Namaskar DOST!

I hope you find this email in the best of your health.

Today, I want to share the story of this call received by our Emergency Response Team last week from the state of Chattisgarh.

The situation started when GST officers went for a routine inspection at Mr Ramesh's place of business, i.e., the company's office. The objective of the inspection was to verify if the registered place of business was the actual place where the company ran its operations.

However, the officers found various issues at the inspection:

1. The GST Registration Certificate number was not displayed at a prominent place inside the office premises.

2. There was a discrepancy between the stock register entry and the actual quantity of stock.

3. The Aadhar number was not updated on the GST portal.

The officers asked for an explanation for all the above points, to which the executives present at the spot replied:

1. The stock register was not up to date, causing a discrepancy at the moment.

2. The company has been following a process in which they update the stock in the register as soon as the Invoice was received, even when the goods were in the transporter's godown.

3. Another practice they followed was of selling the goods to a customer even before the goods reached their office. The goods are then transferred to the customer even before reaching their office. In this process, the vendor creates an Invoice, but the company does not update the stock as neither the invoice received nor the goods. However, the company updates the stock, reducing the quantity equal to what is mentioned in the Invoice created by them.

Hearing all this, the officers suspected a tax evasion case and started planning on making a Summary Assessment under section 64 of the CGST Act and creating a demand.

Mr Ramesh then called our Emergency Response Team and asked for instant help in the matter.

Our team analysed the situation and instantly started fixing the problems. I am now listing all the things that we did to help Mr Ramesh:

1. Our professionals explained to the officer that Mr Ramesh's company had displayed the GST number at a prominent place; however, they did not display the Registration Certificate, which was a mistake. We admitted the mistake and instantly rectified it by pasting a printout of the GST Registration Certificate at the reception of the office space.

2. We explained that the transporter's godown was not registered as an additional place of business, but we will surely do that instantly. To prove that the statements were not false, we brought the stock movement register from the transporter and showed every entry to rectify the discrepancy in the stock register.

3. We showed the Eway bills to the officer for all the goods dispatched from the vendor's office. For the goods that were sold and delivered before reaching Mr Ramesh's office, we showed the Invoice and the Eway bill to the officer. After showing that to the officer, we even educated the company executives that the transaction type in such Eway bills should be "Bill from Dispatch from".

4. The company executives requested the officer to give them 1 week to update the stock register and present the same to him. They even assured him that changes had been made in the processes and the same mistakes would not occur in the future.

5. The Aadhar was updated on the GST portal immediately in front of the officer, which did not take more than 5 minutes.

You would love to know that we had given virtually all this support to them.

What happened next?

The combined effect of our initiation and actions, the commitments made by Mr Ramesh, and the proof and rectification of the mistakes made the officer believe that the situation was not a case of tax evasion.

The officer told Mr Ramesh that his company has to change the way of working and understand the proper GST processes. He has to understand the importance of the stock register and maintain it correctly and up to date.

After verifying all the documents, the officer agreed on not taking any action but told Mr Ramesh that the situation would not be the same every time. A situation like this in the future would invite penalties and a lot of other actions by the department.

The officer was right, and it was really a lucky day for Mr Ramesh as typically, a situation like this may would lead to seizure of the books and records, demand of tax, penalty, interest, and, among many other problems.

Basically a big bag of tensions for months!

As your DOST, I would advise you to think from the perspective of the above situation and imagine yourself in the same. Are you prepared to answer all the questions that an officer might ask in such an inspection?

Why don't you perform a self-surprise inspection of your office and check whether you are following all the GST norms?

You can also do such a surprise visit yourself without any help or through a Consultant like us and protect your company from a lot of problems in the future.

Thank you for reading till the end; let's meet in the next email with another such interesting incident.

If you have any particular questions regarding this issue or something else related to GST, feel free to contact us.

Thanks & Regards

DOST Vikash Dhanania