Exploring the Different Types of Audit under GST

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  • 11/06/2025

Introduction to Goods and Services Tax (GST)

The Goods and Services Tax (GST) came into effect from July 1, 2017, reshaping India’s tax landscape. This comprehensive tax mechanism transformed unfair taxation, establishing a unified and transparent approach that promotes economic growth and facilitates compliance. GST guarantees a shared tax burden for various manufacturers and distributors, encourages entrepreneurship, and discourages tax avoidance. The instrument contains five maximum tax rates for goods and services: 0%, 5%, 12%, 18%, and 28%. Apart from luxury items, cess can be imposed through government implementation. This section will delve into the various GST calculations and examine their importance and utility.

Understanding Audits in GST

The objective of the audit is to ensure compliance with the provisions of the GST law, including accuracy of tax returns, payment of taxes, and other legal requirements that require the taxpayer to cooperate on information and documentation enforce all relevant information that the tax authorities may provide. As per Section 2(13) of the CGST Act, the term “Accounts” is defined as records, returns, and other documents maintained or submitted by a person registered under this Act for the purposes of
  1. Reported Turnover 
  2. Taxes
  3. Refunds
  4. The input tax credit is applied, and a thorough checking of compliance with all the provisions mentioned in this Act or the rules is established thereunder.
Also Read: GST Audit: When And How GST Audits Are Conducted And What Businesses Need To Prepare

Types of Audits under GST

  1. Departmental Audits/Audits by the Tax Department:

Departmental audits, also known as audits conducted by tax authorities, are routine checks conducted by tax authorities. These audits are designed to account for and meet tax obligations accurately, and to empower tax authorities to examine records maintained by taxpayers. As per Section 65 of the GST Accounts Act and Rule 101(3), the Commissioner or their authorized officer may conduct audits and verify registered persons’ ‘records’ and ‘books of accounts’. These audits are carried out by authorized personnel and the police force. On completion of the audit procedure, the Authorized Commissioner shall communicate the findings, rights and obligations, and the reasons thereafter to the registered taxpayer within 30 days through FORM GST ADT-02. Suppose discrepancies such as unfair returns or use of Investment Tax Credit (ITC) in the calculation are discovered. In that case, the authorized officer may initiate the proceedings in accordance with the procedures mentioned in Section 73 or Section 74.

  1. Statutory Audit:

As per Section 35(5) of the GST Audit Rules, a registered taxpayer whose total income exceeds Rs. 2 crore in a financial year requires its books of accounts and returns to be audited by a professional chartered accountant. These audited accounts and certified copies of these reconciliation details should be submitted through Form GSTR 9C through the common portal or through the convenience point designated by the Commissioner. However, with effect from July 30, 2021, the government indicated that the GST audit and certification by CA/CMA will be withdrawn. Therefore, taxpayers must file their certified GSTR 9C from FY 20-21.

  1. Special Audit:

As per section 66 and Rule 102 of GST Audit Rules, an authorized officer (not below the rank of Assistant Commissioner) at any stage of scrutiny, inquiry, or investigation may avail the services of a CA or CMA by considering the nature & complexity of the business and if the authorized officer believes that:
  • The value declared is incorrect, or
  • The credit availed is outside the normal limits.
The authorized officer shall issue the direction for the special audit of GST in Form GST ADT-03, wherein the registered dealer shall be required to get his records, including his books of accounts, to be examined and audited by the specified professional CA or CMA within ninety days from the day of passing such an order.

  1. Limited scrutiny:

A limited audit is conducted in specific cases where the tax authorities suspect non-compliance with the provisions of the GST laws. The objective of limited scrutiny is to verify compliance with the provisions of the GST law, including the correctness of the tax returns filed, payment of tax, and compliance with other provisions of the law.

  1. Taxpayer-Initiated Audit:

The taxpayer himself can initiate an audit. The objective of a taxpayer-initiated audit is to verify compliance with the provisions of the GST law, including the correctness of the tax returns filed, a charge of tax, and compliance with different provisions of the regulation. The GST regulation presents several results of non-compliance with the regulation’s provisions, including fines, penalties, and imprisonment. Therefore, taxpayers need to comply with the GST law’s provisions, including the audits’ provisions. Taxpayers are warned to keep correct and complete statistics of their business transactions, including invoices, receipts, and other helpful files, to ensure compliance with the provisions of the GST regulations; taxpayers are suggested to report their tax returns on a well-timed basis and pay their tax on time.

Importance and Benefits of Different Audits under GST

GST (Goods and Services Tax) audit holds sizeable significance in the realm of taxation and commercial enterprise compliance for several reasons:

Compliance Verification:

GST audit serves as a mechanism to confirm corporations’ compliance with GST laws and guidelines. It guarantees that companies adhere to the prescribed suggestions for tax calculation, fees, and reporting.

