GST Audit Flags MSME Challenges: Key Recommendations to Improve Ease of Doing Business

The Final Minutes of the Stakeholders’ Consultation Meeting held on 21 May 2026 on the Performance Audit of “Ease of Doing Business Initiatives under GST with specific emphasis on MSME taxpayers” highlighted several practical difficulties faced by taxpayers and professionals. Key concerns related to GST registration included repeated requests for Aadhaar and PAN documents, biometric authentication issues, lack of facility to edit or withdraw applications, and delays in amendments. Stakeholders also raised issues regarding cancellation of registration, such as non-speaking rejection orders, levy of late fees during the pendency of cancellation applications, immediate suspension upon issuance of show cause notices, and inadequate opportunities in fake invoice cases. Delayed GST refunds causing working capital stress among MSMEs were another major concern, with suggestions for time-bound processing, automated interest payment, risk-based verification, and greater accountability. The consultation emphasized simplifying procedures and strengthening taxpayer-friendly mechanisms to improve the overall GST compliance environment.

Supreme Audit Institutions of India
Dedicated to truth in Public Interest

AMG-II/4-1/PA on EoDB with GST Perspective/2026-27-Part(1) | Dated: 09.06.2026

To
The President,
Sales Tax Bar Association,
2n^d Floor, Department of Trade and Taxes,
GNCT of Delhi, Vyapar Bhawan, I.P. Estate,
New Delhi-110002

Subject:- Final Minutes of Stakeholders’ Consultation Meeting on Performance Audit of “Ease of Doing Business Initiatives under GST with specific emphasis on MSME taxpayers”

Sir/Madam,

Please find enclosed herewith the Final Minutes of the Stakeholders’ Consultation Meeting (SCM) on the Performance Audit of “Ease of Doing Business Initiatives under GST with specific emphasis on MSME taxpayers”, held on 21.05.2026 in the Conference Hall, 2nd Floor, Co/o the Director General of Audit (Central Expenditure), Audit Bhawan, New Delhi.

The Final Minutes have been prepared after incorporating the suggestions and comments received from the stakeholders subsequent to circulation of the approved Minutes.

The same are forwarded herewith for information and record, please.

Enclosure :As Stated

Yours faithfully.

(Shri Maanas Bajpai)

Sr. Deputy Accountant General

Final Minutes of Stakeholders’ Consultation Meeting

A Stakeholders’ Consultation Meeting in respect of the Performance Audit on Ease of Doing Business Initiatives under GST, with specific emphasis on MSME taxpayers for the period 2024-25 to 2025-26, was held on 21.05.2026 at 11:00 AM in the Conference Hall. Office of the Director General of Audit (Central Expenditure), Audit Bhawan, New Delhi. under the chairpersonship of the Sr. Deputy Accountant General (Admin), Office of the Principal Accountant General (Audit), Delhi.

The meeting was convened to obtain valuable inputs from stakeholders on the subject “Ease of Doing Business in MSMEs (GST Perspective)”. The list of participants is enclosed as Annexure.

The meeting commenced with a welcome address by the Sr. DAG, who welcomed the participants and briefed them on the purpose of the stakeholders’ consultation. Thereafter. a presentation was made on the objectives and agenda of the Performance Audit, highlighting various Ease of Doing Business initiatives and the key focus areas of the consultation.

The stakeholders were requested to share their views, experiences, concerns, and suggestions to support and enrich the audit process. Following the presentation, the stakeholders shared their insights and suggestions based on their respective domains and practical experiences.

The Final key issues and suggestions raised during the consultation are summarized below:

1. GST Registration Issues

Issues Raised

• Difficulties relating to GST registration, amendments, and address verification.
• Taxpayers being compelled to submit documents such as Aadhaar and PAN, which are not mandatory to be uploaded with the registration application.
• Repeated notices seeking PAN, Aadhaar, and identity proofs from taxpayers.
• Issues relating to biometric authentication.
• Absence of facility for editing or withdrawal of registration applications after submissions
• Officers may avoid document not prescribed under GST law or GST portal requirement.

Suggested Reforms

• GST registration and verification procedures may be simplified for businesses.
• Submission of hard copies of digitally available documents such as Aadhaar and PAN should he avoided, and unnecessary notices in this regard should not he issued.
• Issues relating to biometric sauthentication require timely resolution.
• A limited-time facility for editing or withdrawal of registration applications may be provided on the (1ST portal.
• Advisories, Forms, and SON should be issued in a timely and proper manner.
• Bottlenecks in the registration process should be removed.
• Amendments of particulars, especially relating to additional places of business, should be processed promptly.

2. Cancellation of GST Registration Issues

Issues Raised

• Non-issuance of proper orders for rejection of cancellation applications.
• I,evy of late fees for the intervening period after applying for cancellation.
• Non-disposal/rejection of cancellation applications due to pending returns or want of supporting documents.
• Issues relating to fake invoices.
• Improper examination of cases pertaining to fake invoices.
• The cancellation application form may provide For uploading a future correspondence address.
• The issue of immediate suspension of registration upon issuance of a Show Cause Notice

Suggested Reforms

• Late fees for the intervening period may suitably be waived or relaxed.
• Prescribed timelines for disposal of cancellation applications should be strictly adhered to.
• Taxpayers should be given proper opportunity to submit documents before cancellation.
• Proper speaking orders should be passed while rejecting cancellation applications, clearly specifying reasons for rejection.
• Taxpayers should be given an opportunity lbr examination in cases relating to alleged fake invoices before cancellation of registration. Further, taxpayers possessing original invoices should be prioritized for removal from scrutiny to avoid

3. Delayed GST Refunds and Working Capital Stress

Issues Raised

• Delay in refund sanction process which leads to blocking of working capital.
• Assignment of multiple refund claims to multiple officers creating problem for taxpayer in reaching out to the concerned officers.
• Lack of coordination among officers.
• Non-adherence to timelines for disposal of refund claims.
• Absence of risk parameters for sanction of refunds.
• Interest payment on delayed refunds is not system calculated or automatic.

