GST Audit: When and How GST Audits Are Conducted and What Businesses Need To Prepare    

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Published Date:  23-11-2023   Author:   yash-elwadhi
captainbiz gst audit when and how gst audits are conducted and what businesses need to prepare

Introduction 

The GST audit process for taxpayers with an annual turnover exceeding 2 crores is a crucial aspect of GST compliance. It involves a detailed examination of records, returns, and financial documents to ensure the accuracy of turnover, taxes paid, refunds claimed, and input tax credit availed. In this article, we’ll explore the latest updates on GST audit requirements and the key points taxpayers need to be aware of.

Recent Updates:

As of FY 2020-21, the mandatory GST audit by a Chartered Accountant (CA) or Cost Accountant (CMA) for taxpayers with a turnover over 2 crores has been removed. Instead, taxpayers with an annual turnover of over 5 crores must self-certify and submit Form GSTR-9C. These changes were recommended by the 43rd GST Council meeting on May 28, 2021.

Key Information on GST Audit: 

The need for GST audit is rooted in the trust-based taxation system of GST, where taxpayers self-assess their tax liability. A robust audit mechanism ensures the correctness of this self-assessment and compliance with GST regulations. 

Types of GST Audit:

There are three types of GST audits:

  1. Turnover-based Audit: For taxpayers with an annual turnover exceeding 2 crores, a Chartered Accountant or Cost Accountant must audit their accounts.
  2. Normal/General Audit: This audit is initiated by the Commissioner of CGST/SGST or an authorised officer.
  3. Special Audit: This audit is ordered by the Deputy/Assistant Commissioner with the Commissioner’s prior approval.

Turnover-based Audit:

If a taxpayer’s annual turnover exceeds 2 crores, they are required to have their accounts audited by a Chartered Accountant or Cost Accountant each year. The financial year is considered from April of one calendar year to March of the next.

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Calculation of Annual Turnover

Inclusions in Aggregate Turnover Calculation:

– All taxable supplies, whether inter-state or intra-state, except for supplies subject to reverse charge.

– Supplies made between separate business verticals.

– Goods supplied to or received from a job worker on a principal-to-principal basis.

– The total value of export and zero-rated supplies.

– Supplies conducted by agents or job workers on behalf of the principal.

– All exempt supplies, such as the supply of agricultural produce along with branded ready-to-eat food.

– Any taxes not covered under GST, such as entertainment tax paid for movie ticket sales.

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Exclusions from Turnover Calculation:

– Inward supplies on which tax is paid under the reverse charge mechanism.

– Any taxes and cess charges under Goods and Service Tax, including CGST, SGST, IGST, and compensation cess.

– Goods supplied to or received back from a job worker.

– Activities that do not fall under the category of supply of goods or services according to Schedule III of the CGST Act.

Qualifications of GST Auditor:

Only Chartered Accountants or Cost Accountants can perform GST audits. Internal auditors and GST practitioners are not eligible to conduct GST audits.

Conducting GST Audit and Issuing the Report:

The appointment of a GST auditor should occur at the beginning of the financial year. The auditor reviews various accounts and records, including sales registers, stock registers, and more. The taxpayer is responsible for filing relevant forms for annual returns and GST audits.

The crucial accounts and records to be examined include:

  1. Sales register
  2. Stock register
  3. Purchase register and expense ledgers
  4. Utilization of input tax credits
  5. Payment of output tax and records of payments made
  6. Verification of e-Way bills generated, ensuring compliance with regulations
  7. Preservation of e-Invoices and Invoice Reference Numbers (IRN)
  8. Maintenance of any documents that document interactions with the GST department during the fiscal year.

Submission of GST Audit Report:

The final GSTR-9C report can be certified by the same CA who conducted the audit or by another CA who didn’t perform the audit for that GSTIN. The report should cover the maintenance of records, the accuracy of the information, and any audit observations or comments.

Documents to Be Furnished:

The taxpayer is required to provide the following documents:

  1. Audited financial statements (linked to PAN)
  2. Annual return in GSTR-9 format (for each GSTIN)
  3. A certified reconciliation statement in Form GSTR-9C, which displays reconciled figures of supplies and tax amounts declared in GSTR-9 compared to the audited financials in Part-A, along with the audit report in Part-B.

Due Dates for Submission:

The due date for GSTR-9 and GSTR-9C is December 31 of the subsequent Financial year. Extension of the due date may be possible through a CBIC notification.

Penalty for Non-submission:

While there is no specific penalty for not submitting the GST audit report, it is subject to a general penalty of Rs. 25,000.

The Bottom Line

In summary, a GST audit is a crucial process for taxpayers with annual turnovers above a certain threshold. It involves the examination of financial records, ensuring compliance with GST regulations, and reporting audit observations. With recent changes in the audit threshold, businesses need to stay updated on their GST audit requirements to avoid penalties.

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Also Read:

HSN Code And GST Rate For Fruits And Dry Fruits

Decoding HSN Code 39: GST Rates And Classification For Plastic Products

Understanding HSN Code For Job Work In GST: A Comprehensive Guide

Frequently Asked Questions:

  • What is the threshold for a GST audit under the latest regulations?

The threshold for a GST audit varies based on the latest regulations. As of the latest update, taxpayers with an annual aggregate turnover of equal to or more than Rs.5 crore are required to undergo a GST audit.

  • What are the types of GST audits, and who conducts them?

There are three types of GST audits:

Turnover-based Audit: Conducted by Chartered Accountants or Cost Accountants when the turnover exceeds a specific threshold. Normal Audit/General Audit: Performed by authorised officers or Commissioners and initiated with prior notice. Special Audit: Appointed by the Commissioner and generally initiated by the Deputy/Assistant Commissioner.

  • Can businesses with turnovers below the threshold voluntarily opt for a GST audit?

Yes, businesses with turnovers below the audit threshold can voluntarily opt for a GST audit, even though it might not be mandatory. This choice can help ensure accurate compliance with GST regulations and provide confidence to stakeholders.

  • What are the due dates for submitting GST audit reports and annual returns?

Generally, GSTR-9 and GSTR-9C are due on or before December 31st of the subsequent fiscal year. However, it’s essential to keep an eye on any extensions provided by the CBIC through notifications for specific years.

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Yash Elwadhi

Yash Elwadhi is a highly skilled and experienced finance content writer with a proven track record of providing insightful and engaging content to a wide range of clients in the financial industry. He has collaborated with prominent financial institutions, fintech companies, and wealth management firms, and is known for his ability to convey complex financial concepts in a clear and engaging manner. Yash is committed to delivering high-quality content that adds value to his clients' target audience and helps them achieve their financial goals.

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