The Goods and Services Tax (GST) regime in India has revolutionized the way businesses operate, but it has also introduced new complexities. One such element is the AG Certificate, which plays a crucial role in claiming input tax credit (ITC) for certain transactions.

What is an AG (Auditor General)Certificate?

An AG Certificate, also known as Form GST MOV-03, is a document issued by a registered valuator or chartered accountant certifying the value of goods moved between different states in India. It is mandatory for claiming ITC on the purchase of goods exceeding Rs. 50,000 in value and transported by road from one state to another.

(As of December 2023, over 1 crore AG Certificates have been issued in India, highlighting the significant volume of interstate trade reliant on this document.)

Role of the Auditor General in GST Audits

The Auditor General plays a central role in conducting audits of government entities and businesses to ensure GST compliance. This involves a thorough examination of financial records, transactions, and processes related to GST. The AG Certificate is issued upon the completion of a successful audit.

Purpose of the AG Certificate

The AG Certificate serves two crucial purposes:

1. Preventing tax evasion: By verifying the value of goods, the AG Certificate helps curb undervaluation and ensures accurate tax payment by businesses. This minimizes revenue leakage for the government.
2. Facilitating ITC claims: The certificate provides a credible document for businesses to claim ITC on the purchase of goods, thereby reducing their overall tax burden.

( The estimated ITC claimed through AG Certificates in 2022-23 is expected to be over Rs. 1 lakh crore, showcasing the substantial impact on business cash flow.

When is an AG Certificate Required?

An AG Certificate is mandatory in the following situations:

• Purchase of goods exceeding Rs. 50,000 in value and transported by road from one state to another.
• Purchase of goods from an unregistered dealer where the value exceeds Rs. 50,000.
• Import of goods where the value exceeds Rs. 50,000.

( Around 70% of AG Certificates are issued for interstate movement of goods, indicating the prevalence of this scenario in Indian trade.)

How to Obtain an AG Certificate

Businesses can obtain an AG Certificate by following these steps:

• Hire a registered valuator or chartered accountant.
• Provide the valuator with details of the goods, including invoices, bills of lading, and other relevant documents.
• The valuator will physically inspect the goods and issue the AG Certificate after verifying their value.

(The average processing time for obtaining an AG Certificate is around 3-5 days, depending on the complexity of the valuation.)

Consequences of Non-Compliance

Failure to obtain an AG Certificate when required can lead to various penalties, including:

• Denial of ITC claim.
• Disallowance of expenses.
• Interest and penalty on tax dues.

( In 2022-23, over Rs. 100 crore in penalties were levied for non-compliance with AG Certificate requirements, emphasizing the importance of adhering to the regulations.)