Suggested Reforms

• The refund process should be simplified and made time-bound.
• Refund applications should preferably be assigned to jurisdictional proper officers familiar with the taxpayer’s profile and business activities.
• Process and approval of refunds above Rs.10 lakhs by Senior Officers in DGST should be dispensed as no such process anywhere else.
• Internal timelines and accountability mechanisms should be prescribed for timely

disposal of refund claims.

• Small refund claims may ordinarily be processed based on risk parameters and portal-based document verification.
• The GST portal should automatically calculate applicable interest for delayed refunds and auto-disburse the same along with the principal refund amount without requiring separate application.

4. Disposal of Appeals

Issues Raised

• Lack of timely hearings.
• Absence of a proper appeal management system.

Suggested Reforms

• Timely hearing and disposal of appeals should be ensured.
• A proper administrative and appeal management system with transparent tracking mechanisms may be introduced to reduce pendency and backlog.
• Adjudicatory/appellate functions may be separated from administrative functions, and additional appellate authorities may be appointed to reduce the backlog of appeals.

5. E-Way Bill Related Issues

Issues Raised

• Clerical mistakes in E-Way Bills resulting in blockage of consignments.
• Unnecessary notices issued for mismatch between GST turnover and E-Way Bill turnover.
• Unable to see previous records for more than five days.

Suggested Reforms

• Facility for amendment of E-Way Bills may be provided.
• Notices should not be issued for minor clerical mistakes in E-Way Bills.
• As E-way bill details are visible on the E-way Bill portal only for the last five days, taxpayers face difficulties in compiling and reconciling E-way bill data for compliance purposes. Therefore, the portal may allow taxpayers to access such details for at least one month, which would facilitate easier compilation, reconciliation, and maintenance of records.

6. Grievance Redressal Mechanism and Training Efficiency

Issues Raised

• Absence of an effective grievance redressal mechanism.
• Posting of inefficient officers in GST administration.
• Lack of dedicated helpdesks for MSME taxpayers.

Suggested Reforms

• A fast, transparent, and effective grievance redressal mechanism should be established.
• Time-bound resolution of grievances and application-related issues should be ensured.
• Dedicated MSME and exporter support helpdesks/Suvidha Kendras may be established.
• Trained officers/staff should be deployed for timely assistance and effective resolution of taxpayer grievances.
• It was suggested to strengthen the Advance Ruling mechanism through timely disposal of applications, effective monitoring of pendency, and enhanced taxpayer awareness.

7. Mismatch Between GSTR-3B and GSTR-2A & Improper Proceedings

Issues Raised

• Issuance of unwarranted notices.
• Direct issuance of SCNs for broad or general issues without preliminary verification.
• Duplication of proceedings on the same issue.

Suggested Reforms

• Before issuance of Show Cause Notices (SCNs), proper verification from books of accounts and portal data should be undertaken.
  SCNs should not be issued directly for broad or general issues without preliminary verification.
• Old proceedings should be concluded before initiation of fresh proceedings on the same issue.
  A designated portal may be developed where proper officers can verify whether proceedings on the same issue are already pending.

8. GSTR-9 / 9C Related Issues

Issues Raised

• Difficulty in filing GSTR-9 and GSTR-9C.
• Uniform compliance requirements for Micro, Small, and Medium Enterprises resulting in disproportionate compliance burden, particularly on micro enterprises.

Suggested Reforms

• Threshold limits for filing GSTR-9/9C should differ based on turnover slabs for various categories of MSME taxpayers.
• GSTR-9 data should be auto-populated into GSTR-9C to minimize clerical errors.
• Merging GSTR-9 and GSTR-9C into a single annual return and align the threshold for filing GSTR-9C with the Income Tax audit threshold.

9. Credit Note Related Issues of Small Taxpayers

Issues Raised

• No automated adjustment mechanism for credit notes.
• Lack of simplified compliance mechanism relating to credit notes.

Suggested Reforms

• A simplified credit note compliance mechanism may be introduced for MSMEs and small taxpayers.
• Automated tax adjustment mechanisms for valid credit notes may be developed.
• Flexible timelines for reporting and reconciliation of credit notes may be provided.
• A prescribed timeline for issuance of credit notes to MSME buyers may be introduced to improve cash flow and reduce pending account adjustments.
• Suitable system-based controls and validation checks be introduced on the GST portal to detect and prevent fraudulent manipulation of invoices and credit notes.

10. E-Invoicing and MSME Concerns

Issues Raised

• Threshold limit for applicability of E-invoicing.
• Additional financial burden on micro and small enterprises.

Suggested Reforms

• The threshold limit of ₹5 crore for applicability of E-invoicing may be relaxed/waived for micro and small enterprises.

11. Duty Drawback and Export Related Issues

Issues Raised

• Delay in refund of duty drawback.
• Lack of coordination between Customs and State GST authorities.

Suggested Reforms

• Export benefit processes should be simplified to reduce paperwork and save time for MSME exporters.
• Instant GST credit/refund mechanisms at the time of customs clearance for exports may be introduced.

The Sr. Audit Officer thanked all the participants for their valuable inputs and assured them that the issues highlighted during the meeting would be examined in detail during the course of audit.

The meeting concluded with a vote of thanks.

Annexure

Participants’ List for the Stakeholders’ Consultation Meeting

The following were present in the meeting: