Haryana GST Audit To Cover All the Financial Year till Current Financial Year – How to Prepare

Haryana GST Update: New Guidelines for Multi-Year Audits Under Section 65

The Excise & Taxation Department of Haryana recently issued a significant memorandum that changes how Goods and Services Tax (GST) audits will be conducted across the state. Dated November 29, 2025, this circular provides specific instructions to all tax authorities regarding the scope and duration of audit cases.

If you are a business owner or tax professional operating in Haryana, understanding these changes is crucial for maintaining compliance and preparing for potential department reviews.

The Shift to “Comprehensive” Audit Periods

The core of the new directive, issued under Memo No. 1218 / GST-II, centers on the duration of audits conducted under Section 65 of the Haryana Goods & Services Tax (HGST) Act, 2017. (Copy Attached)

Previously, audits might have focused on specific, isolated financial years. However, the department has now mandated that:

• Multi-Year Scope: Any audit case selected under Section 65 must now cover a comprehensive period.
• Continuity: The audit will include the originally selected year plus all subsequent financial years up to the current financial year.

What This Means for Taxpayers

The objective behind this change is to ensure a thorough and holistic review of a taxpayer’s activities. Instead of looking at a “snapshot” of one year, the department aims to track compliance trends over time.

During these expanded audits, officers are instructed to examine several key areas:

• Total Compliance: A full review of statutory requirements applicable during the entire period.
• Tax Liability: Ensuring all taxes owed across multiple years have been correctly calculated and paid.
• Input Tax Credit (ITC): A deep dive into the ITC availed to ensure it aligns with legal provisions over the years.
• Documentation: Officers will review all relevant records, returns, statements, and financial documents pertaining to the entire multi-year period.

Strict Enforcement for Field Formations

The Department has made it clear that these instructions are not optional for tax officers. All field formations—including Additional, Joint, and Deputy Excise & Taxation Commissioners—are directed to adhere strictly to these timelines and provisions.

The circular explicitly states that any deviation from these directions will be viewed seriously by the competent authority

Preparing for a Comprehensive Audit

Given this move toward more extensive reviews, businesses should ensure their records for all financial years since the implementation of GST are organized and easily accessible. A “holistic” audit means that a discrepancy found in one year could lead to closer scrutiny of subsequent years.

Based on the instructions provided in the Haryana Excise & Taxation Department circular , here is a checklist of the specific records and focus areas you should prepare for a multi-year GST audit under Section 65 of the HGST Act.

Audit Preparation Checklist

As per the official memo, the scope of examination includes all documents pertaining to the entire selected period, up to the current financial year.

1. Core Financial Records

Officers are directed to review all financial documents to verify tax liability.

• Financial Statements: Ensure you have audited Balance Sheets and Profit & Loss accounts for every financial year within the audit period.
• Trial Balances: Keep year-wise trial balances ready to reconcile with your GST returns.
• Ledgers: Detailed purchase and sales ledgers, along with cash and bank books.

2. GST Returns and Statements

The audit will involve a comprehensive review of all filed returns.

• GSTR-1 & GSTR-3B: Copies of all monthly or quarterly returns filed during the multi-year period.
• GSTR-9 & 9C: Annual returns and reconciliation statements for each year.
• Statements: Any other statutory statements or declarations filed with the department.

3. Input Tax Credit (ITC) Documentation

A “holistic review” of ITC availed is a primary objective of this audit directive.

• Purchase Invoices: All tax invoices, debit notes, and credit notes supporting the ITC claimed.
• ITC Reconciliation: Documentation showing reconciliation between ITC claimed in GSTR-3B and credit available in GSTR-2B.
• Reversal Records: Records of any ITC reversals made during the period (e.g., for exempt supplies or non-business use).

4. Statutory Compliance Records

The department aims to ensure adherence to all statutory requirements.

• E-way Bills: Records of e-way bills generated for the movement of goods.
• Registration Documents: Any amendments made to the GST registration during the audit period.
• Tax Payment Receipts: Proof of payment for all tax liabilities, including interest or penalties paid.

How to Prepare

Phase 1: Immediate Actions (Upon Receipt of Notice)

The department must provide at least 15 working days’ notice via Form GST ADT-01.

• Verify the Scope: Check the starting financial year mentioned in the notice. Remember, the audit will automatically extend to the 2025–26 financial year.
• Form an Audit Team: Designate a point person (or your CA) to handle all communication. The circular warns that field officers will take “serious view” of deviations, so professional handling is key.
• Consolidate Locations: If you have multiple business places in Haryana, determine if the audit will be at your office or the department’s office (as per Section 65(2)).

