VAT AUDIT PRACTICAL ASPECTS CA. ABHAY DESAI Managing Partner,Yagnesh Desai & Co.
AGENDA WHY AUDIT CAN WE BE TRUSTED WHO IS TO BE AUDITED WHO CAN DO THE AUDIT TIME WITHIN WHICH REPORT IS TO BE MADE TIME WITHIN WHICH REPORT IS TO BE FILED AUDIT REPORT LIVE CASE PENALTY FOR NON-FILING ISSUES
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CA. Abhay Desai
WHY AUDIT Para 2.12 of WHITE PAPER ON VAT – System of Self-
assessment No longer compulsory assessment of all the dealers It is not a formality Trust reposed in us has to be reciprocated
“It takes 20 years to build a reputation and five minutes to ruin it. It you think about that, you’ll do things differently” - Warren Buffett
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CA. Abhay Desai
CAN WE BE TRUSTED Held, dismissing the petition, that the chartered
accountants by reason of their training had special aptitude in the matter of audit . A tax practitioner did not have the same expertise as the chartered accountant in the matter of accounts. They constituted two different class having nexus with the object of the provisions which was prevention of evasion of tax dues. Therefore the amendment requiring chartered accountant to certify statements thereby disabling legal and tax practitioners from submitting any statement and prescription of form 41A for audit report were valid. [Kar Salahakar Sangh ([2013] 60 VST 126 (MP))] 4
CA. Abhay Desai
SEC. 63 If in respect of any particular year, total turnover of a
dealer exceeds such amount, not being less than one crore, as may be prescribed, then such dealer shall get his accounts verified and audited by a specified authority within nine months from the end of that year and obtain within that period a report of such audit in the prescribed form duly signed and verified by such specified authority along with such particulars as may be prescribed. A true copy of such report shall be furnished by such dealer to the Commissioner within such period as may be prescribed. 5
CA. Abhay Desai
WHO IS TO BE AUDITED Every registered dealer whose total turnover in respect
of any particular year exceeds rupees one crore AND taxable turnover exceeds rupees twenty lacs shall get his accounts verified and audited by a specified authority.(Rule 44(3))
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CA. Abhay Desai
TOTAL TURNOVER Sec. 2(34) “total turnover” means aggregate of the
following transactions effected by a dealer: (a)turnover of sales or purchases of goods within the State whether such sales or purchases of goods are taxable or exempt under this Act; (b)turnover of sales of goods in the course of inter-State trade or commerce; (c)turnover of sales of goods in the course of export of goods out of the territory of India; (d)turnover of sales by a dealer on his own account and also on behalf of his principal. 7
CA. Abhay Desai
TAXABLE TURNOVER Sec. 2(30)“taxable turnover” means the turnover of all sales or
purchases of a dealer during the prescribed period in any year, which remains after deducting therefrom,(a)the turnover of sales not subject to tax under this Act; (b)the turnover of goods declared exempt under sub-section (1) of section 5 or under a notification under sub-section (2) of section 5, and (c)in case of turnover of sales in relation to works contract, the charges towards labour, service and other like charges, and subject to such conditions as may be prescribed: Provided that in the cases where the amount of charges towards labour, service and other like charges in such contract are not ascertainable from the terms and conditions of the contract, the amount of such charges shall be calculated in such manner as may be prescribed;
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CA. Abhay Desai
WHO CAN DO THE AUDIT a Chartered Accountant a Cost Accountant a Legal practitioner or a Sales Tax Practitioner
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CA. Abhay Desai
TIME WITHIN WHICH REPORT IS TO BE MADE Nine months from end of the year (Sec.63) Due date for annual return in audit cases – Nine
months (Rule 20) Revised return to be filed in case of differences
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CA. Abhay Desai
TIME LIMIT WITHIN WHICH REPORT IS TO BE SUBMITTED Shall within a period of thirty days from the date of
obtaining such report, submit true copy of such report (Rule 44(2))
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CA. Abhay Desai
AUDIT REPORT (Rule 44) Shall be in Form 217 and shall contain following particulars,
namely: (a)verification of accounts and documents as mentioned in rule 45, (b)certificate containing a report as to (i)correctness of the tax credits claimed by the dealer during the period under report, and (ii)whether the dealer has employed fair and reasonable method as required under sub-section (11) of section 11 of the Act; (c)whether the dealer has made the true and proper calculation and payment of tax as required under the Act. 12
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FORM 217 Clause 1: Correctness & Completeness of annual return Clause 2: Documents relied upon Clause 3: Major changes
Clause 4: Summary Clause 5: Advise
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ENCLOSURES 1)Statutory Audit Report with Profit and Loss Account and balance sheet. 2)Statement of particulars. 3)Statement of other particulars as decided by the Commissioner through public circular.
