GST Audit & Notice Drives (2017–2022 Onwards)
In 2022, the authority responsible for enforcing the Goods and Services Tax (GST) law issued approximately 50,000 show-cause notices to various assessees (companies and partnership firms) across sectors such as jewellery and real estate, for discrepancies related to the fiscal years 2017–2018 and 2018–2019.
The GST department conducted GST audits on the filing data from these years, as well as some from the returns of fiscal years 2019–2020 and 2020–2021.
Key Highlights of the GST Notice Drive
- Notices Issued: ~50,000
- 20,000 notices up until September 2022
- Another 30,000 issued in recent months
- Response Time: 15–30 days to provide explanations
- Documents: Taxpayers may be required to submit supporting information
- Nature of Drive: First such initiative since GST implementation
GST Audit Requirement (Earlier Years)
- Until FY 2018–2019: Businesses with annual turnover ≥ INR 2 crore were required to complete a GST audit.
- Departmental officers have also been conducting departmental audits of taxpayers.
- Notices were issued after scrutiny of documents under provisions of the CGST Act.
- Approximately 100,000 GSTIN accounts were audited.
Later, the GST Council removed the requirement for a GST audit.
Why Were GST Notices Issued?
Notices were served for various reasons, including:
- Misdeclaration of goods or services
- Unpaid or short-paid taxes
- Wrongful input tax credit (ITC) claims
- Wrong classification of goods/services as exports
- Mismatches in sales vs purchases
Duration of GST Audits
- Large businesses: ~3 months
- Complex entities: Up to 6 months
- Small businesses: A few weeks
These audits have been useful in detecting irregularities and nudging businesses to strengthen compliance.
Focus Sectors for Audit
- Gems & Jewellery
- Real Estate
- Other high-risk industries prone to tax evasion
Documents Reviewed During GST Audit
Primary documents: Income tax returns, audited financial statements, ROC filings
Stock registers: List of stockholders, number and class of shares held
Production records: Details of production of goods/services
Customer/Supplier records: Invoices, bills, subsidiary documents
Other documents: Any additional documents required by ROC/statutory agencies
After reviewing, the department issues a final audit report, which may include:
- Tax demand (if discrepancies are confirmed)
- Closure of matter (if taxpayer pays dues)
- Litigation (if taxpayer disputes demand)
State-Level GST Audit Drives
- Started July 2022 (after expiry of Compensation Cess on June 30, 2022)
- Selection of cases based on inputs from commissioners of Tier-1 and Tier-2 cities
Common Reasons for Receiving GST Notices
- Incorrect use of GST input tax credit (ITC)
- Mismatch between GSTR-1 and GSTR-3B
- Delay in filing GSTR-1 and GSTR-3B
- Inconsistency between GSTR-1 and E-way Bill portal
- Failure to reduce prices after GST rate cut (anti-profiteering)
- Submission of incorrect information/documents
- Ineligible or wrongly claimed GST refund
- Inconsistent export reporting in GSTR-1
- Tax evasion
Responding to GST Notices
- Mode: All responses must be filed online via the GST portal
- Signature: Taxpayer’s DSC/e-signature OR authorized representative’s signature
- If tax/interest payable: Payment must be made in the correct form before submitting reply
- Non-response: Penalties and further action under GST law
- Delegation: Possible through a GST Letter of Authorization to a representative or practicing CA
Guidelines for Response
- Verify format and ensure factual accuracy with supporting justifications
- Check if the default is your responsibility
- Clarify doubts directly with the issuing authority
- Avoid assumptions or hurried replies
- Gather and document all facts before writing response
- Don’t just cite case law – explain how it applies to your case
How ViTWO Can Help
ViTWO empowers businesses through end-to-end financial management and virtual CFO services.
- Ensures businesses are always on top of compliance
- Provides expert guidance through every statutory process
- Helps avoid GST notices through proactive checks
- If notices are received, assists in preparing accurate and timely responses
With ViTWO’s professional team, your business won’t have to face unnecessary disputes or compliance risks in the long run.