Accuracy in Transactions:

The audit method confirms the accuracy of transactions recorded by way of agencies. It is essential for retaining transparency and reliability in financial reporting. Correct recording of transactions ensures timely payment of GST.

Timely GST Payments:

A Timely charge of GST is essential for the easy functioning of the tax device and the government’s revenue series. The audit facilitates confirming that organizations are making their GST payments on time, contributing to the general efficiency of the tax gadget.

Maximising Profits and Efficiency:

Through the audit, groups can identify areas wherein operational and economic improvements can be made. It may need to contain optimizing strategies, lowering mistakes, and ensuring that the to-be-had enter tax credits are applied correctly. As a result, agencies can maximize their earnings and streamline their operations.

Fraud Detection and Prevention:

One of the vital uses of GST audits is detecting and preventing fraudulent activities. By analyzing economic information and transactions, auditors can perceive any tries to steer clear of taxes or engage in fraudulent practices. This saves the authorities from sales loss and protects compliant corporations from unfair competition.

Legal Compliance:

GST audit ensures that agencies observe the criminal requirements set forth by tax authorities. Non-compliance can result in consequences or even prison.

Conclusion

In conclusion, audits under the GST regime are a critical aspect of the Indian tax system, and taxpayers are expected to conform to the provisions of the law. Taxpayers are counseled to maintain correct and complete statistics of their industrial enterprise transactions to document their tax returns properly and pay the tax due on time. The consequences of non-compliance with the provisions of the GST regulation are intense, together with fines, penalties, or even imprisonment. Therefore, taxpayers ought to ensure compliance with the GST regulation’s provisions and compliance with the associated audit provisions. CaptainBiz is India’s leading GST computerized billing software that takes the hassle of calculating GST prices. Using CaptainBiz, you can get an entire overview of GST and comply with audit details. Also Read: Know Everything About GST Billing Software

FAQs

  • Why is the GST audit done?

Examination of taxpayer records is an important process for the effectiveness of the self-examination tax system, with activities such as tax credits, tax credit declaration, refunds, and additional tax liability monitoring This system enables you to monitor the tax for each registered business entity, which is an important tax tool to ensure compliance with legal requirements and prevent any loss of revenue tip.

  • What is the Time limit to complete a GST Audit?

The appointed CA or CWA shall submit the audit report to the Assistant Commissioner within 90 days, mentioning the specified particulars.

  • What is the meaning of the date of audit initiation?

The date of audit initiation means the date on which the registered person makes available the records and documents requisitioned by the tax authorities or the initiation of the audit at the place of business, whichever is later.

  • Who may conduct an audit?

Any officer authorized by the Commissioner can conduct the audit, whether by general or specific order. The audit will occur at the registered person’s place of business or the tax authorities’ office. The taxable person must be notified of the audit within at least 15 working days.

  • What documents are required to be furnished by the auditee for Audit?

The Auditee is required to submit the following documents for the Audit:
  • Inward and outward supply of Goods & Services or both
  • Goods Produced or Manufactured
  • Input Tax Credit availed
  • Output Tax Payable & Paid

  • What are the consequences of not filing GST annual returns or failing to get accounts audited?

As per Section 47(2) of the CGST Act, 2017, if a registered person does not put up the Annual Return within the due date, they will be susceptible to paying a late fee of Rs. 100 per day, with a maximum of 0.25% in their turnover inside the State or Union Territory. The respective SGST Acts also lay down similar provisions.

  • What is the purpose of Audit under GST?

To verify the correctness of
  • Turnover declared
  • Taxes assessed & paid
  • Refund claimed
  • Input Tax Credit availed
Also, to assess compliance with the provisions of the GST Acts or the rules made thereunder

  • What are the frequent issues detected during an audit?

  • Non-payment or incorrect payment of Tax
  • Wrong classification of Goods/Services
  • Short/Excess payment of Tax due to an improper calculation or accounting
  • Collecting Tax from the customers but not paying the same to the Government
  • Wrong claim of ITC on ineligible document

  • Is a tax audit important if the turnover surpasses the required restriction but the total earnings remain beneath the maximum exemption restriction?

Yes, a tax audit is compulsory. Section 44AB mandates a tax audit.

  • Would a non-resident undertaking a commercial enterprise be a problem to audit under Section 44AB?

A10. Section 44AB no longer differentiates between citizens and non-residents. Therefore, a non-resident assessee should also get his bills audited if his turnover/income/gross receipts exceed the prescribed limits.

Understand different GST audit types and ensure your compliance is always on point.

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Niharika Kapoor Content Writer
Niharika is a Freelance Content Writer and Translator with a Master of Arts in Literature. She has 5+ years of working in the same and has worked in different industries.
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