Madhya Pradesh Govt Tightens GST Audits with New Guidelines, Strict Deadlines and Penalties

The Commercial Tax Department of the Madhya Pradesh Government has issued a Standard Operating Procedure (SOP), outlining detailed instructions for conducting GST audits under Section 65 of the Madhya Pradesh Goods and Services Tax (MPGST) Act, 2017.

An audit is a mandatory statutory process conducted by the officials of tax authorities to verify the correctness of returns, ensure proper tax compliance, and protect government revenue.

This action has been taken by the Madhya Pradesh government because it had been noticed in several audit cases that the following

• Even after issuing notices, taxpayers do not submit required records/documents.
• The “Commencement of Audit” gets delayed,
• Audits are not completed within the prescribed 3-month timeline
• This leads to delay in revenue collection and affects administrative efficiency.

As per the provisions of Section 65 of the Madhya Pradesh Goods and Services Tax (MPGST) Act, 2017, the commissioner or authorised officer conducts an audit of a registered taxpayer, either at the taxpayer’s place of business or at the department office. The condition is that the tax authorities, before conducting any audit, must issue a minimum of 15 working days’ prior notice (FORM GST ADT-01).

Further, the tax authorities must complete the audit within 3 months from the date of commencement (it is the date when documents are submitted OR the audit actually begins, whichever is later). This time limit can be further extended up to 6 months with reasons recorded. During the process, tax officials examine books of accounts, GST returns (GSTR forms), tax payments, input tax credit (ITC) and other related financial records. The team conducting an audit under the MPGST Act, 2017, can include a joint commissioner, deputy/assistant commissioner, state tax officer and other supporting officers.

If the taxpayer does not provide the required documents to the concerned tax officials conducting the audit, in that case, reminder notices are issued, followed by penalty proceedings initiated against the taxpayer under Section 122(1)(XVII). Repeated non-compliance may lead to multiple penalties.

After completion of the audit, a draft audit report is prepared and approved by senior officers. The final findings are communicated through Form GST ADT-02 within 30 days of audit completion. If issues such as non-payment, short payment, wrong ITC, etc., are found, immediate action will be taken under Sections 73/74/74A. The SOP has mandated virtual mode for audit-related hearings to ensure efficiency and transparency.

Refer to the official SOP for complete information.