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))]
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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.
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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.
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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.
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CA. Abhay Desai
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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CA. Abhay Desai
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.
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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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CA. Abhay Desai
EXAMPLE
 LIVE CASE
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CA. Abhay Desai
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
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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).
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CA. Abhay Desai
ISSUES
PENALTY
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CA. Abhay Desai
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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CA. Abhay Desai
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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CA. Abhay Desai
FAILURE TO SUBMIT IN
PRESCRIBED FORM
 Tax not found payable on assessment
 Birla Corporation Ltd [2009] 26 VST 471 (Pat)
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CA. Abhay Desai
PENALTY FOR NON-SUBMISSION
CONFIRMED
 Dhruv Automobiles (SA NO 794 OF 2011)
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CA. Abhay Desai
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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CA. Abhay Desai
THREE AUDIT REPORTS – ASSESSMENT
BASED ON TRUE FACTS
 Shree Krishna Vijay Petroleum (2013-GSTB-I-98)
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CA. Abhay Desai
OTHERS
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CA. Abhay Desai
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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CA. Abhay Desai
STATUTORY AUDIT REPORT
AUTHENTIC
 Classic Marbles [2009] 25 VST 295 (Ker)
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CA. Abhay Desai
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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CA. Abhay Desai
DEALER NOT TO SUFFER FOR
FAULT OF CONSULTANT
 Return not filed by consultant
 Mayur Construction (SA NO 964 OF 2009)
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CA. Abhay Desai
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..!"
Abhaydesai86@gmail.com
7874668953
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CA. Abhay Desai