GST Audit for Taxpayers above 2 Crore Turnover


GST Audit is one of the measures taken by the government for proper implementation of GST. Section 35(5) of the CGST Act mentions provisions for a turnover-based GST audit. It says if the annual turnover of a registered taxpayer is above Rs. 2 crores in a financial year, he must get his accounts audited by a Cost Accountant or a Chartered Accountant every year.

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GST Audit for Taxpayers above 2 Crore Turnover

GST is a trust-based taxation system in which the applicant is allowed to self-assess his tax responsibility and charges the same for himself, without any interference by the tax authorities. To guarantee that the self-assessed GST returns are not misappropriated, the government has in place a rigorous audit process to test and verify that the taxpayer complies with the requirements of the GST statute. If, within the financial year, the revenue touches Rs. 2 Crores, the taxpayer is expected to get his records audited by a Chartered Accountant or Cost Accountant. They are expected to include a copy of the annual reports and accounts and a properly certified summary document in Form GSTR 9C on or before 31 December. The GST audit limit is the same for all taxpayers registered, i.e. no distinct GST audit limit is set for special category states or union territories.

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Benefits of GST Audit

  • The actual place of supply such that the required taxes are levied and assessed properly (IGST, CGST, SGST) as incorrect and full payment of taxes is no excuse, and taxes must be paid appropriately by the respective suppliers.
  • Properly specified and provided HSN codes for the goods and services in exchange for GSTR 1.
  • The exact date of SUPPLY will be known, so taxes are neither paid (i.e. paying before due) or post-ordered (i.e. charging later than due) and as a result payable on time. This also leads to reduced interest rates (both on prepayment and post-payment) and fines (in situations of post-payment). For example tax liability on advance receipts received by consumers, etc.
  • Any over-collected tax needs to be charged to the government because it would result in profiteering, and therefore massive fines. Likewise, the manufacturer or retailer will incur some tax levy.
  • Good & Service taxes are charged and collected at effective GST rates as the year has seen many adjustments in the tax levels of different products.
  • Account records are held in compliance with the manner set forth under the ACT.
  • The invoices were collected appropriately (i.e. keeping complete information).
  • Matching the GST returns for account books.
  • GST electronic credit & cash register equal to the tax reflected in the accounts.
  • Find if there is any not stated GST input tax credit. Eg: bank charges, sundry cost bills like printing & paperwork, etc.
  • Noting down of fixed assets accumulated on taxable appraisal and enabling the usage of the necessary GST input tax credit in such a manner that GST ITC may be implemented accurately, totally, and also the tax benefit depreciation can be calculated.
  • The payment that is due under the reverse tax, is for a few different facilities.
  • Reversal of any ITC that has been, or is probable to be, wrongly reported.
  • For the exporters, claiming the correct reimbursement for the input tax charged.

Checklist Types of GST Audits

The 2017 GST Act allows for three forms of Audit.

The chartered accountant or tax accountant audit GST:

Section 35(5) of CGST Act, 2017, the first examination shall be performed by a cost accountant or a chartered accountant. Each enrolled individual whose gross revenue exceeds two crore rupees within a financial year shall have his or her reports audited by a CA and include a copy of the audited annual reports and a properly certified reconciliation statement in FORM GSTR-9C.

GST Departmental Audit:

Section 65(1) of the CGST Act, 2017, the second form is the regular audit, the GST law gives the audit authority to the Commissioner or to any officer allowed by him/her to conduct the audit of any registered individual at such frequency and in such a manner as may be required for that time.

GST-Special Audit:

The third form of audit, Section 66(1) of the CGST Act, 2017, is named the Special Audit. In Special Audit, the licensed individual could be required to have his documents checked and audited at any point of inspection, examination, prosecution, or other litigation, like account books, by a chartered accountant or expense accountant; depending on the nature of the situation.

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 GST Audit

  • An Offer letter which includes the auditor and the management's scope and goals.
  • A Letter of Engagement.
  • A Letter of Appointment.
  • Audit plan details, and the audit program as well.
  • A full GST or GSTR-9C audit checklist.
  • A sample copy of receipts or agreements etc.
  • A written copy of the letters obtained from the administration about the representation.
  • Duplicate copies of GST returns, tax-paid details, and also credit used or sales made, etc.
  • The relevant problems that were found through the evaluation and organizational control failures that were reported to management.
  • It should be noted the risk management method extended for high-risk areas and even low-risk areas.
  • Evidence obtained during the audit is necessary and relevant.
  • All research papers have to be in electronic form like JPEG, PDF, CSV, Excel, JSON, etc.

The list provided above is not inclusive, so it is also important to record all other documents that are required or appear essential.

The purpose of GST audit documentation are as follows:

  • To show the audit was prepared and carried out in compliance with auditing practices.
  • To support the engagement team in the successful preparation and execution of the GST audit.
  • To function as proof to demonstrate that the auditors have achieved the overall targets set by the auditors.
  • To promote transparency and obligation for the job within the engagement team.
  • To allow the reporting partner to assure adequate completion of all planned works.
  • To assist in the preparation and tracking of future audits.
  • Foster a methodical approach.
  • To allow external inspections, reviews per statutory legislative, regulatory, or other standards.
  • To maintain records of matters relevant to the continuity of future audits.

FAQs on GST Audit for Taxpayers above 2 Crore Turnover

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