Inspection Under GST
Gaurav Yadav

Updated on February 9th, 2024

The GST department holds the power to carry out on-site inspection of the business to ensure that the business is fully compliant with the GST laws. In order to face such inspection under GST, it is necessary for the businesses to keep their records clean and unambiguous and also have an internal GST litigation management system to handle all the GST compliance related queries.

In the later part of this article, we will tell you a simple way as of how you can manage all your GST notices right from keeping track of the reply due dates or what should be the content of your reply and many other things can be made easy with automation.

What are on-site inspection under GST? Should I be worried?

Prepare for Inspection Under GST

The GST authorities carry out on-site inspection under GST to confirm the accuracy and completeness of information provided by taxpayers in their documents, records, and GST return filing. These inspections may also include examination of physical assets and stocks, and identification of any potential tax evasion or fraud. GST department may carry out such Inspections based on specific intelligence or risk analysis, or as part of routine checks. A team of GST officers typically conduct these inspections and may request access to various documents, equipment, and facilities owned by the taxpayers.

During the inspection, the GST officers can collect samples from the taxpayer’s premises and can also record statements from the taxpayer and his staff. The officers have a right to confiscate any goods or documents that deem to be suspected by the GST officer. In short, GST officers will be looking for cases of violation of the GST laws throughout this inspection.

Should the business worry about this inspection?

Prevention is always better than cure. Businesses are advised to make sure that their every GST return filing is clearly recorded. They should NOT claim any ineligible Input Tax Credit under GST and should respond to the GST notices received on time and with accurate justifications.

How should Taxpayers Prepare for on-site GST inspections?

There are simple steps of hygiene that a business can follow in order to stay 100% compliant with the GST laws and easily sail through such on-site inspection under GST:

a. Accurate Books of Accounts / Purchase Records

  • The first and foremost step is to keep your books of accounts including transaction records, payment receipts, purchase records up to date and as clear as possible.
  • Also, Purchase records are most essential for ITC reconciliation which enables claiming of eligible ITC.


Importance of Purchase Records vs GSTR-2B Reconciliation:

Reconciliation of GSTR-2B against your Purchase records becomes very important for the purpose to claim maximum ITC.  Any mismatch between these two data clearly indicates that either your supplier have made an error or you have made an incorrect entry. In either of the cases, your ITC gets blocked.

Claiming of ineligible ITC can attract GST notices from the department and your business may incur heavy penalties.

b. Availability of GST related documents

  • Have all your GST-related documents ready, such as your GST registration certificate, payment challans, and filled GST returns.
  • Make sure that all invoices and documents are compliant with GST law and contain all necessary information.

c. Carrying out in-house GST Audit

  • In-house GST audit becomes very important for the businesses with multiple GST registrations. For such medium sized enterprises, the probability of errors goes up and thus GST audit is the only way to identify such errors.

We do have the separate article for in-house audit under GST
5 reasons to conduct in-house audit

  • The process of conducting a GST audit goes beyond merely verifying compliance requirements. It involves a thorough examination of previously filed GST returns, identification of any potential issues or warning signs, and taking steps to mitigate the risk of future penalties.

To learn more about GST Audit Tool, click on the link.

d. Review and evaluate your GST registration

  • Taxpayers are advised to ensure that their registration certificate is current, precise, and accurately reflects their current business activities.
  • Taxpayers must also make certain that they have registered for all applicable GST registrations, including GST Composition Scheme, GST TDS, GST ISD, and GST E-Commerce, where appropriate.

e. Establish a detailed list of inventory and assets

  • Taxpayers must create a comprehensive list of their goods and assets, such as raw materials, finished products, equipment, vehicles, and real estate.
  • Additionally, they must maintain a record of physical stock movements, such as items received, dispatched, and transferred, and the related invoices and documents.

f. Prepare for IT system accessibility

Taxpayers must grant access to their IT systems, including accounting software, ERP systems, databases, and servers, and ensure that GST officials have all necessary login credentials, passwords, and authorization levels. They should also have a data backup and a plan to restore it in the event of data loss or system failure.

g. Verify for any ongoing legal proceedings or disputes

Taxpayers should verify whether they have any ongoing legal proceedings or disputes with the GST authorities, such as assessments, audits, investigations, or appeals, and take necessary steps to resolve them. Taxpayers must also examine their tax payment history and ensure that they have paid all due taxes, interest, and penalties, if any.

Internal GST Auditing is the key!

Internal audit in GST

In order to prepare your business for any GST inspections, it I essential to have internal checks and balances in place to help you identify red flags in the GST returns and carry out a flawless reconciliation that ensures you claim only the eligible Input Tax Credit.

An internal GST audit gives:

  • A summarized picture of the entire financial year’s GST returns & related activities.
  • Identifies red flags for the differences in GST paid and the actual GST liability.
  • Identifies GST Input Tax Credit leakages and ensures optimal utilization of the ITC.
  • Points out the pending GST liabilities so that the decision-makers can act on it and save revenue drain which goes into paying fines and late fees.

Benefits of using a GST Audit tool like GSTHero

  • Provides an Unbiased review of your business
  • All units/depots are brought under common review
  • Identify Input Tax Credit leakages for all your business units
  • Calculate the total accumulated ITC in all branches combined
  • Internal monitoring of inward & outward monetary flow of your business
  • Root-level reporting of your GST return filing activities
  • Identify & mitigate risk exposures that may invite GST audit by department


By following the simple steps mentioned in the article, businesses can prepare themselves for the on-site GST inspection.

It's important for businesses to have a regular diagnostic system in place to prepare for GST audits by the government. To achieve this, they can use reliable GST audit software that not only consolidates their data but also saves them time and money.

It's worth noting that relying solely on their ERP system is not enough for businesses to review their GST filing data. Therefore, having separate GST audit software is crucial for any business with one or more GST registrations.

Stay updated; stay ahead!

Until the next time…..

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Gaurav Yadav

About the author

Gaurav is an Engineer by training with a deep interest in Economics & Finance. He has been associated with the Fin-Tech industry for quite some time now. He writes for GSTHero for topics including GST Compliance, GST Structure, etc & aims to break down complicated technical jargon into simple terms for the taxpayers.

His expertise includes GST Laws, Corporate Finance & Macro-Economics.

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