Maharashtra GST Audit Selection Guidelines for FY 2023-24: New Risk Assessment Framework, Revenue Thresholds and Key Implications for Taxpayers
Maharashtra GST Audit Selection Guidelines for FY 2023-24 | Instructions dated 30 October 2026 | Section 65 of the MGST Act
The Maharashtra State Tax Department has issued important instructions dated 30 October 2026 concerning the selection of GST audit cases for Financial Year 2023-24. The instructions, issued by the Office of the Commissioner of State Tax, Maharashtra, mark a significant shift in the approach towards GST audit selection. The Department has moved from a conventional risk-based selection approach to a more structured risk assessment-based selection mechanism, with greater emphasis on detailed desk review, identification of specific audit issues, quantification of revenue risk and centralised approval.
The instructions have been issued in the backdrop of deficiencies observed in the conduct and supervision of GST audits for FY 2022-23. The Department has identified several shortcomings, including inadequate desk reviews, unfocused requisition of documents, selection of cases involving insignificant revenue risk, delays in audit commencement and inadequate supervisory involvement.
For taxpayers, GST practitioners and tax professionals in Maharashtra, these instructions are particularly significant as they provide greater clarity regarding the manner in which audit cases are proposed, evaluated and finally selected.
1. Background: Why Has Maharashtra Changed the GST Audit Selection Process?
GST audits conducted by State Tax authorities are governed by Section 65 of the GST Act. The existing framework provides for a two-tier mechanism for selecting audit cases, involving centrally selected cases based on data analytics and cases recommended under the Local Importance category based on intelligence available with field formations.
However, the Department’s review of audit performance for FY 2022-23 revealed several deficiencies.
The major shortcomings identified include:
– Desk reviews and audit plans were often prepared without adequate diligence.
– Specific audit issues were not identified in advance.
– Sectoral analysis and examination of past audit cases were frequently neglected.
– Audit officers requisitioned records and books of accounts without establishing their relevance to identified audit issues.
– Taxpayers were sometimes asked to undertake verification activities that were expected to be performed by the audit officers themselves.
– Local Importance category proposals were often based merely on discrepancies in return figures.
– Several cases involving insignificant revenue risk, particularly mismatches below ₹5 lakh, were recommended for audit.
– Audits were commenced with delays, resulting in last-minute Audit Monitoring Committee proceedings.
– Deputy Commissioners in charge of Audit Units were not sufficiently involved in the audit process.
To address these concerns, the Department has introduced a more focused selection mechanism designed to improve audit quality, efficiency and revenue outcomes.
2. Risk-Based Selection Replaced by Risk Assessment-Based Selection
One of the most important changes introduced by the instructions dated 30 October 2026 is the shift from risk-based selection of audit cases to risk assessment-based selection.
Under the modified framework, centrally selected cases will not be directly assigned to particular audit desks for conducting audits.
Instead, a pool of centrally selected cases having verifiable potential risks will be made available to the respective Audit Divisions.
The Audit Divisions will undertake a detailed desk review of these cases, identify specific audit issues and assess the revenue risk involved. Only after such assessment will proposals be prepared for recommending cases for audit.
This approach seeks to ensure that the selection of a taxpayer for audit is not merely based on the existence of a risk indicator but is supported by a detailed examination of the underlying facts and potential revenue implications.
In other words, the focus is now on identifying the actual audit issues before selecting the taxpayer for audit.
3. Detailed Desk Review Before Selection of GST Audit Cases
The new guidelines place considerable emphasis on the quality of desk review.
Before recommending any case for audit, the Audit Units are required to undertake a preliminary analysis of the available information and risk indicators.
The analysis is expected to cover:
– Sectoral trends and industry-specific patterns.
– Past audit cases involving similar taxpayers.
– Intelligence inputs available with the Department.
– Data patterns and risk indicators provided by the Economic Intelligence Unit (EIU).
– Risk analysis available on the BIFA portal.
– Information available on the E-Way Bill Management Information System (EWB MIS) portal.
– Show Cause Notices (SCNs) and cases booked for earlier periods.
– Supply chain analysis, wherever relevant.
– Other relevant open-source information.
The findings of this analysis must form the basis for identifying specific audit issues, assessing the associated revenue risk and preparing the audit selection proposal.
This is a welcome development because a meaningful desk review can help distinguish genuine revenue risks from routine reporting differences or inconsequential discrepancies.