Phase 2: The “Multi-Year” Reconciliation

The core of the new directive is a “holistic review.” You must ensure your numbers tell a consistent story across years.

• GSTR-1 vs. GSTR-3B vs. Books: For every year in the audit period, reconcile your outward supplies. Any discrepancy in 2023 could lead the auditor to look for the same pattern in 2025.
• ITC Reconciliation (2B vs. 3B): This is a high-priority area. Ensure that Input Tax Credit (ITC) claimed matches the auto-populated GSTR-2B for the entire period.
• Year-to-Year Carryforwards: Check that closing balances of one financial year match the opening balances of the next in your Electronic Credit Ledger.

Phase 3: Statutory & Financial Documentation

Gather the following for the entire period (e.g., 2022 to 2026):

1. Audited Financials: Balance Sheets, P&L Accounts, and Director’s Reports.
2. Trial Balances: Detailed year-wise trial balances.
3. Income Tax Returns (ITR): Auditors often compare turnover reported in ITR-6/Form 26AS with GST turnover.
4. E-Way Bill Logs: Match e-way bill data with your sales registers to ensure no “off-the-books” movement of goods.

Phase 4: Risk Mitigation (The “Red Flag” Check)

Before the auditor arrives, check for these common triggers mentioned in recent Haryana tax guidelines:

• RCM Compliance: Ensure tax on Reverse Charge Mechanism (RCM) items (like GTAs, legal fees, or security services) has been paid and then claimed as ITC.
• HSN Accuracy: Verify that 6-digit HSN codes are correctly reported, especially after the latest 2025-26 classification updates.
• 180-Day Rule: Ensure ITC has been reversed for any purchase invoices where payment to the vendor exceeded 180 days.

Here are the specific areas to check in depth, categorized by the circular’s requirements and standard audit scrutiny parameters:

1. Output Tax Liability (Accuracy of Payments)

The circular explicitly requires verifying “tax liability”. In-depth checks include:

• GSTR-1 vs. GSTR-3B Mismatches: Ensure that the turnover and tax reported in your detailed GSTR-1 match the summary payments made in GSTR-3B.
• HSN/SAC Classification: Audit the HSN codes used for all products/services. Misclassification often leads to paying a lower rate (e.g., 12% instead of 18%), which auditors will view as short-payment.
• Reverse Charge Mechanism (RCM): Review expense ledgers for payments to GTA (transporters), legal fees, and security services. These often have missing RCM payments.
• Place of Supply: Verify if Inter-state (IGST) vs. Intra-state (CGST/SGST) taxes were correctly applied, especially for services where the location of the recipient and provider can be complex.

2. Input Tax Credit (ITC) Verification

The department is focused on “ITC availed”. You must verify:

• GSTR-2B Reconciliation: Every rupee of ITC claimed in GSTR-3B must be supported by an invoice appearing in your GSTR-2B.
• Blocked Credits (Section 17(5)): Ensure ITC has not been claimed on ineligible items like motor vehicles (with exceptions), food and beverages, club memberships, or personal expenses.
• Rule 42 & 43 Reversals: If you make both taxable and exempt supplies, you must have a documented calculation for the proportional reversal of common ITC.
• The 180-Day Rule: Check that you have paid your suppliers within 180 days from the invoice date; if not, the ITC must be reversed with interest.

3. Financial Document Reconciliation

Auditors will compare your “returns” against your “financial documents”.

• Income Tax (ITR) vs. GST: Compare the turnover reported in your audited Profit & Loss account and Form 26AS with your GSTR-9/9C. Any significant variance is a primary “red flag” for auditors.
• Trial Balance Scrutiny: Auditors often scan the “Other Income” and “Miscellaneous Expenses” heads in your Trial Balance to find hidden taxable supplies or RCM liabilities.

4. Statutory Compliance & Records

“Other statutory requirements” mentioned in the memo typically include:

• E-way Bill Matching: Use the E-way bill portal data to ensure every significant movement of goods has a corresponding tax invoice reported in GSTR-1.
• Stock Register Accuracy: Maintain a clear record of opening stock, receipts, supplies, and goods lost or destroyed. Discrepancies here can lead to a “Best Judgment Assessment”.
• Registration Details: Ensure the GST certificate is displayed at your place of business and that all “Additional Places of Business” (like warehouses) are officially added to the registration.

CA Ankit Gulgulia (Jain)

FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)

Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.