The Commercial Tax Department, Government of Madhya Pradesh, has issued a Standard Operating Procedure (SOP) dated April 23, 2026 for conducting audits under Section 65 of the Madhya Pradesh Goods and Services Tax Act, 2017. The SOP aims to ensure a uniform, transparent, and time-bound audit mechanism, while safeguarding revenue interests and verifying the correctness of returns and records submitted by registered taxpayers.
The need for a revised SOP has arisen following observations that in several audit cases, taxpayers failed to furnish required documents even after issuance of notices, resulting in delays in commencement and completion of audit proceedings within the prescribed timelines. Such delays adversely impact revenue realization and administrative efficiency. The newly issued SOP addresses these concerns through clearly defined procedures and accountability measures.
As per the provisions of Section 65 of the GST Act and Rule 101, tax authorities are empowered to conduct audits at the place of business or departmental offices. A minimum notice period of 15 working days in FORM GST ADT-01 is mandatory before commencement of audit. The audit is required to be completed within three months from the date of commencement, extendable up to six months with recorded reasons.
The SOP emphasizes that audits are a critical statutory process aimed at assessing compliance levels, identifying discrepancies such as non-payment or short payment of tax, incorrect Input Tax Credit (ITC) claims, and wrongful refunds, and encouraging voluntary compliance among taxpayers.
A system-based approach has been introduced for selection and allocation of audit cases through the BO-Web portal. Cases will be identified based on risk parameters, thematic or sectoral analysis, and revenue considerations to ensure targeted and effective audits.
Prior to initiating audit proceedings, officers will undertake a comprehensive pre-audit desk review using available data such as GST returns, e-way bill data, e-invoices, tax payment details, and analytical reports. This risk-based analysis will facilitate focused and evidence-based audits.
The SOP prescribes detailed procedures for issuance of notices and conduct of audit. Upon issuance of FORM GST ADT-01, taxpayers will be provided 15 working days to submit required records. The audit shall be deemed to have commenced from the date on which such records are furnished or when audit proceedings begin, whichever is later.
In cases of non-compliance, a structured escalation mechanism has been introduced. This includes issuance of reminder notices and initiation of penalty proceedings under Section 122(1)(XVII). Continued failure to furnish documents may lead to repeated penalty actions through statutory forms such as DRC-01 and DRC-07.
The audit process will culminate in preparation of a Draft Audit Report (DAR), followed by issuance of the final audit findings in FORM GST ADT-02 along with a detailed speaking order specifying tax, interest, and penalty liabilities, if any.
Strict timelines have been prescribed for each stage of the audit process, from allocation of cases to issuance of final reports. The SOP also fixes accountability for delays, ensuring responsibility at all levels of audit and supervisory officers.
In line with digital governance initiatives, the SOP mandates that audit proceedings shall be conducted predominantly through online platforms and virtual modes, minimizing physical interface and enhancing ease of compliance.
The implementation of this SOP is expected to improve audit efficiency, enhance transparency, ensure timely completion of audits, and strengthen the overall revenue administration framework in the State.
All officers have been directed to strictly adhere to the SOP and conduct audit proceedings in a lawful, evidence-based, and result-oriented manner. Any negligence or delay in compliance will entail personal accountability.
The Complete SOP can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/04/Madhya-Pradesh-GST-Standard-Operating-Procedure-SOP-April-23-2026.pdf
