The Goods and Services Tax (GST) system is designed to streamline tax collection, minimize corruption, and facilitate the smooth movement of goods across states. GST legislation supports self-assessment, simplifying tax compliance and payment. Additionally, it outlines the procedures for notices, demand, and recovery when taxes are unpaid, underpaid, or returns are not submitted.

Audits Under GST

An audit under GST involves scrutinizing the records kept by a registered taxpayer. Its purpose is to confirm the accuracy of declared information, taxes paid, and overall adherence to GST regulations.

Audit by Registered Dealer

Prior to the financial year 2019-20, registered businesses with an annual turnover exceeding Rs 2 crore were required to have their accounts audited by a Chartered Accountant (CA) or a Cost and Management Accountant (CMA). The Institute of Chartered Accountants of India (ICAI) had specified on September 28, 2018, that an internal auditor could not simultaneously perform a GST audit. However, starting from FY 2020-21, the compulsory GST audit by external professionals and CA/CMA certification in Form GSTR-9C was abolished, replaced by a self-certification requirement for Form GSTR-9C, which is a reconciliation statement.

Audit by GST Tax Authorities

GST tax authorities can conduct two main types of audits:

• General Audit: A commissioner, or an officer acting under their directive, may conduct an audit of any registered taxpayer.
• Special Audit: The department can initiate a special audit when a case is particularly complex or when it is deemed necessary to protect revenue interests. In such instances, a Chartered Accountant (CA) or a Cost and Management Accountant (CMA) is appointed to carry out the audit.

Assessments in GST

Determining tax liability under GST is referred to as assessment. There are five distinct categories of GST assessments.

Self Assessment

In the GST framework, all registered taxable individuals are responsible for calculating their own tax obligations and submitting returns for each tax period, a process known as self-assessment.

Provisional Assessment

If a registered dealer cannot ascertain the precise value of goods or the applicable tax rate, they may apply to the officer for a provisional assessment. The designated officer can then permit the taxpayer to make provisional tax payments based on a rate or value determined by the officer.

Scrutiny Assessment

A GST officer has the authority to examine returns to confirm their accuracy. Should any discrepancies be identified, the officer will request explanations. Starting from FY 2019-20, the department introduced automated return scrutiny in May 2023, enhancing efficiency for officers and transparency for taxpayers.

Summary Assessment

A summary assessment is conducted when the assessing officer has strong reasons to believe that any delay in recognizing a tax liability could negatively impact government revenue. To safeguard revenue interests, the officer can issue a summary assessment after obtaining prior approval from the additional or joint commissioner.

Best Judgement Assessment

Best judgement assessment under GST includes two scenarios:

• Assessment of Non-Filers of Returns: If a registered taxable individual fails to file a return even after receiving a notice, the appropriate officer will determine the tax liability based on their best judgment, using all available pertinent information.
• Assessment of Unregistered Persons: This assessment applies when a taxable person is obligated to register but fails to do so. The officer will then assess that person's tax liability to the best of their judgment. The taxable person will be issued a show cause notice and given an opportunity to be heard.

Demand and Recovery Under GST

Demand and recovery stipulations are invoked when a registered dealer has either incorrectly paid tax or failed to pay tax entirely. These provisions also apply if a dealer improperly claims a refund or Input Tax Credit (ITC). In instances of fraud, the relevant officer will issue a show cause notice, demanding tax payment and imposing a penalty. Demands can stem from situations such as:

• Unpaid or underpaid tax, or an erroneous refund.
• Tax collected but not remitted to the Central or a State Government.
• Payment of CGST/SGST when IGST was due, or vice versa.

If a demand remains unpaid, the GST authority will initiate recovery proceedings.

Advance Rulings in GST

Under GST, an advance ruling involves obtaining clarifications from the GST authority regarding specific tax issues before commencing a planned activity. This mechanism helps to mitigate expensive legal disputes. Essentially, an advance ruling is a formal written decision provided by the tax authority to an applicant concerning questions about the supply of goods or services.