Home / GST Audit

Updated on 25 Sep 2020  9.00 AM IST | 4 min read

Audit under GST

It is the process of analyzing the records, documents and returns maintained by taxpayers as per GST laws. The main purpose of doing audit under GST is to verify accuracy of turnover, payment of taxes, claiming of refunds and availing of input tax credit under GST provisions laid down by the central government. It is also considered as first external assessment undertaken by the auditors under GST law.

We at FinacBooks provide comprehensive reviews of all your GST records by analyzing your turnover, tax payment, refund claiming & availing of input tax credit. Not only this, we also suggest you various measures to strengthen your internal controls by providing appropriate way of recording, entering & analyzing data which ensures company growth.

What is GST Audit?

As per section 35(5) of the CGST act, every registered taxpayer whose turnover is more than Rs 2 Crores in a particular financial year needs to get their books of accounts audited from a practicing chartered accountant or cost accountant. Registered taxpayer needs to submit copy of audited financial statements & reconciliation statement in form GSTR 9C. It is required bythe tax department once in a financial year.

GST Audit

Persons Liable For GST Audit

Persons who are registered taxpayers and whose turnover exceeds GST limit of Rs 2 Crores in a particular financial year are liable for GST audit. It is mandatory for such persons to get their accounts audited from a practicing chartered accountant or a cost accountant. GST turnover limit of Rs 2 Crores is same across all states & UT’s for registered taxpayers.

Aggregate turnover of a registered taxpayer includes –

  1. Exports
  2. Inter-state supplies
  3. Stock transfers
  4. Exempt supplies

Above mentioned supplies are exclusive of GST & compensation cess.

How to Prepare for Audit under GST?

You need to take care of the following points while preparing for audit under GST –

  • The auditors will check your monthly and quarterly returns. You must have data as well as supporting documents available with you.
  • In case of claiming extra input tax credit (ITC), you need to pay 24% interest on the excess tax amount. In such cases, the auditor will reconcile the returns of your organization.
  • The auditor also suggests you to make amendments in case any data gaps you are having at the time of audit.
  • The auditor also checks if any ITC reversal has been made for non-payment within 180 days.
  • There are some rules specified by GST department in relation to invoice format too. Invoice format is used for entering invoice details. In case while auditing, auditor find your business format to be different, he or she might ask you to change it as per GST rules.
  • The difference between invoice date & payment date should not exceed 180 days.
  • The Payment amount should match with the invoice amount including GST. In case your payment amount is less than what invoice is showing in the total (including GST), your input tax credit will be reversed to the extent of short payment.
  • The other point you need to take care of is evaluation of E-way bills and its match with the invoices. Auditors evaluate e-way bills and match it with the invoices to identify the amount mismatches (if any). Any mismatch between e-way bill and invoice can only cancelled within 24 hours of generation. It cannot be edited or deleted. You can also be fined by the auditor in case you move your goods without issuing E-way bill or your goods can be withheld till you pay the tax amount or penalty.

The main objective of the auditor in GST audit is to ensure that business is complying with all E-way bill provisions and effective measures are suggested to avoid legal complications.

GST Audit Checklist

Mandatory GST audit checklist which should be strictly followed is as follows –

  • Checking of GSTR 3B in relation to GSTR 1 & GSTR 2A which includes –
    1. Interest & penalties in GST
    2. Amendment in GSTR
  • Checking and verifying of invoice details
  • Input tax credit reversal for non-payment within 180 days.
  • Evaluation of e-way bills & its matching with invoices.
  • Cross-checking of pending stock lying with job workers.

Types of GST Audit

Types When initiated Performed by
Normal Audit/General Audit Need to give 15 days prior notice on the order of commissioner CGST/SGST commissioner or any authorized officer
Turnover Audit Taxpayers having turnover of more than Rs 2 Crores must get their books of accounts audited Any chartered accountant or cost accountant appointed by the taxpayer
Special Audit On order of deputy commissioner with prior approval of commissioner Any chartered accountant or cost accountant nominated by commissioner

Turnover-based GST Audit under Section 35(5) of CGST Act

As per section 35(5) of CGST act, any registered taxpayer having turnover of more than Rs 2 Crores in a financial year must get their books of accounts audited every year from a chartered accountant or a cost accountant. Financial year is 12 months period starting from 1st April to 31st March of the next year. There is a specified formula for calculating the aggregate turnover of a company which are as follows –

Aggregate turnover = value of all taxable (inter-state & intra-state) supplies + exempt supplies + export supplies of all goods & services.

Items included while calculating turnover Items excluded while calculating turnover
  • All taxable inter-state & intra state supplies except supplies on which reverse charge is applicable.
  • Goods supplied to job worker on principal basis.
  • Job worker/agent supplies on behalf of Principal
  • Value of all export/zero rated supplies
  • All exempt supplies
  • All taxes except those who are covered under GST
  • All taxes & Cess covered under GST such as CGST, SGST or IGST, compensation cess.
  • Goods supplied back to a job worker
  • Goods received back from a Job worker
  • Inward supplies on which tax payment is done under reverse charge
  • Activities which do not come under the supply of goods or services as per schedule III of CGST act.

Read Also: Reverse Charge Mechanism under GST

GST Audit by Tax Authorities

  • Audit of a taxpayer may be conducted by CGST/SGST commissioner or any authorized officer.
  • A notice will be sent by the tax authorities to the auditee at least 15 days before GST audit.
  • The audit will be completed within 3 months from the date audit is initiated by the tax authorities.
  • Commissioner can lengthen the audit period for another 6 months with causes recorded in writing.

