2003, the Karnataka Tax on Entry of Goods Act of 1979, etc.), had transitioned to "Self-Assessment" based tax compliance, which would mean that the taxpayer would determine the value of goods/services and the Central Goods and Service Tax Act of 2017 (the "CGST Act, 2017") contains the Goods and Service Tax Law, allows the registered taxable person to self-assess the taxes due and produce a return for each tax period. Self-Assessment can occasionally result in the wrong application of laws, the depositing of lower taxes, or the claiming of irregular/incorrect input tax credits and refunds.

The CGST Act 2017 defines "Assessment" as calculating the tax due under this Act under Section 2(11). It covers best judgement evaluation, provisional assessment, self-assessment, re-assessment, and summary assessment.

Assessment under the GST Laws The ensuing paras discuss the various means available for the tax authorities to conduct an assessment under the CGST Act, 2017, i.e.,

Section 60 – Provisional Assessment;

Section 62 – Assessment of non-filers of returns;

Section 63 – Assessment of unregistered persons;

Section 64 – Summary Assessment;

Provisional GST Assessment

A provisional assessment is made when the taxable person cannot ascertain the cost of the goods or services or the corresponding tax rate. The taxable person may then ask the appropriate officer in writing for justifications for making a provisional tax payment. Within ninety days of receiving the request, the proper officer must issue an order permitting tax payment on a provisional basis at the rate or based on the value he may specify.

The execution of a "BOND WITH SURETY," as established by the proper official, is a condition of the provisional assessment. Within six months, the proper officer must complete the final assessment. The date for finishing the assessment may be postponed by the Joint/Additional Commissioner for a further term of no more than six months and by the commissioner for a further period of no more than four years if sufficient cause is given and for reasons that must be in writing. If the tax previously paid were less, the taxpayer would be required to pay interest after the final assessment. If the tax previously paid were more, the taxpayer would be eligible for a refund with interest as provided by Section 56 of the CGST Act, 2017. 

• GST Assessment of non-filers of returns:

  Whether or not any supplies of goods, services, or both were made during the tax period described in Section 39 of the CGST Act of 2017, every registered person must abide by the law by filing regular returns. In the event of non-compliance, a notice according to Section 46 of the CGST Act 2017 would be issued.

The proper officer would be empowered to proceed and assess the tax liability of the said person to the best of his ability, taking into account all the relevant information available or gathered, and issue an assessment order within five years from the date specified under section 44 for furnishing the annual return for the financial year to which the tax was not paid. Any additional default after service of the notice would give the proper officer this authority to look after the matter.  

• GST Assessment of unregistered persons:

  Anyone who engages in the provision of goods, services, or both must register following the law. The proper officer may proceed to assess the tax liability of such a taxable person to the best of his ability for the relevant tax periods and issue an assessment order within five years from the date specified under section 44 for furnishing the annual return for tax purposes in cases where the taxable person fails to obtain registration despite being required to do so or whose registration has been cancelled under section 29(2) of the CGST Act, 2017, but who was required to pay tax.

It is important to note that even though best judgement evaluation usually entails a certain level of ambiguity, the authorities are responsible for estimating the income honestly and fairly and should not act arbitrarily.

Summary Assessment

When the assessing officer discovers sufficient justification to think that postponing demonstrating a tax liability could hurt the revenue's interests, a brief assessment is made. With the additional or joint commissioner's prior approval, he may pass the summary assessment to safeguard the interest of the revenue.

Best Judgement Assessment

Under GST, best judgement assessments might be of the following two types:

1. Evaluation of those who don't file returns, the proper officer will determine the tax liability to the best of his abilities using the pertinent information available if a registered taxable person fails to file his return after receiving notice.
2. Evaluation of those who are not registered When a taxable person is obligated to register but does not, an assessment is made against him. To the best of his abilities, the officer will determine the tax liability of such individuals. The taxable person will be given a notice of show cause and a chance to be heard.

Demand and Recovery

The demand and recovery option would cover the following scenarios:

• If the tax was not paid correctly
• Unless taxes have been paid
• If the stated tax refund is false
• If the claimed Input Tax Credit is false

The competent official would inform the assessee to provide the justifications mentioned above. The assessee must also pay the tax and fraud penalty. The officer would issue a demand when tax is collected but not deposited with the government or the assessee paid CGST or SGST when IGST was due to be paid. The GST authority initiates collection actions if the assessee refuses to pay the demand.

Advance Ruling

Before beginning any procedure, you should get clarification from the GST Authority on several tax-related issues. This lowers the price of legal proceedings. When a requester inquires about the provision of goods and services, the tax authority responds in writing with an advance ruling. Therefore, to calculate and file your GST accurately, you must grasp the GST procedures and their laws if you are a taxable assessed and required to pay GST on your products and services.

Service offered by Enterslice

Enterslice is a professional services firm that offers a range of services, including GST audits and assessments. Here are some of the services they provide for GST audit and assessment:

GST Audit:

• To ensure adherence to GST laws and regulations, Enterslice helps firms conduct in-depth GST audits.
• To find non-compliance or possible problems, they examine the financial records, GST returns, input tax credits, invoices, and other pertinent necessary papers.
• The specialists offer advice and solutions on fixing regulation violations and enhancing the processes for GST compliance.

GST Assessment:

• The tax authorities' GST assessment procedure is made more accessible for businesses.
• They aid in preparing and submitting replies to GST notices, questions, and assessments from the tax authorities.
• To ensure adequate representation of the client's interests during the assessment proceedings, Enterslice professionals offer assistance and representation.

Review of Compliance:

• Enterslice thoroughly examines a business's GST compliance policies and practices.
• They evaluate tax invoices, input tax credit claims, GST returns, and other compliance-related elements for accuracy and completeness.
• Enterslice evaluates the compliance process, detects any flaws or opportunities for improvement, and offers suggestions for change.

Advisory Services:

• Enterslice provides GST audit and assessment consultancy services.
• They govern input tax credits, registration, returns filing, valuation, and other GST-related obligations.
• The professionals at Enterslice can help companies comprehend the consequences of the GST laws and regulations and offer specialised solutions for specific issues.