Audit under the Sales Tax Act — Legacy VAT & CST Compliance
State-level sales tax and VAT audit, open assessment closure, and reconciliation of pre-GST liability with post-GST data — handled by experienced CAs from our Mumbai practice who know the legacy VAT regime inside out.
Although GST replaced most sales taxes from 1 July 2017, legacy VAT and CST assessments remain open for financial years prior to GST's introduction. State Sales Tax Acts (e.g., Maharashtra Value Added Tax Act, 2002 — MVAT) required dealers above specified turnover thresholds to get their accounts audited and file an audit report (e.g., Form 704 under MVAT). Assessments for these years are still ongoing. Additionally, certain goods — petroleum products, liquor and real estate (in some states) — remain outside GST and continue to attract state VAT and mandatory annual audit. The Classic Partners LLP handles both legacy audit compliance and the defence of open VAT assessments.
Sales tax audit that closes legacy liabilities and defends open assessments
For most businesses, sales tax compliance did not end when GST came into force — it just got frozen in time. VAT assessments for FY 2016-17 and earlier are still being taken up by State VAT departments. Businesses that did not file their VAT audit reports, paid tax incorrectly or have ITC mismatches face notices, demands and penalties that compound with interest.
We audit the books for the relevant VAT period, prepare or correct the VAT audit report in the prescribed state format (e.g., Form 704 for Maharashtra VAT), reconcile ITC claimed against purchase data, and represent clients before the assessing authority for scrutiny, ex-parte orders and appeals.
- Maharashtra VAT (MVAT) audit — Form 704 preparation and filing
- Central Sales Tax (CST) reconciliation and return verification
- Legacy ITC verification — Form 16A / C declarations
- Open VAT assessment defence and representation
- Petroleum, liquor and real estate VAT — ongoing annual audit
- GST-to-pre-GST turnover reconciliation for assessments straddling the transition
Legacy VAT, continuing VAT and open assessments
GST replaced most state sales taxes — but legacy compliance and certain sectors remain active.
| Situation | What's required | Key states / law |
|---|---|---|
| Open VAT assessments (pre-FY 2017-18) | VAT audit reports, ITC reconciliation, representation before assessing authority | MVAT (Maharashtra), KVAT (Karnataka), TNVAT (Tamil Nadu) and others |
| MVAT audit — Form 704 | Annual VAT audit for dealers with turnover above the state threshold during the VAT era — Form 704 with CA certificate | Maharashtra Value Added Tax Act, 2002 |
| Petroleum & petroleum products | Ongoing state VAT — annual VAT audit still required in most states | State VAT Acts — petroleum outside GST |
| Liquor (IMFL & beer) | Ongoing state excise and VAT — annual audit and return filing still required | State Excise Acts and VAT Acts |
| Real estate (in applicable states) | State VAT on works contracts may still have legacy audit obligations for ongoing projects | State VAT Acts (pre-GST) |
| CST — Central Sales Tax | Reconciliation of inter-state sales, C-Form and F-Form declarations against sales data — for open assessments | Central Sales Tax Act, 1956 |
Received a VAT notice or assessment order? Share the details — we'll advise on the best path forward.
What our sales tax audit engagement covers
From legacy audit report preparation to assessment defence — end-to-end.
Form 704 — MVAT Audit Report
Preparation and filing of Form 704 (Maharashtra VAT audit report) for open VAT years — turnover reconciliation, ITC verification and CA certificate.
ITC Reconciliation
Matching of input tax credit claimed in VAT returns against purchase invoices, Form 16A declarations and supplier data — critical for assessment defence.
CST & C-Form Reconciliation
Verification of inter-state sale declarations, C-Form and F-Form reconciliation against sales data and VAT returns — for Central Sales Tax assessment closure.
Assessment Defence & Representation
Representation before VAT assessing officers, response to show-cause notices, ex-parte order rectification and filing of VAT appeals where required.
Petroleum & Liquor VAT Audit
Ongoing annual VAT audit for businesses in petroleum distribution and liquor trade — sectors still outside GST and subject to continuing state VAT audit obligations.
GST Transition Reconciliation
Reconciliation of closing stock, ITC carried forward and turnover figures at the GST transition date — required when assessments straddle FY 2016-17 and FY 2017-18.
Our four-stage sales tax audit process
Structured to close legacy liabilities efficiently — with assessment defence built in.
Assessment of open years
We review all open VAT periods, pending notices and assessment orders to map exactly what is outstanding and what the exposure is.
Data gathering & reconciliation
Sales registers, purchase registers, VAT returns, C-Form/F-Form declarations and bank statements gathered and reconciled for the relevant years.
Audit report preparation
Form 704 (or equivalent state form) prepared and reviewed with management — ITC differences and turnover gaps explained and documented before filing.
Filing & defence
Audit report filed with the state VAT authority; representation before the assessing officer; response to notices and, where needed, VAT appeal filing.
Legacy VAT expertise that most firms no longer offer
Pre-GST compliance is a specialist area — we have the experience to close it cleanly.
MVAT Form 704 expertise
We have prepared Form 704 reports across multiple sectors and understand the state VAT department's expectations at assessment.
Assessment representation
We don't just file the report and leave — we represent you before the assessing officer and draft responses to VAT notices.
GST transition knowledge
We understand where pre-GST and post-GST data intersect — critical for assessments covering the transition period.
Fixed fee, written upfront
Scoping call, then a written quote — including the assessment defence scope. No open-ended billing as the assessment drags on.
Petroleum & liquor specialisation
Businesses in sectors that remain under state VAT — petroleum, IMFL — get ongoing annual audit support, not a one-time engagement.
Linked to GST practice
Our GST team and sales tax auditors work together — so the GST-era data needed for legacy reconciliation is already in-house.
Sales tax audit questions dealers and distributors ask us
Have open VAT assessments or an unfiled Form 704?
Share the relevant year, state and the nature of the notice or obligation. You'll get a fixed quote and a partner-level contact within one working day.