4. Minimum Revenue Risk Threshold for GST Audit Selection
The guidelines prescribe specific revenue risk thresholds for recommending cases for audit.
The prescribed thresholds are as follows:
Region| Revenue Risk Threshold
Mumbai Metropolitan Region (MMR)| Exceeding ₹2 crore
Pune Metropolitan Region (PMR)| Exceeding ₹2 crore
Rest of Maharashtra| Exceeding ₹1 crore
Importantly, the revenue risk must arise from parameters other than routine return scrutiny parameters.
Thus, cases involving revenue risk below the prescribed threshold would ordinarily not qualify for recommendation under the new framework, unless the case is otherwise covered by an applicable selection mechanism.
The thresholds are intended to ensure that audit resources are deployed towards cases involving substantial revenue implications.
It is also important to note that the prescribed threshold is a revenue-risk criterion for recommending cases for audit. It should not be confused with the determination of any actual tax liability of the taxpayer.
5. Routine Return Scrutiny Issues Cannot Be the Sole Basis for Audit Selection
Another significant feature of the new instructions is the restriction on selecting audit cases solely on the basis of routine return scrutiny parameters.
The Department has clarified that cases should not be recommended for audit merely because of discrepancies ordinarily covered under return scrutiny.
However, such discrepancies may be included as additional issues in an audit proposal where they are relevant and accompanied by other specific audit issues warranting comprehensive verification.
Further, if any risk identified during the desk review remains unaddressed and the case is not finally selected for audit, the matter must be referred to the concerned jurisdictional officer for appropriate action.
This distinction between return scrutiny and comprehensive audit is important.
Return scrutiny is generally intended to examine particular discrepancies in the returns filed by a taxpayer. A GST audit, on the other hand, involves a more comprehensive verification of records and compliance relating to the identified audit issues.
The new framework seeks to avoid unnecessary duplication of proceedings.
6. Central Selection Committee: A New Layer of Scrutiny
The selection of audit cases will be subject to scrutiny and approval by the Central Selection Committee.
The process is broadly as follows:
1. The centrally selected pool of cases is made available to the Audit Divisions.
2. Audit Units undertake detailed desk reviews.
3. Specific audit issues and associated revenue risks are identified.
4. Audit Units prepare proposals for recommending cases.
5. The Joint Commissioner (Audit) recommends cases to the Central Selection Committee.
6. Recommendations are submitted through the PRAISE system.
7. The concerned Audit Division makes a presentation before the Central Selection Committee.
8. The Committee examines the merits of each proposal and approves or rejects the selection.
The Committee is required to ensure that proposals are complete, identify specific and clearly articulated audit issues, and substantiate the revenue risk through supporting analysis.
The Central Selection Committee will meet every Tuesday and Friday to examine proposals submitted by the Audit Units.
The involvement of the Committee is expected to bring greater uniformity and objectivity to the selection process.
7. Only Approximately 10% of Cases from the First Lot to Be Recommended
The instructions provide that each Audit Division shall recommend approximately 10% of the cases from the first lot for selection for audit.
The recommendation is to be based on the findings of the desk review and the merits of the identified risk areas.
The first lot comprises 3,258 cases distributed among the respective Audit Divisions and Audit Units for desk review.
This provision indicates that the Department intends to undertake a selective and focused audit exercise rather than subjecting every case identified through data analytics to an actual audit.
The final selection will depend upon the quality of the desk review and the strength of the identified revenue-risk areas.
8. GST Audit Notice in FORM GST ADT-01: Documents Must Be Relevant
The guidelines also address the scope of documents to be requisitioned from taxpayers.
The Joint Commissioner (Audit) is required to ensure that a draft FORM GST ADT-01 is prepared and submitted along with the proposal for selection of the case for audit.
The notice must specifically identify the records and documents required for verification of the identified risk areas.
The documents requisitioned must:
– Be directly relevant to the audit issues identified during the desk review.
– Be specifically mentioned in the audit selection proposal.
– Be commensurate with the objectives of the proposed audit.
The Department has expressly criticised the practice of routinely calling for all records and books of accounts without establishing their linkage to identified audit issues.
This instruction is particularly relevant for taxpayers who receive broad or extensive document requisitions during audit proceedings.
A focused audit should ordinarily involve a focused requisition of records.
9. Audit Visits: Approval Mechanism and 30% Limit
The guidelines also prescribe an approval mechanism for audit visits to taxpayers’ premises.