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CA. Abhay Desai
STATEMENT OF PARTICULARS Part A – FOR TRADERS ENGAGED IN LOCAL SALES &
PURCHASES ONLY Part B - FOR TRADERS HOLDING VAT & CST REGISTRATION Part C - FOR DEALERS OTHER THAN COVERED UNDER STATEMENT OF PARTICULARS A & B
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CA. Abhay Desai
SUB-PARTS PART I - GENERAL INFORMATION PART II – MANUFACTURING ACTIVITY RESULT PART III - TRADING ACTIVITY RESULT
PART IV – OTHER STATEMENTS PART V – FINANCIAL RESULT
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CA. Abhay Desai
ANNEXURES 1. Separate statement of month-wise payments with details of challan is submitted. 2. Separate Quantitative particulars of principle items is submitted. 2. Separate list of Statutory Forms obtained from the Commercial Tax Office with serial no. (Form C, E-I, E-II, F, H, I, J and others if any) is submitted. 3. Separate list of statutory forms issued by the dealer during the year (Form C, E-I, E-II, F, H, I, J and others if any) is submitted. 4. Separate list of Statutory Forms received on the Sales of goods under Gujarat Value Added Tax Act, 2003 as well as under Central Sales Tax Act, 1956 is submitted. 5. Observations about delay in filing returns, delay in payment of tax or non-payment or short payment of tax (if any) 6. Separate list of mentioning commodity wise turnover of sales and purchase, tax rate and tax involved of top 10 commodities. 17
CA. Abhay Desai
ACKNOWLEDGMENT Audit report as received above is submitted as per
requirement of S. 63 of Gujarat VAT Act, 2003. – ACKNOWLEDGMENT BY DEPARTMENT
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EXAMPLE LIVE CASE
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INDICATIVE LIST OF DOCUMENTS 1. Sales Ledger with rate wise bifurcation reconciled with yearly summary of returns 2. Purchase Ledger with consolidated 201B for entire year reconciled with yearly summary of returns 3. Copy of sales invoices 4. Copy of purchase invoices 5. Statement of direct exports along with relevant proofs. 6.Statement of capital goods on which ITC has been claimed reconciled with additions to fixed assets in Balance Sheet 7. Reconciliation of VAT & CST Account 20
CA. Abhay Desai
INDICATIVE LIST OF DOCUMENTS 8. Reconciliation of C / H / F forms received & to be received with OGS Sales, indirect export & branch transfers resp. 9. Statement of purchases against form H with its referable direct exports and relevant evidence 10. Statement of Highseas sales along with its referable import purchase 11.Details of opening and closing stock 12. Statement of sales return (VAT & CST) - within six months and beyond six months 13. Copy of audited accounts 14.TRIAL BALANCE of Gujarat location as on 31st March 13 (Certified by mgmt). 21
CA. Abhay Desai
ISSUES
PENALTY
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REVISION
OTHERS
PENALTY Not exceeding rupees ten thousand (Sec. 63(2)) Reasonable opportunity of being heard Incomplete audit report ??
Fails to furnish a true copy of such report Notice in Form 309 is mandatory (Rule 46(1))
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DISCRETION TO IMPOSE PENALTY FOR LATE FILING OF REPORT Ankit International [2011] 46 VST 1 (Bom) Nitco Paints Ltd. [2011] 42 VST 71 (Bom)
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FAILURE TO SUBMIT IN PRESCRIBED FORM Tax not found payable on assessment Birla Corporation Ltd [2009] 26 VST 471 (Pat)
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PENALTY FOR NON-SUBMISSION CONFIRMED Dhruv Automobiles (SA NO 794 OF 2011)
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REVISION Only returns can be revised (Sec. 29(4)) Annual return can be revised to make corrections as
advised by VAT Auditor No provision for filing revised VAT Audit Report
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THREE AUDIT REPORTS – ASSESSMENT BASED ON TRUE FACTS Shree Krishna Vijay Petroleum (2013-GSTB-I-98)
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OTHERS
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NO PENALTY IF TAX PAID AFTER INTERNAL AUDIT BUT BEFORE ASSESSMENT Delay not attributable to DELIBERATE, WILFUL OR
CONTUMACIOUS CONDUCT Food Corporation of India 45 VST 9 (Pat) Narendra Machinery Works Private Limited (2010 GSTB – Part-I)
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STATUTORY AUDIT REPORT AUTHENTIC Classic Marbles [2009] 25 VST 295 (Ker)
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MISTAKE IN AUDIT REPORT Labour charges shown as purchase Clarification given by CA Adroit engg. services (SA NO 80 OF 2012)
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DEALER NOT TO SUFFER FOR FAULT OF CONSULTANT Return not filed by consultant Mayur Construction (SA NO 964 OF 2009)
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SUMMARY WHY AUDIT ? CAN WE BE TRUSTED ? WHO IS TO BE AUDITED ? WHO CAN AUDIT ? TIME WITHIN WHICH REPORT IS TO BE MADE ? TIME WITHIN WHICH REPORT IS TO BE FILED ? AUDIT REPORT LIVE CASE PENALTY FOR NOT-FILING ISSUES
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CA. Abhay Desai
WE CAN DO IT !! The AS are very complex and there are major variances in
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respect of turnover of sales and purchases accounted as per AAS in the profit and loss account of the enterprise and turnover of sales and purchases which is required to be considered for the purpose of levy of tax under the Maharashtra Value Added Tax Act, 2002. Clear cut comments on the major changes made by any firm in a given period in respect of accounting system, method of valuation of stocks and business model, etc., are required from the auditor. These are complex accounting and audit issues which advocates, sales tax practitioners and company secretaries are not professionally qualified to handle. Sales Tax Practitioners' Association of Maharashtra and another (2008) 14 VST 69 (Bom) CA. Abhay Desai
THANKS !! “Truth Is Always Like Oil In Water; No Matter How Much Of Water You Add, It Always Floats On Top..!"
[email protected] 7874668953
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