Obligations of the Auditee

Obligations include what are the responsibilities of an auditee or what an auditee required to do. The taxable person needs to perform the following responsibilities –

  • To provide information as well as assistance to the auditor in order to complete audit on time.
  • Provide required facilities to the auditor for verification of books of accounts & other documents (if needed)

Audit findings

After concluding the audit, audit officer prepares a audit report within 30 days containing the following –

  • Findings
  • Reason of findings
  • Rights & obligations of taxable person

Recovery actions will be initiated by the auditor in case of unpaid tax or short payment of tax or wrong input tax credit availed or wrong refund processed.

Special Audit

When special audit is required?

A special audit may be required in the following circumstances –

  • When the value has not been correctly declared by the auditee during any stage of scrutiny/inquiry/investigation
  • When the wrong credit has been availed by the auditee during any stage of scrutiny/inquiry/investigation

Special audit can also be conducted in case the taxpayer books of accounts are already been audited before.

Who will order for Special Audit?

Assistant commissioner can order for special audit in writing by taking prior approval from the commissioner.

Who will carry Special Audit?

Special audit is carried out by a Chartered Accountant/Cost Accountant nominated by the commissioner.

What is the time limit for Special Audit?

Auditor doing special audit needs to submit the report within 90 days. It may be extended further by the tax officer for 90 days on the application request made by the taxable person or by the auditor.

Who will pay the cost of Special Audit?

The expenses incurred by the auditor during the audit process are borne by the commissioner. It also includes remuneration given to the auditor.

Findings of Special Audit

Findings of special audit mean the positive/negative results obtained by the auditor after analyzing the records of the taxpayer. Taxpayer will also provide an opportunity of being heard by the auditor in findings of the special audit.

Recovery action may also be taken by the auditor in the following cases –

  1. Unpaid tax
  2. Short payment of tax
  3. Input tax credit wrongly availed
  4. Wrong refund

Differences between Statutory Audit, Departmental Audit, Special Audit and Management Audit

Basis of Distinction Statutory Audit Departmental Audit Special Audit Management Audit/reviews
Scope Books of accounts are examined Books of accounts are examined Books of accounts are examined keeping in mind the notice received by the taxpayer Books of accounts are verified or special investigation can be done on assesse’s demand
Appointment (Auditors) Appointed by the taxpayer Appointed by the department Appointed by the Scrutiny officer Appointed by the taxpayer
Fees Auditor is hired by the taxpayer. Hence, taxpayer will pay the fees N/A Auditor is hired by the officer. Hence, officer will pay the fees. Auditor is hired by the taxpayer. Hence, taxpayer will pay the fees.
Time allotted for audit On or before 31st December 3 months are allotted but it may extend further to 6 months (Maximum) 90 days are allotted but it may extend further to 90 days. Time allotted is mentioned in the audit engagement lette.

What are the Documents required for GST Audit?

The documents required for GST audit are as follows –

  • Purchase bill
  • Sales bill
  • Credit ledger copies
  • Electronic cash ledger copies
  • Refund documents (If applied for)
  • E-way bill generated copies
  • ITC-02 copies (If applicable)
  • TRANS-01 copies (if applicable)
  • TRANS-02 copies (if applicable)
  • Copies of debit notes
  • Copies of credit notes
  • Copy of statement of reconciliation
  • HSN wise summary
  • Job work invoices
  • Delivery challans copy
  • RCM challan copy
  • RFD-01 (if generated or applied for refund)
  • GSTR 3B, GSTR 1 & GSTR-2A for all months
  • Copy of any other order/notice issued by department
  • Financial statements audited by chartered accountant or cost accountant
  • Copies of reconciliation for GSTR-3B & GSTR-2A, GSTR-3B & GSTR-2A, GSTR-3B & GSTR-1

Forms for Annual Return and GST Audit

Type of taxpayer Form to be filed
Is it applicable to GST audit?
For Regular taxpayers filing form GSTR 1 and GSTR 3B GSTR 9
For Taxpayers using composition scheme GSTR 9A
For E-commerce operators GSTR 9B
Applicable for GST Audit
Taxpayers having turnover of more than Rs 2 Crores in a FY GSTR 9C

Due Dates for Submission of GST Audit Report

There are 2 main GST reports prepared in GST audit –

Report Type of taxpayer Due date
GSTR 9A Normal taxpayer On or before 31st December
For Taxpayers using GSTR 9C Taxpayers having turnover above Rs 2 Crores On or before 31st December

Penalty for not submitting GST Audit Report

There is no specific provision created to penalize a taxpayer on non-submission of GST report. Hence, a general penalty of Rs 25,000 will be applied on the taxpayer.

What Is Included In Our Package?

Eligibility Consultation

Document Preparation

Application Drafting

Government Fees

GST Audit FAQ’s

Taxpayers having turnover of more than Rs 2 Crores in a particular financial year are eligible for GST audit.
The limit for GST audit is Rs. 2 Crores.
GST audit is required to verify the records, returns & documents maintained by the taxable persons and to ensure that whether company is following all GST compliances or not.

As per u/s 35(5) of the CGST act, following persons can do audit under GST –

  1. Chartered accountant
  2. Cost accountant
No rectification is allowed in case of GST returns after the due date for filing of return for the month of September or second quarter following the end of the financial year or actual date of filing the return (whichever is earlier). He can rectify it by paying the interest.
The commissioner of CGST/SGST or any other authorized officer may conduct general audit of a tax payer. The auditor needs to complete the audit within 3 months from the date of commencement of the audit. The commissioner has the right to extend it further by 6 months by giving reason in writing.
An auditor should submit the special audit report within 90 days.

How FinacBooks helps in GST Audit?

Finacbooks is one of the leading Indian firms with more than 10 years of experience in helping businesses with GST audit. To avail the best deals on GST audit, kindly call us at 8800221252 or you can also e-mail us at info@finacbooks.com

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