The Zonal Additional Commissioner concerned is authorised to approve audit visits up to 30% of the total cases selected for audit in that Zone.
Where the proposed audit visits exceed this 30% limit, the proposal must be submitted to the Central Committee for approval.
No audit visit in such cases can be undertaken without the requisite approval.
The Joint Commissioner concerned may issue the authorisation for a visit only after obtaining the necessary approval.
This provision seeks to regulate physical audit visits and ensure that such visits are undertaken only where justified by the identified audit risks.
10. Cross-Zone Allocation of Cases in MMR and PMR
To ensure objective and balanced selection, the guidelines provide for allocation of the initial pool of cases among Audit Divisions on a cross-zone or criss-cross basis.
Under this arrangement, each Audit Division will receive cases pertaining to another Zone as per the prescribed allocation arrangement.
However, this cross-zone allocation mechanism is applicable only to the Mumbai Metropolitan Region and Pune Metropolitan Region.
The objective is to ensure balanced selection and prevent undue concentration of audit cases in a particular zone.
11. Timelines for GST Audit Selection
The instructions also prescribe specific timelines for submitting recommendations.
The Joint Commissioner (Audit) is required to ensure that recommendations are submitted on PRAISE within 15 days from the date on which the pool of cases is made available on PRAISE.
Further, the Audit Divisions are required to complete the desk review exercise and submit recommendations within 15 days from the issuance of the instructions.
The concerned Deputy Commissioner is required to make the presentation before the Central Selection Committee.
These timelines are intended to avoid delays in the commencement of audits and ensure that the selection process is completed in a timely manner.
12. What Should GST Taxpayers in Maharashtra Do?
The new guidelines do not mean that taxpayers can relax their GST compliance practices. On the contrary, taxpayers should continue to maintain complete and accurate records.
Businesses should consider undertaking a comprehensive internal review of their GST compliance, particularly in relation to:
– Reconciliation of GSTR-1, GSTR-3B and books of accounts.
– Input Tax Credit (ITC) reconciliation with relevant supplier and recipient records.
– Verification of tax liability and payment.
– E-Way Bill and supply-chain related discrepancies.
– Classification of goods and services under HSN/SAC.
– Related-party transactions and valuation issues.
– Compliance with applicable GST provisions.
– Previous audit observations and outstanding issues.
Businesses operating in sectors involving significant transactions should ensure that their GST records are properly organised and readily available.
Where an audit notice is received, taxpayers should carefully examine the audit issues identified and provide the relevant records and explanations.
A well-documented response supported by reconciliations and appropriate evidence can help facilitate a smoother audit process.
Conclusion: A Welcome Move Towards Focused and Meaningful GST Audits
The Maharashtra State Tax Department’s instructions dated 30 October 2026 represent an important step towards improving the quality of GST audit selection.
The shift from risk-based selection to risk assessment-based selection, the prescription of revenue-risk thresholds, the emphasis on detailed desk reviews and the requirement for centralised approval are all intended to make the audit process more focused and effective.
The restriction on routine requisition of documents is particularly noteworthy. An audit should not become an exercise in collecting every possible record from a taxpayer. It should be a structured examination of specific issues supported by relevant evidence.
The success of this framework will ultimately depend upon its implementation.
For taxpayers, the message remains clear: maintain proper GST records, undertake regular reconciliations and ensure that identified discrepancies are addressed promptly.
For the Department, the challenge is to ensure that the new framework results in meaningful audits, better revenue outcomes and a more efficient compliance environment.
A focused GST audit is not merely a tool for revenue collection; it is also an opportunity to promote better compliance, greater transparency and a more balanced relationship between the taxpayer and the tax administration.
Maharashtra GST Audit Selection Guidelines for FY 2023-24 dated 30 October 2026 introduce a new risk assessment-based audit framework, revenue thresholds of ₹2 crore for MMR and PMR and ₹1 crore for the rest of Maharashtra, central committee approval, desk review requirements and focused GST audit notices.
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Maharashtra GST Audit Guidelines 2026: Big Shift in Audit Selection! ₹2 Crore / ₹1 Crore Revenue Risk Thresholds Introduced
Source: Instructions No. CST/ACST/HQR-05/GST-Audit/2023-24/Guidelines/B.85 dated 30 October 2026, issued by the Office of the Commissioner of State Tax, Maharashtra.
The copy of the order is as under:
FINAL-GST_AUDIT_SELECTION-GUIDELINES-FOR-FY-_2023-24-30.10.2026
