VAT Audit Purpose and Objective

• VAT audits ensure correct assessment and payment of Value Added Tax by registered dealers
  
• Conducted to detect under-reporting, tax evasion, or suppression of sales and purchases
  
• Audits help verify the correctness of returns, books of accounts, and tax calculations
  
• They serve as a compliance measure to maintain transparency and accountability
  
• Aimed at strengthening the revenue administration and detecting irregularities

Eligibility and Selection Criteria for VAT Audit

• Dealers crossing specific turnover thresholds are mandatorily selected for audit
  
• Some states follow risk-based or random selection for detailed audit scrutiny
  
• Audits may also be triggered due to mismatches in returns or suspicious transactions
  
• Non-filers or late filers of VAT returns are also subject to scrutiny
  
• Turnover limits for audit differ by state (e.g., ₹1 crore or more in some states)

Documents and Records Required During VAT Audit

• All VAT returns filed during the period under audit must be presented
  
• Books of accounts like sales and purchase registers, ledgers, stock records are required
  
• Supporting documents such as tax invoices, debit/credit notes, challans must be provided
  
• Details of input tax credit availed and tax payments made are scrutinized
  
• Additional records like audit report, balance sheet, and profit & loss account may be asked

Procedure Followed During VAT Audit

• Audit notice is served in advance by the tax officer or auditing authority
  
• Dealers are required to appear in person or through an authorized representative
  
• Field visits to business premises may be conducted for physical verification
  
• Audit findings are documented in a report with observations and discrepancies
  
• Opportunity is given to the dealer to explain or justify any irregularities found

Post-Audit Action and Consequences

• If discrepancies are confirmed, demand notices are issued for tax, interest, and penalties
  
• Dealers may face penal action or prosecution for willful suppression or fraud
  
• Assessment orders based on audit findings are passed under relevant VAT provisions
  
• Audit reports are preserved as official records for further reference or appeal
  

Timely cooperation during audit helps avoid legal disputes and ensures smoother compliance