Companies to take GST audit exam; Experts want no penal action

NEW DELHI: India Inc. is gearing up to face the first test of their goods and services tax filings, with the authorities looking to initiate audits by picking up returns for risk-based assessment from July.

“There is a direction that the audits should begin in July,” a government official said.

The audit is significant because this is the first time that GST returns and the accounts of companies will be scrutinised for compliance levels and the positions they had taken — whether they had interpreted tax provisions correctly and paid tax — after GST was introduced in July 2017. However, tax experts have called for the authorities to adopt a moderate approach during the reviews.


Companies are required to file two returns by December 31, following the financial year ended March, although for FY18, the deadline was extended to June 30, 2019.

The returns are the GSTR9, or the annual return, and GSTR9C, or the annual reconciliation statement of GST returns with financial statements, certified by a chartered accountant.

The GSTR9C is the GST audit report and is akin to the tax audit report. This will become the basis for all GST audits conducted in future.

“This will also be a test of how the GST audit certificates issued in the GSTR9C format are utilised by the authorities and their significance in the whole audit process,” said Bipin Sapra, a partner at EY.

Experts batted for a lenient view this time.

“Businesses need to be prepared as this will be the first departmental audit,” said Anita Rastogi, indirect tax partner at PwC. “Also, considering that it will pertain to the first year of GST, it is recommended that the authorities should be mindful of the fact that there were many interpretational and portal issues and therefore a lenient view should be considered.”

Sapra of EY supported this view. “Initial process ought to be more liberal and the auditors should look to educate taxpayers if there is a compliance gap and avoid stringent penal actions,” he said.

The first year’s deadline for returns had been extended because the formats of both returns were very elaborate and were released late too close to the last date. The government issued a clarification on Tuesday making it clear that the returns need to be filed before June 30.

According to an official statement, taxpayers who reported a mismatch between auto-populated data and the entries in their books of accounts or returns should report the data as per their books of accounts or returns filed.