Namaskar!
Getting Notice for GST Audit or GST officers raiding offices have become pretty common these days. The first thing that an officer will ask from the business on a raid or an audit is the Audited Financial Statement of the business.
This is not a mere formality but the most important part of the review as the Officers usually find red flags in the audit or raid, to begin with.
The first thing that an officer will most probably check is the notes on accounts and particularly Related Party Transactions. This is because red flags are most often found in the related party transactions and these are challenged by the GST Officers.
Related party transactions consist of all the transactions that take place with those people or entity who have direct or indirect control over the business. Because of that, businesses tend to make a lot of concessions in these transactions which is the reason officers can easily find red flags here.
Therefore, the officers scrutinize such transactions intensely and upon finding even a minor variation in these number, they raise the valuation disputes under Rule 28 on that transaction and at the same time alleged charge of tax evasion. Besides that, they raise demand for additional tax or put a question mark on the entitlement of input tax credit. This ultimately results in litigation.
The officer can also notify the GST officer in the jurisdiction of the Related Party with whom transactions have taken place.
What if you also have significantly related party transactions and the officer challenges them?
This part is the gist of this email. The GST Act contains Rule 28 which has a Proviso for related party transactions and you must refer these to the officer which can prevent all the issues -
- The proviso to Rule 28 says that if the goods or service supply to the related party, then10% variation in prices from the open market value is allowed;
- Further, Proviso also states that if the buyer will get full input tax credit with the transaction, the value of the bill will be considered the open market value. Transaction Price cannot be challenged.
Just citing these rules properly to the officer will help you to prevent an audit, investigation, assessment, controversy litigation and other problems.
This is the reason we always quote that the solution to a problem is always somewhere near the problem.
DOST is someone you always go for a solution and relief from your problems. This DOST always has a solution for all your GST problems.
If you are also facing an issue or confusion related to GST, contact GST DOST who will solve all your worries and allow you to expand your business tension free!
T: 90 8888 3000
