Audit Under Sales Tax Act
Audit Under Sales Tax Act – Classic Partners LLP
Classic Partner – Chartered Accountants & Indirect Tax Advisors
What is Audit Under Sales Tax / VAT Act?
Before the introduction of Goods & Services Tax (GST) in July 2017, businesses registered under State Value Added Tax (VAT) / Sales Tax Acts were required to get their accounts audited once their turnover crossed a prescribed threshold.
Even today, for past years where VAT assessments are pending, businesses may still need to comply with Sales Tax Audit requirements under the respective State VAT laws.
The audit ensures that:
VAT returns filed tally with books of accounts
Input Tax Credit (ITC) is correctly claimed
Output VAT liability is accurately computed
Any discrepancies are reported in the Audit Report (Form prescribed by State Act)
Applicability
Sales Tax / VAT Audit was applicable to:
Dealers registered under VAT laws of the State
Whose turnover exceeded the threshold limit (varied State to State, e.g., ₹40 lakh / ₹60 lakh / ₹1 crore)
Dealers engaged in trading, manufacturing, or services (where VAT applied)
Scope of Sales Tax Audit
Verification of books of accounts, invoices, and returns
Checking Input Tax Credit (ITC) claims with purchase invoices
Matching turnover in VAT returns with financial statements
Identifying under-reporting / misreporting of sales
Verification of statutory forms (C-Form, F-Form, H-Form, etc.) for interstate sales
Ensuring correct rate of tax applied to goods sold
Audit Report (Form Requirement)
Dealers were required to submit a VAT Audit Report in prescribed forms (e.g., Form 704 in Maharashtra)
The report had to be certified by a Chartered Accountant
Filing was annual, generally along with or soon after annual VAT return filing
Penalties for Non-Compliance
Failure to conduct or file VAT Audit Report could lead to:
Penalty under the respective State VAT Act
Rejection of ITC claims
Additional tax demand with interest
Possible prosecution in severe cases
Benefits of Audit Under Sales Tax / VAT Act
Ensures correctness of VAT returns
Prevents disallowance of ITC
Reduces risk of penalties during assessment
Strengthens compliance record with State VAT Department
Helps in smooth transition of past records in GST regime
Why Classic Partner?
At Classic Partner, we assist businesses in:
Conducting VAT / Sales Tax Audits for pending years
Filing VAT Audit Reports in prescribed formats
Reconciliation of VAT returns with books of accounts
Representing clients before VAT officers during assessment or scrutiny
Advisory on handling past VAT issues in line with current GST compliance
Need assistance with VAT / Sales Tax Audit or legacy assessments?
Classic Partner – Trusted Advisors for Statutory Indirect Tax Audits in India.
