Frequent updates in GST audit regulations affect the business community. Changes in thresholds, compliance norms, and procedures have implications for taxpayers, making it essential to be well-informed and adapt to the latest GST audit developments.
Audit under GST
A GST audit is a process of examining the GST records of a taxpayer to verify compliance with the GST law. Audits can be conducted by the taxpayer’s own auditor or by the GST authorities.
Recent Updates on GST Audits
- Model All India GST Audit Manual 2023: The Central Board of Indirect Taxes and Customs (CBIC) has released the Model All India GST Audit Manual 2023 for the Centre and state tax officials. The manual lays out standard principles for selecting audit cases, preparing and conducting audits, and issuing audit reports.
- GST audit requirement by specific professionals removed: The GST law has been amended to remove the requirement for GST audits to be conducted by specific professionals such as Chartered Accountants (CAs) and Cost and Management Accountants (CMAs).
- GSTR-9C reconciliation statement removed: The requirement for taxpayers to file the GSTR-9C reconciliation statement has been removed.
- GST audits to be deferred for three months: The GST department has deferred the time limit for taxpayers with an annual turnover of Rs. 100 crore or more to report tax invoices and credit-debit notes to the Invoice Registration Portal (IRP) in three months. The new implementation date is yet to be announced.
Objectives of GST Audit
The objectives of a GST audit are to:
- Verify the accuracy of the taxpayer’s GST returns.
- Ensure compliance with the GST law.
- Detecting and preventing tax evasion.
- Improve the taxpayer’s understanding of the GST law and procedures.
GST Audit Checklist
The following items are typically included in a GST audit checklist:
- Registration details
- GST returns filed
- Input tax credit availed
- Output tax liability discharged
- Invoicing and record-keeping practices
- Other relevant documents
Threshold Limit for Audit under GST by CA/CMA
The GST law does not prescribe any threshold limit for audit by CA/CMA. However, the CBIC has issued guidelines recommending that taxpayers with an annual turnover of Rs. 50 crore or more should have their GST records audited by a CA or CMA.
Rectifications to Returns After GST Audit
If the auditor finds any errors or omissions in the taxpayer’s GST returns, they will recommend rectifications. The taxpayer can rectify the errors and omissions by filing revised returns.
Audit by Tax Authorities
The GST authorities can select any taxpayer for audit, irrespective of their turnover. The selection of audit cases is typically based on risk factors such as:
- High turnover
- High input tax credit availed
- Sectoral risk factors
- Previous audit findings
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Obligations of the Auditee
The auditee is required to provide all relevant documents and information to the auditor. The auditee must also cooperate with the auditor and respond to any questions they may have.
Findings of Audit
The auditor will prepare an audit report outlining their findings. The audit report may contain recommendations for rectifications, if any. The taxpayer must respond to the audit report within the prescribed time limit.
Documents Required for GST Audit
The following documents are typically required for a GST audit:
- GST registration certificate
- GST returns filed
- Invoices issued and received
- Debit and credit notes
- Payment and receipt vouchers
- Stock register
- Purchase register
- Sales register
- Input tax credit ledger
- Output tax liability ledger
- Any other relevant documents
Due Dates for Submission of GST Audit Report
The due date for submission of the GST audit report is 31st December of the subsequent financial year. For example, the GST audit report for the financial year 2022-23 must be submitted by 31st December 2023.
Penalty for not submitting GST Audit Report
If a taxpayer fails to submit the GST audit report by the due date, they will be liable to pay a penalty of Rs. 25 per day. The penalty is capped at 0.5% of the taxpayer’s turnover.
Who is liable for the GST Audit?
All taxpayers with an annual turnover of Rs. 2 crores or more are required to have their GST records audited by a chartered accountant or a cost accountant. However, the GST authorities can select any taxpayer for audit, irrespective of their turnover.
How to Prepare for a GST Audit?
The following points can guide the auditee in preparing for a GST audit:
- Ensure that all GST returns have been filed on time and accurately.
- Keep all GST records in a systematic manner.
- Reconcile all GST accounts regularly.
- Be prepared to answer any questions that the auditor may have.
Types of Audits under GST
There are two main types of audits under GST:
- Self-audit: This is an audit conducted by the taxpayer’s own auditor.
- Departmental audit: This is an audit conducted by the GST authorities.
Special Audit under GST
The GST authorities may conduct a special audit if they have reason to believe that a taxpayer is not complying with the GST law. Special audits are typically more detailed and comprehensive than regular audits.
When Can a Special Audit Be Initiated?
A special audit under GST can be initiated when the Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits.
Who Will Order and Conduct a Special Audit?
A special audit under GST is ordered by the Assistant Commissioner and conducted by a chartered accountant or a cost accountant nominated by the Commissioner.
What is the Time Limit to Initiate a Special Audit Under GST?
A special audit under GST can be initiated at any stage of scrutiny, inquiry, investigation, or any other proceedings before the Assistant Commissioner.
Who Will Bear the Expenses of the Special Audit?
The expenses of the special audit, including the remuneration of the chartered accountant or cost accountant, are borne by the taxpayer. Register under GST to comply with legal requirements and avoid penalties.
How Are the Findings of the Special Audit Dealt With?
If the special audit results in the detection of tax not paid short paid or erroneously refunded or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74 of the CGST Act.
Differences between Statutory Audit, Departmental Audit, Special Audit, and Management Audit
| Type of Audit | Objective | Who conducts the audit? | Who bears the expense of the audit? |
| Statutory Audit | To ensure compliance with the law and to provide a true and fair view of the financial position of the business. | Chartered Accountant or Cost Accountant | Taxpayer |
| Departmental Audit | To verify compliance with the GST law and to detect and prevent tax evasion. | GST authorities | Taxpayer |
| Special Audit | To investigate specific suspected irregularities in the taxpayer’s GST records. | Chartered Accountant or Cost Accountant nominated by the Commissioner | Taxpayer |
| Management Audit | To evaluate the efficiency and effectiveness of the business and to identify areas for improvement. | Internal auditor or external auditor | Taxpayer |
GST Audit FAQs
Who is eligible for the GST audit?
All taxpayers with an annual turnover of Rs. 2 crores or more are required to have their GST records audited by a chartered accountant or a cost accountant. However, the GST authorities can select any taxpayer for audit, irrespective of their turnover.
What is the limit for the GST Audit?
The threshold limit for GST audit is Rs. 2 crores. However, as mentioned above, the GST authorities can select any taxpayer for audit, irrespective of their turnover.
Why is a GST Audit required?
GST audit is required to:
- Verify the accuracy of the taxpayer's GST returns
- Ensure compliance with the GST law
- Detect and prevent tax evasion
- Improve the taxpayer's understanding of the GST law and procedures
Who can do Audit under GST?
GST audits can be conducted by either a chartered accountant (CA) or a cost accountant (CMA). The CA or CMA must be registered with the Institute of Chartered Accountants of India (ICAI) or the Institute of Cost Accountants of India (ICAI), respectively.
After the GST audit, whether rectification is allowed in GST returns?
Yes, rectification is allowed in GST returns after a GST audit. However, the taxpayer must file the revised returns within the prescribed time limit.
Who conducts the general audit? How much time is needed to complete the general audit? Whether it can be extended?
General GST audits are conducted by the GST authorities. The time required to complete a general audit depends on the size and complexity of the taxpayer's business. However, the GST authorities are required to complete the audit within 3 months from the date of commencement of the audit. This period can be extended by a further 6 months with reasons recorded in writing.
