Chemical Import & Trading Company — ₹22 Lakh GST Demand Eliminated
A Mumbai chemical importer across two GST registrations received a notice flagging ITC discrepancies across two financial years. We regularised ₹9.6 lakh in mismatched credits, eliminated a ₹22 lakh pending demand, and recovered a ₹1.8 lakh export refund — before the audit officer arrived.
A multi-layer GST compliance failure across 24 months.
The company operated two GST registrations — one for import-linked trading, one for a small domestic manufacturing unit — across multiple GST rates and a mix of domestic, zero-rated, and exempt supplies. A preliminary department communication flagged discrepancies between ITC claimed in GSTR-3B returns and ITC reflected in GSTR-2B auto-populated data for two financial years. The root causes were layered: suppliers filing GSTR-1 late (making ITC visible in 2A but not 2B at the time of 3B filing); inadmissible ITC on import freight under Section 17(5); RCM lapses on road freight and legal consultancy; and four export shipping bills incorrectly coded as domestic supply, meaning IGST had been paid unnecessarily and no zero-rated refund had been claimed. If the department escalated to a formal show-cause notice, the all-in exposure including interest and penalty would have reached ₹22 lakh.
How we executed the engagement.
24-Month GSTR-2A vs 2B Reconciliation
Ran a month-by-month reconciliation covering the full 24-month audit period. Every invoice in the purchase register was matched against GSTR-2B data. 63 invoices totalling ₹9.6 lakh were identified where the supplier had not filed GSTR-1 at the time of GSTR-3B filing — ITC reversed proactively before the audit.
Section 17(5) Blocked ITC Analysis
Invoice-by-invoice review of all import freight, port handling, and customs clearance charges. Charges directly attributable to goods movement assessed as eligible; bonded facility services assessed for admissibility. Net inadmissible ITC quantified at ₹3.1 lakh and reversed.
RCM Liability Computation
RCM liabilities on road freight and legal services computed, paid with interest under Section 50, and corresponding ITC (eligible under RCM) simultaneously claimed. Net cash outflow: interest only — the tax itself was cost-neutral.
Export Reclassification & Refund
All four misclassified shipping bills corrected in the GST portal. LUT updated to cover the relevant periods. Formal IGST refund application filed for ₹1.8 lakh.
GSTR-9/9C & 140-Page SCN Response
GSTR-9 and GSTR-9C prepared with full disclosure of all adjustments and reversals. The complete reconciliation package was submitted to the GST officer before the audit date. A 140-page written SCN response — reconciliation statements, supporting invoices, and working papers — addressed every discrepancy raised by the department.
The capabilities we brought to bear.
GSTR-2A vs GSTR-2B Reconciliation
Month-by-month matching across 24 months, invoice-level identification of timing gaps between supplier GSTR-1 filing and GSTR-3B filing.
Section 17(5) ITC Analysis
Invoice-level classification of import freight and handling charges against admissibility criteria, with detailed reversal computation.
RCM Compliance
Liability identification, payment with interest, and simultaneous eligible ITC claim — neutral tax impact with a clean compliance record.
Export Refund Recovery
Shipping bill reclassification, LUT correction, and formal IGST refund application filed and followed through.
GST Audit SCN Response
140-page response covering ITC timing, Section 17(5) reversals, RCM, and export classification — submitted before the physical audit commenced.
The numbers that matter.
The results we delivered.
The best time to handle a GST audit is before the officer walks in. Voluntary reversals with a well-documented position on every issue removed the department’s basis for a penalty and opened the door to recovering refunds they hadn’t even noticed were owed.
