For GST return scrutiny, assemble the filed returns and the records needed to explain the specific discrepancies raised. Build an issue-wise reconciliation between those returns and the books, with transaction-level evidence for each adjustment. Scrutiny preparation should answer the notice’s questions rather than produce an undirected dump of the entire accounting system.
Identify the scrutiny period and process
Section 61 and rule 99 govern return scrutiny. The familiar form sequence is ASMT-10 for communicating discrepancies, ASMT-11 for the taxpayer’s explanation or relevant information and ASMT-12 where the explanation or corrective information is accepted.
CBIC Instruction 02/2023 sets out the Central Tax scrutiny workflow for FY 2019-20 onwards and modifies the earlier SOP for that scope. Read the actual notice and applicable jurisdictional process; the existence of an older SOP does not establish every current step for every authority.
Record the GSTIN, financial year, individual months, allegations and response date. A company’s consolidated accounts may cover several registrations, while scrutiny concerns one registration’s returns.
Preserve the filed baseline
Download the relevant filed GSTR-1, any GSTR-1A, GSTR-3B and other statements actually involved. Retain filing references and dates, not only the current software return report.
Export the sales register, purchase register, credit and debit notes, tax ledgers and relevant general-ledger balances using a stated cut-off. Keep a copy before making corrections so the original difference remains reproducible.
If returns were amended later, preserve both the original reporting and the later correction trail. A current annual total may hide why the earlier data snapshot showed a mismatch.
Build separate reconciliation bridges
| Comparison | Starting records | Typical matters to investigate |
|---|---|---|
| Outward supplies | Books and filed sales statements | Omissions, amendments, timing and classification |
| Tax payment | Filed liability and ledger debits | Tax heads, periods and payment allocation |
| Input credit | Purchase records and relevant inward statements | Eligibility, timing, reversals and duplicate claims |
| Notes and returns | Credit/debit-note registers | Original supply, reporting and adjustment status |
These are investigation categories, not automatic defences. A timing label must identify the transaction and the later filed period. A claimed reversal needs its actual return and ledger evidence.
An illustrative scrutiny working
A Coimbatore trader’s books show taxable outward value of ₹48,00,000, while the compared filed statement shows ₹50,00,000. The ₹2,00,000 difference requires invoice-level analysis.
Suppose the team identifies an invoice of ₹1,20,000 reported twice and an ₹80,000 classification difference between extracts. Those figures add to ₹2,00,000, but that arithmetic alone does not establish the correct tax result.
Verify that the duplicate is genuinely one supply, establish what the classification difference represents and check both GSTR-3B payment and amendment history. If the second item is unsupported, leave it unresolved rather than describing the whole difference as reconciled.
Explain payment separately from turnover
A turnover mismatch and a tax-payment mismatch can differ. The tax rate, nature of supply, credit notes and reporting period all affect the liability bridge.
Match the relevant liability with actual debits in electronic ledgers and any supported payment references. Money deposited into the cash ledger is not automatically proof that the questioned liability was discharged.
Where a voluntary payment was made, record its ARN, tax period, tax heads and issue linkage. Check whether it has been appropriately connected to the proceeding or demand; do not subtract every historical payment from every new discrepancy.
Support credit claims with more than a statement total
For queried ITC, connect the invoice, receipt or service-performance evidence, business purpose, supplier details and applicable eligibility conditions. Distinguish a purchase recorded in books from credit actually availed in the return.
Preserve reversals and reclaims separately. Net annual credit can conceal that an amount was claimed twice temporarily or reversed in a different period.
The law applicable to the relevant period matters. Do not apply a current inward-statement rule retrospectively without checking its effective history, and do not use an old relaxation as a permanent rule for later years.
Use the notice’s allegation order
Write a short response section for each discrepancy, supported by the corresponding reconciliation and annexures. State the compared amounts, the supported explanation and any remaining difference.
Where the business accepts an error, have the adviser assess the appropriate corrective and payment route. A scrutiny-related matter should not be treated casually as an unrestricted ability to revise an old filed return.
Keep the tax conclusion distinct from the evidence compilation. The preparer can identify documents and arithmetic, while the authorised reviewer confirms the legal treatment and submission position.
Review completeness and consistency
Check that the same invoice amount, tax type and period appear consistently across the reply, working paper and source documents. Confirm that later amendments are not counted again as new supplies.
Have a second person reproduce a sample of each reconciliation category. This can reveal wrong filters, excluded branches and spreadsheet signs that a high-level total review misses.
Preserve the outcome
File through the appropriate case route, retain the exact submission and acknowledgement, and track any follow-up or formal acceptance. A persuasive explanation is not the same as a recorded conclusion of the proceeding.
The most useful scrutiny file is a traceable bridge from the filed returns to the underlying business records. It lets the authority and the business review the same facts without mistaking an unexplained difference for an established liability or a proven reconciliation.