Preparing for GST onsite inspections and ensuring GST compliance. Explore how you can prepare with the help of GST consultants.
GST, or Goods and Service Tax, can also be defined as the government’s single indirect tax structure. This unified system was introduced to bring all different central and state taxes under one umbrella —One Nation, One Tax System.
Tax authorities may conduct surprise onsite inspections to ensure that taxpayers comply with GST tax laws. These inspections aim to verify the authenticity of GST-related documents such as invoices and accounts.
Preparing for such inspections is essential to avoid penalties or legal consequences. In this blog, we will provide insights on how GST consultants and businesses can prepare themselves for GST inspections and stay compliant with GST regulations.
The Reason Behind Onsite GST Inspections
Paying taxes is a must for every individual and business. This helps in the economic growth of the country. Unfortunately, tax evasion is one main reason authorities conduct an onsite inspection. This is to confirm that returns are being filed with accurate taxpayer information. It can also include the assessment of physical stock and assets. Besides being a routine check by the authorities, an onsite inspection can also be based on a specific report.
Types of Onsite Inspections
GST law allows 3 kinds of situations where the officers are allowed to visit the premises of the taxpayer to verify accounts and records maintained by them. First is the Audit which is conducted by informing the taxpayer in writing. The other 2 are Inspection and Search where the officers can visit the premises without informing the taxpayer. Under Inspection proceedings officials can verify the records but they cannot seize any record or goods whereas under Search proceedings officials have power to verify and seize any or all record and/or goods including electronic gadgets like phone, computers, laptops, server etc which they deem is necessary for further inquiry and safeguarding of government revenue.
Onsite Inspection by GST Officer: What Do They Do?
Authorized GST inspectors do all GST-related onsite checkups. These officers must be allowed access to business-related activities, such as workstations, servers, and other databases. These inspectors can confiscate goods or seal the premises if they find anything suspicious. In addition, they might record statements from both the employee and the taxpayer as a part of their duty. Therefore, to avoid such issues, following best practices while running a business involving goods and services is imperative otherwise, you might receive a show-cause notice from the authorities.
Critical Steps for Businesses to Prepare and Ensure Compliance
Onsite GST departmental visits consist of a detailed review of financial and operational records. With the proper preparation, companies can ensure a smoother audit and minimize the risk of non-compliance or the imposition of penalties. Below are some critical steps companies can take to prepare for an onsite GST audit. These include organizing their records, reviewing their compliance status, and training their employees to be ready for the audit. By following these steps, companies can not only pass an audit but also identify areas for improvement and strengthen their overall compliance and governance practices.
Ensure to Keep Books of Accounts Accurate
The first step in preparing for an onsite audit is to keep your accounting records current. You should keep accurate records of all your transactions, including invoices, receipts, and payments. In addition, ensure you have reconciled your bank accounts and other financial documents.
Organize your GST-related Papers
Having all GST-related papers and documents will allow a smooth onsite inspection. For example, inspectors might want to verify registration certificates, returns, payments, and other documents relating to the goods and services provided by your organization. It should be remembered that all GST-related documents must comply with or adhere to the GST tax laws.
Training employees is another important step businesses must follow in all GST-related matters. This is to ensure that all staff complies with GST regulations. For example, they must be prepared to answer any questions put forward by the inspectors during an onsite check, in case they are not sure on any legal issues, they should direct it to their superiors or Indirect tax advisors. In addition, they should know where all GST documents are kept to show them immediately when asked.
Maintain good digital hygiene
One should maintain good digital hygiene whereby the digital gadgets in the organization must be sanitized of any unwanted information or data. Social media and messenger apps like whatsapp or telegram must be used with due care as its data can be legally taken by the officials.
Assign a Designated Staff
A person must be assigned to handle the inspection to ensure a timely manner of dealing with GST inspectors. This authorized person should be well aware of all GST-related queries and laws. Moreover, they should be able to handle the matter seamlessly to avoid any hassle during the inspection.
Perform a Self-Assessment
Doing a self-assessment to ensure everything is in order is a good idea before the GST authorities arrive. This will allow you to identify any violations and take corrective action before the scrutiny.
Ensure Complete Collaboration
You must collaborate and assist the GST inspectors when faced with an onsite inspection. As they are the governing authorities, you should provide all documents when asked. If you have any questions, please put them forward gently to avoid getting them upset or irritated.
Update GST Registration Certificate
Taxpayers should authenticate that their registration certificate is up-to-date, precise, and reflects their business activities. Any changes should be notified and updated immediately. They should also ensure they are registered for all applicable GST registrations, whichever is applicable.
Maintain Up-to-Date Inventory
During an onsite inspection, GST officials can also check the business inventory of goods and services. Therefore, businesses must maintain an up-to-date inventory that includes raw materials, finished products, equipment, and any immovable asset. Besides this, they should also keep a comprehensive detail on goods shipped or relocated. They should be able to substantiate everything with proper documentation
Provide Access to Systems
GST officials may need to access IT systems to check records such as ERP, accounting software, servers, etc. Taxpayers must ensure they are provided with all information regarding login credentials and authorization. They can even assign a computer-trained staff to oversee their requirements. The business needs to create a backup of its documents to restore them in case of a system malfunction.
Prior Show Cause or Disputes
Taxpayers should review any outstanding issues or disputes with GST authorities, such as calculations, assessments, inquiries, or appeals, and take necessary action to settle them. They should also check their tax payment records to ensure that all taxes, interest, and penalties have been paid.
Hire GST Professional
Businesses that are uncertain of compliance or encounter complex or technical questions may hire a GST consultant or expert to assist them during the audit. The consultant may also assist in preparing relevant documents and returns and respond to any concerns or objections GST authorities raise.
By taking these steps, taxpayers can improve their readiness and confidence in an onsite audit, reducing the risk of non-adherence or fines.
Onsite inspections by the GST department is a standard norm so that the government can verify that companies comply with the law. Following the procedures above, you can prepare for an onsite inspection and verify that your business adheres to GST regulations.
While onsite GST audits can be a difficult and unpleasant experience for taxpayers, they can also be an opportunity to demonstrate compliance and improve business operations. In addition, taxpayers can avoid fines and lawsuits if they adequately prepare for the audit/inspection, cooperate with GST officials, and learn from the exercise..