Everything you need to know about VAT Audit

VAT Audit, a process of checking the total paid tax by audit officers. Tax is collected from dealer/manufacturer or any importer which is levied by government. According to rules & guidelines provided by sales tax department, the officers issue a notice to the selected 10-20 percent dealers with respect to region. The dealers need to respond to the notice in a defined period or else has to face the actions taken by the officers. A financial audit may show that the financial records must be agree with the basic and important documents. There are different reasons and situations that may cause false result such as taxable sales are nowhere recorded, invoice receipts are duplicate or forged, products/goods have been taken from stock and not recorded, given discounts may reduce the taxable value incorrectly.

Motive of auditing is to bring the non performing asset into account and raise the tax revenue in government treasury. For this purpose some important legal formalities are required such as correct registration of the dealer, maintaining the accounting records, documents of business activities and other risk factors posed by the dealer are taken into consideration. Authorised auditors has to conduct the investigation according to the strict rules and instructions given by the department. Also has to treat the dealer in a kind way and also has to gain the personal information and assuring the dealer about it being confidential.  If the auditor fails to get co-operation or dealer not giving proper information or any unusual issues arised from the dealer’s side, the auditor has to report the scenario of the case to the investigation section.

As we know, the VAT Audit is broadly classified into three main categories i.e., general, refund and specific audit. In general audit a broad coverage of around five years tax payments of VAT dealers is declared. In case of urgent references late registrations, cancellation of registration or emergency situation specific audit is carried out. While performing audit a proper plan and program need to set up along with arranging an appointment with dealer,  doing mock drills to successfully carry out the audit without revealing the confidential information in public. In specific time period. The allotment for audits depends upon the annual tax, paid by the VAT dealer. For example,  the payable  tax of Rs 10 lakhs & more  should required only 5 days for auditing and Rs 2 lakhs-10 lakhs should require 3 days and annual tax payable below 2 lakhs should not extend more than two days.  The officers according to grade are initially allotted number of audit visit per month, say like deputy commissioner has four audit visits per month, assistant  commissioner have eight visits per month, the sale tax officer has to complete ten audit visits per month, to hot the actual target.  Actual management of Audit activity is an interesting part to be discussed. The actual & proper management of VAT audit section is the responsibility of additional commissioner sales tax. Planning  & achieving the VAT audit revenue target in the respective geographical region with the help of  joint commissioner VAT administration. Commissioner has to look for policy matters related to business audit and generating the general audit cases according to region. Joint and Deputy commissioner carries out different activities such as confirmation of satisfactory audit programs, maintaining control register for the cases allocated to his section, reviewing overall audit results achieved, conducting quarterly staff meetings to share opinions, views regarding areas & audit techniques. Responsibility of the sales tax officer ensuring the team audit program is completed.

The auditor has to frame a structural questionnaire to gain the detailed information from the dealers during the interviews This include professional as well as personal questions which can sometimes be irritating and disturbing, like all the “W” questions, who is the owner of the firm, who is providing the information to fill on VAT returns, what do you understand by VAT etc and  many more concerned questions.  Before completing the audit, the officers need to submit visit report till date. Also, if there are any queries or unresolved issues with the VAT dealers that has not been cleared on the visit should be referred to the immediate supervising authority and the final decision has to be notified to the VAT dealer within ten days and has to be recorded on Form Audit 6 as per regulation. The supervising authority retains all the daily visit reports analyze data, declarations and resolves the issues in specified time by submitting the final report.  After auditing any fraud cases investigated need to taken into consideration and strict actions are taken against that person or firm. Auditor plays vital role in identifying a potential fraud case, quantifying the fraud amount which need to be recollected back, collecting the data of the involved people in that case.

In case of fraud, the investigated fraud amount has to be paid back by the dealer also a legal investigation and prosecution in the court and the subjected financial penalties and punishments are liable on the dealers.  The VAT Auditors are having proper, special and technical  training about the VAT fraud cases which are handled by specialist fraud investigation team.  The online data of the tax need to be updated at the Mahavikas-official website of sale tax department of India, when it is updated. Till then the account data has to be maintained in book format(Offline data) provided by the authority.  The data submitted should be precise yet should fulfill all the requirements of the department. So that it helps the auditors to access the data easily. The level of documentation should be decreased to a minimum level by the auditors. This VAT audit may be the last audit because of GST i.e., Goods and Service Tax has been implemented in India on 1st July, 2017 governed by a GST council. This is the tax which is applicable throughout India. It is an indirect tax has already replaced all the other taxes which were earlier levied by state & central government, in all over India.

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