A Standard Operating Procedure (SOP) has been issued by the Commercial Tax Department of the Madhya Pradesh Government, specifying detailed guidelines for conducting GST audits under section 65 of the Madhya Pradesh Goods and Services Tax (MPGST) Act, 2017.
The tax officials of the tax authorities have conducted an audit, which is a mandatory statutory process to validate the correctness of returns, ensure proper tax compliance, and protect government revenue.
The Madhya Pradesh government has taken action following observations in several audit cases that indicated the following:
- Despite issuing notices, taxpayers often fail to submit the required records and documents
- As a result, the commencement of audits is delayed
- Many audits are not completed within the prescribed three-month timeline
- This leads to delays in revenue collection and adversely impacts administrative efficiency
Under the norms of Section 65 of the Madhya Pradesh Goods and Services Tax (MPGST) Act, 2017, the commissioner or authorised officer performs an audit of a registered taxpayer, either at the taxpayer’s place of business or at the department office. The condition mentioned is that the tax authorities, before performing any audit, should provide a minimum of 15 working days
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According to Section 65 of the Madhya Pradesh Goods and Services Tax (MPGST) Act, 2017, the commissioner or an authorised officer conducts an audit of a registered taxpayer at either the taxpayer’s place of business or at the department’s office. Importantly, the tax authorities must provide at least 15 working days’ notice (in FORM GST ADT-01) before conducting any audit.
The tax authorities are required to complete the audit within three months from the date it begins. This date is defined as the later of either the date when the relevant documents are submitted or the date when the audit actually starts. This initial three-month period can be extended by an additional six months if valid reasons are documented.
During the audit process, tax officials review various financial records, including the books of accounts, GST returns (GSTR forms), tax payments, input tax credit (ITC), and other related documents. The team conducting the audit under the MPGST Act of 2017 may include a joint commissioner, deputy or assistant commissioner, state tax officer, and other supporting staff.
If the taxpayer fails to provide the necessary documents to the tax officials conducting the audit, reminder notices will be issued. Failing to comply can result in penalty proceedings against the taxpayer under Section 122(1)(XVII). Continued non-compliance may lead to multiple penalties being imposed.
Post completion of the audit, a draft audit report is made and approved by senior officers. The final findings are communicated via Form GST ADT-02 within 30 days of audit completion. Action under Sections 73/74/74A will be taken if issues like non-payment, short payment, wrong ITC, etc. are discovered. The SOP has mandated virtual mode for audit-related hearings to ensure efficiency and clarity.
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