CBIC Asks GST Officers To Consult Board On Law Interpretation While Conducting Audit

The CBIC has asked GST officers conducting audit to refer to the board those cases where they face issues of conflicting interpretation of provisions of the tax law.

In an instruction to field offices, the Central Board of Indirect Taxes and Customs (CBIC) said during the process of audit, a CGST Audit Principal Commissioner may come across a scenario where a taxpayer has followed a prevalent trade practice based on particular interpretation of Goods and Services Tax (GST) law and more than one such interpretation of the law could result in litigation.

"In such cases, it is desirable that the zonal (Pr.) Chief Commissioner make a self-contained reference to the relevant policy wing of the Board i.e. the GST Policy or TRU (Tax research Unit)," the CBIC said, adding that the Commissioner would make the reference before conclusion of the audit and before issuing show cause notice to promote uniformity and avoid litigation.

Moore Singhi Executive Director Rajat Mohan said industry has been facing significant challenges during GST audits and one of the recurring issues has been the inconsistency in interpretations of GST laws by various audit authorities. These inconsistencies have often resulted in conflicting decisions, leading to increased litigation and uncertainty for businesses.

Industries have frequently reported that during audits, differing views among audit officers regarding the applicability of certain provisions have led to undue pressure and prolonged disputes. This not only causes operational disruptions but also increases compliance costs for businesses as they are compelled to engage in prolonged legal battles, Mohan said.

"In response to these concerns, the CBIC's instruction aims to standardize the audit process by requiring Zonal Principal Chief Commissioners to consult with the relevant policy wing of the Board (GST Policy or TRU) before concluding any investigation where multiple interpretations of the law exist.

"This step is crucial in ensuring that a uniform interpretation of the GST laws is maintained across different jurisdictions, thereby reducing the likelihood of unnecessary litigation," Mohan added.

Deloitte India Partner and Leader Indirect Tax, Mahesh Jaising said "this proactive step, applicable to ongoing audits as well, ensures policy alignment, focuses on ease of doing business and reduces unnecessary litigation by maintaining uniformity."