The Classic Partners LLP

VAT Annual Audit Services

Statutory VAT annual audit services under State VAT Acts — Section 61 of the Maharashtra VAT Act with Form 704, and analogous provisions in Karnataka, Tamil Nadu, Delhi, and other States. Our Chartered Accountants reconcile your VAT returns with audited books, verify ITC and inter-State sales, and certify the prescribed audit form for filing with the State Commercial Tax Department.

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What is a VAT Annual Audit?

A VAT annual audit is a statutory audit prescribed under various State VAT / Sales Tax Acts, applicable to dealers above a prescribed turnover threshold. The most well-known is Section 61 of the Maharashtra Value Added Tax Act, 2002, which requires a VAT audit in Form 704 to be conducted by a Chartered Accountant or Cost Accountant where turnover crosses the prescribed limit (currently ₹1 crore, subject to revision).

Although GST has replaced most State VAT, the VAT annual audit continues to be relevant for dealers in petroleum products and alcoholic liquor for human consumption — goods that remain outside the GST net — and for legacy pre-GST audits that are still being completed or assessed. The audit reconciles the VAT returns with audited financial statements, verifies the correctness of output tax, input credit, exemptions, and inter-State transactions, and certifies compliance under the relevant State VAT Act.

Who Requires a VAT Annual Audit?

Petroleum dealers (petrol pumps, oil marketing companies) above the State VAT audit threshold.
Liquor manufacturers, distributors, and large liquor retailers above the threshold.
Composite dealers handling VAT-taxable goods alongside GST supplies.
Dealers with legacy pre-GST VAT periods still pending audit or assessment.
Multi-State dealers — separate VAT audit may be applicable in each State based on State-wise turnover.

What Our VAT Audit Covers

Turnover Verification

Reconciliation of VAT-return turnover with audited financial statements and books of account.

Output Tax Audit

Verification of rate-wise output VAT, exemptions, and treatment of branch / stock transfers.

Input VAT Credit

Audit of input VAT credit availed against statutory conditions and supplier compliance.

Inter-State & CST

Verification of CST returns and reconciliation of C-Forms / F-Forms / E-1 / E-2.

Refund & Set-Off

Audit of VAT refunds claimed and unutilised credit carried forward.

Form 704 / State Form

Preparation and certification of the prescribed audit form for filing with the department.

State-Wise VAT Audit Provisions (Illustrative)

Maharashtra: Section 61 read with Form 704 of the Maharashtra VAT Act, 2002 — audit by CA / CMA where turnover exceeds the prescribed limit.
Karnataka: Section 31(4) of the Karnataka VAT Act, 2003 — audit by CA where turnover exceeds the prescribed limit.
Gujarat: Section 63 of the Gujarat VAT Act — analogous statutory audit.
Delhi: Section 49 of the Delhi VAT Act, 2004 — audit by CA above threshold.
Punjab, Haryana, Tamil Nadu, West Bengal and others — State-specific audit / assessment provisions.
Thresholds, forms, and due dates are revised periodically — we track current requirements for every engagement.

VAT Audit Procedure

Step 1 — Engagement & scoping: identification of applicable State VAT Acts and audit thresholds.
Step 2 — Data request: structured data request covering VAT returns, books, sales / purchase registers, stock records, and CST declarations.
Step 3 — Reconciliations: turnover, output VAT, input VAT, branch transfers, and refunds reconciled with audited books.
Step 4 — Substantive testing: sample testing of invoices, declarations, and exempt sales.
Step 5 — Form preparation: drafting of Form 704 (Maharashtra) or analogous State audit form.
Step 6 — Filing & certification: upload on State portal, certification by partner, and acknowledgement preserved for assessment.

Why Choose The Classic Partners

Specialist post-GST VAT audit capability for petroleum and liquor businesses.
Multi-State VAT audit coverage under one engagement.
Integrated with VAT return filing — audit findings inform the next return cycle.
Continuity to assessments and appeals — same team can defend findings before the VAT department.

Frequently Asked Questions

Is VAT annual audit still applicable after GST?

Yes, for dealers in goods that remain outside GST — primarily petroleum products and alcoholic liquor for human consumption. These dealers continue to operate under the relevant State VAT Acts, and the statutory VAT audit (e.g. Form 704 under MVAT Act) continues to apply above the prescribed turnover threshold.

What is the turnover threshold for VAT audit?

Each State VAT Act prescribes its own threshold. Under Section 61 of the Maharashtra VAT Act, the audit is currently applicable to dealers with turnover exceeding ₹1 crore. Other States have their own limits, which are revised from time to time.

Who is eligible to conduct a VAT audit?

Most State VAT Acts require the audit to be conducted by a Chartered Accountant or Cost Accountant in practice. In Maharashtra, for instance, the Form 704 audit is conducted by a CA / CMA holding a Certificate of Practice.

What is Form 704?

Form 704 is the prescribed VAT audit report under the Maharashtra VAT Act, 2002. It contains certification by the CA on turnover, output VAT, input VAT credit, exemptions, inter-State sales, refunds, and reconciliation with audited financials. It is filed online with the Maharashtra Commercial Tax Department.

What happens if VAT audit is not filed?

Non-filing of the VAT audit attracts a penalty under the relevant State VAT Act — typically 0.1% of turnover or a fixed sum, whichever is higher, subject to State-specific provisions. It can also trigger detailed scrutiny and best-judgement assessment by the VAT officer.

How does VAT audit interact with GST audit?

The two operate in parallel for composite dealers. The VAT audit covers VAT-taxable supplies (petroleum, liquor), while the GST audit / GSTR-9C covers GST-taxable supplies. Where the same legal entity deals in both, separate audit / certification streams run on the GST and VAT sides.

CA-Certified VAT Audit, On Time

Get statutory VAT audit under MVAT / KVAT / DVAT / GVAT and other State VAT Acts.