Audit under GST


Audit under GST involves an examination of returns, records, and other documents maintained by a registered taxpayer. It also ensures the correctness of taxes paid, turnover declared, input tax credit availed & refund claimed. GST Audit also checks the compliances under the GST Act to be checked through an authorized expert.

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Audit under GST

GST audit includes checking accounts, receipts, and other documentation kept by an individual registered with GST. It also guarantees the accuracy of the reported turnover, the taxes charged, the rebate received, the input tax credit used, and the determination of all such compliances to be reviewed by an authorised professional under the GST Act.

GST is a trust-based taxation system that allows an individual to self-assess their tax obligation, pay taxes, and file reports. Therefore, a reliable evaluation or a GST audit process is a must to ensure that the taxpayer has properly calculated his tax liability. The government is taking various measures to properly implement GST, and auditing is one among them.

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Benefits of GST Audit

  • The actual supply date should be known, and taxes are never accrued (i.e. paying before due) or post-charged (i.e. paying longer than due) and payable on schedule as a result. It often contributes to a reduction in interest rate (both on prepayment and post-payment) and fines (in post-payment cases). For example tax liability on consumer's advance receipts, etc.
  • The actual location of supply so that the appropriate taxes are received and charged accurately (IGST, CGST, SGST) because inaccurate yet full payment of taxes is no justification and the taxes under the respective suppliers must be paid correctly.
  • HSN codes for the products and services were properly defined and submitted in return GSTR 1.
  • Any over-collected tax must be paid to the government because it will lead to profiteering, and consequently enormous penalties. Similarly, any levy of tax must be paid by the supplier or seller.
  • Taxes on products & services are levied and paid at appropriate GST rates since the year has seen several changes in the tax levels of various items.
  • Account books were maintained following the way set down under the ACT.
  • The invoices were correctly raised (i.e. with full information held).
  • Matching GST returns for account books.
  • GST electronic credit & cash register corresponding with the payment expressed in the books.
  • Find if there are any GST input Tax Credit not claimed. Eg: bank fees, bills of sundry expenses such as printing & paperwork, etc.
  • Noting down of fixed assets acquired on taxable valuation and allowing the use of the appropriate GST input tax credit such that GST ITC can be applied properly and entirely and even depreciation on the tax value can be measured.
  • The payment that is due under the reverse tax, is for a few different facilities.
  • Reversal of any ITC which has been falsely claimed or is likely to be overturned.
  • For the export markets, demanding the right refunds for the tax charged on the inputs.

Checklist for GST Audit

The following are the required checklists for the GST Audit which involve strict compliance:

GSTR 3B regulations in support of GSTR 1 & GSTR 2A:

Under this, there are two significant points:

Under this, the receiver may demand additional input tax credit. So for this, he/she is obligated to make an interest payment at 24 percent. This refers to the sum of the sales tax. The auditors must match the GSTR 3B with GSTR 2A to ensure that the company will not assert any extra tax credit. Whether it was charged in excess, inflation and the tax payment will be incurred by the corporation on the date applied. As the GST authorities are informed of the data discrepancies between GSTR 3B and GSTR 2A, taxpayers may have to pay both the interest amount and the penalty.

  • Penalties and interests under the GST Act:

Once the auditor is conscious of the data discrepancies he/she must suggest that the managers make a summary level adjustment of the invoices in GSTR 1.

  • Amendment in GSTR:

Checks invoice details:

It is quite obvious that strict guidelines are in effect for the details of the invoices. If the invoice style changes, he will urge the management to create an invoice modification to provide the specifications of the GST regulations.

Input tax credit for failure to pay in 180 days is reversed:

The GST auditor has to find out the following information at this stage:

  • Difference between the invoice and the payment date. Also, it shouldn't exceed 180 days.
  • The payment amount shall remain equal to the amount of the invoice and the GST. If the expenditure balance is smaller than the sum invoiced along with the GST, there will be a reversal of the input tax credit to the point of short payment.

Reviewing e-way bills and invoice matching:

This stage is composed of three steps, such as:

  • Consequences of some misalignment reported in the invoice e-way charge. And it's a common reality that an e-way bill can not be changed and can't be removed. Yet cancellation within 24 hours of the creation is acceptable. The appointed authority could issue a fine for this if the items are transferred without the e-way bill.
  • Other important points:
  • If a company needs them, e-way bills become completely unavoidable.
  • And information will fit with the invoice provided in the e-way bill

If the movement happens in non-motorized cars, there is no need to file the e-way request. Since certain companies are taking this method to stop e-way bills, the audit committee needs to investigate the e-way bill which is over Rs.50,000 worth.

  • Goods transferred in non-motorized vehicles:

Cross-checking the pending stock of staff on June 30, 2017:

Goods that are with workers on 30th April 2020 will be obtained within one year. Capital goods residing with staff will be returned by August 30, 2022, which is within a two-year period.

What are the steps involved in GST registration through Vakilsearch?

  • Step 1: We help you get a Secure GST Identification Number.
  • Step 2: We make it easy for you to get your GST from the comfort of your own home.
  • Step 3: We will file your returns and complete all other compliances as and when required.

Documents required for GST Audit.

  • Offer letter addressing the auditor's and management's scope and goals, and management's approval of the same (SA 210).
  • Audit program and plan. (As 300 SA).
  • Letters of engagement and appointment.
  • Sample copies of the contracts, invoices, etc.
  • Full audit checklist for audit GSTR 9C / GST.
  • Authorized letters of approval (SA 580) were received from administration.
  • The relevant problems found through the evaluation, and organizational process failures, which are reported to management. (SA 260 et 265)
  • The impact of failure to comply with a specific law, and sharing the same information to TCWG. (SA 250)
  • Reasons are given, copies of GST returns, tax details payable & credit used, sales made etc.
  • The risk management technique is used in high-risk areas and low-risk areas.
  • All the working papers are in electronic form at CIS Environment. This may involve CSV, Excel, JPEG, JSON, etc. The GST Auditor shall provide, in Part A and Part B of GSTR 9C, a description of the collection of files as an index and the output of such files and a crosslink with different points.
  • Proof collected during the audit is necessary and appropriate.

FAQs on Audit under GST

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