GST Audit by Tax Officers

GST Audit is a process of evaluation and examination of the taxable person’s filed and maintained records, documents and returns. The purpose of conducting GST Audit for a taxpayer registered under Goods and Services Tax (GST) is to verify the correctness and fairness of the declared turnover, claimed refunds, paid taxes and availed Input Tax Credits by the taxpayer. Also, it helps to check the compliance of assesses with the prescribed provisions of the GST. The GST department or Council conducts the audit as per the GST Audit Checklist prescribed by the CGST Laws.

Prescribed Threshold Limit for GST Audit:

All the GST registered taxpayers are liable to get audited under GST if the turnover for a financial year exceeds the prescribed threshold limit of Rs. 2 Crore. They become liable to get their accounts and financial statements audited by a Cost Accountant or Chartered Accountant. It is the duty of the taxpayer to file the following through electronic mode-

·         Copy of the audited annual accounts

·         Annual Returns through Form GSTR-9 on or before 31^st December of the next fiscal year.

·         Reconciliation statement, reconciling the audited annual financial statements and the value of the declared supplies in Form GSTR-9C certified by a CA

·         Any other particulars or forms or documents as may prescribed in CGST Act, 2017

Audit by Tax Authorities:

Once the taxpayer meets the above-mentioned conditions for the GST Audit, they are liable to get audited by the tax authority. Here are some related facts for the same-

·         The Central Goods and Services Tax (CGST) or State Goods and Services Tax (SGST) Commissioner or any authorized officer by him can conduct a GST Audit of the taxpayer.

·         The taxpayer is intimated about the audit beforehand, at least 15 days in advance through an issued notice by the authority.

·         The GST Audit of the taxpayer has to be completed within 3 months from the date of the commencement of the audit.

·         The audit period can be extended for a period of six months but not more than that by the commissioner by recording the reasons for the extension in written format.

Also Read: GST Audit for Government Company- What you should know?

Auditee’s obligation:

There are certain obligations on the taxable person during the GST Audit. He/ she is required to-

·         Furnish information and assistance or cooperation to the tax officer for on time completion of the audit.

·         Provide with all the essential or necessary facilities for verification of the financial statements, books of accounts or other documents as may be required.

Audit findings:

Once the GST Audit is concluded, the tax officer is required to inform about the same to the taxpayer within 30 days of the following-

·         The findings of the GST Audit

·         Reasons behind the findings

·         Rights and obligations of the taxpayer as prescribed in the CGST Act, 2017

If, the GST Audit findings state any shortly or unpaid taxes or wrong refund claims or wrongly availed ITC, then the authority can initiate a demand and recovery action against the taxpayer for getting the due taxes.

Special Audit:

The GST Audit that is initiated by an Assistant Commissioner after considering the nature and complexity of the taxpayer’s case and interest on the revenue is called as Special Audit. This type of audit is conducted when during any stage of investigation or enquiry or scrutiny, an opinion is formed that the declared values or ITC availed in the returns is incorrect or wrong. It can be conducted even when the taxpayer has already been audited before.

GST Refund Simplified- GST Refund Consultant

The GST Refund as per the Goods and Services Tax (GST) Act, 2017 means the amount or sum that a the person receives back upon the occurring and happening of a particular event. In the term of taxation parlance, the GST Refund Process is a procedure to claim any an amount that is due to the taxpayer with the taxation administration or authority. This amount is to be refunded by the authority to the taxpayer because such tax amount has been paid in excess or for any other viable reason prescribed in the CGST Act, 2017. Some facts related to the GST Refund Services in India are as follow-

1.       The refunds under the GST nowadays have become an open issue in the country. It is a problematic event for almost all the classes of a taxpayer in India. Basically for the exporter class whose working capital is directly affected by these refund amount.

2.       Several types of GST Refund are provided on account of the following-

·         Deemed Exports

·         Excessive balance left in the Electronic Cash Ledger

·         Excessive tax payments due to inadvertence or mistakes

·         Exports of goods and services by paying the IGST or with the LUT or under Bond

·         Miscellaneous refunds

·         Persons holding a registered Unique Identification Number (UIN)

·         Supplies made to SEZ Developer or SEZ Unit by paying IGST

·         Supplies made under Inverted Duty Structure

Related Articles: Guide to Provisional Refund under GST

3.       Some other reasons where the taxpayer that can hinder the application for GST Refund. These situations areas follows-

·         Mistakes made in the GST Return Filing

·         Mistakes made during the manual filing or online filing

·         Lack of clarity on the refund filing form and procedures.

·         Which proper officer is to interact for the refund process

·         Validations that have been placed on the GST Common Portal

·         Confusion created due to issuance of numerous notifications, forms, documents, press release and clarifications.

Scope of GST Refund in the GST Laws and Provisions:

The term “Refund” has been provided an explanation in Section 54 of the Central Goods and Services Tax (GST) Act, 2017. It includes the following-

·         Refund of taxes on the supply of goods that are considered as deemed exports.

·         Refund of output tax paid on the supplies of goods or services or both that are considered zero-rated.

·         Refund of input taxes on the inputs or input services that have been used in producing or making zero-supplied supplies.

·         Refund of the Unutilized Input Tax Credits due to the inverted duty structure as prescribed in Section 54(3) of the act.

We at Ezybiz India Consulting LLP are a team of professional GST Consultants and GST Refund Consultant helping the clients in Delhi, national and multi-national disciplinary with the GST issues and making refund application hassle-free and with ease. We guide the clients from the very the first step of the process till the refund is obtained.

What should be done after receiving notice under Income Tax?

The Income Tax Department collects taxes on various incomes of the registered taxpayer in each financial year as per the Income Tax Act, 1961. In case of default or non-payment of income tax by the taxpayer the department serves various types of Income Tax Notice to the taxpayer. There can be many different reasons for getting notice from the Income Tax Department. In this article, we will try and understand the different types of notices that are issued to the taxpayer.

Types of Income Tax Notice:

·         Notice under Section 131(1A):

This type of Income Tax Notice is served to the taxpayer in case the assessing or proper officer suspects that the taxpayer has concealed his/ her income, this means that where it is believed that the person has hidden the total accrued income in a financial year. A taxpayer who has been served with this type of notice must gather all the sought and related documents and file the same against the reply for the notice within the deadline prescribed in the act. If the documents are incomplete the same is to be attached with an application to seek more time for collecting the relevant documents.

·         Notice under Section 139(9): 

This notice is sent to the taxpayer in case where a wrong form is filed for defective return or where the income details for the claimed refund is missing or where there are multiple numbers of mistakes and errors done in the filing. To respond to such an Income Tax Notice, the taxpayer has to file it within 15 days of the receipt of the notice. They can file the reply using the e-file option in the tax department official website.

·         Notice under Section 143(1):

This is a type of demand Income Tax Notice that is served to a taxpayer for demanding or instructing them to pay additional taxes or other levied payments required due to any calculation mistake or due to incorrect furnished information. The taxpayer shall respond to the department within 30 days of receipt of the notice. One can file the notice in the e-proceeding facility of the taxation department’s online portal.   

Related Article: How to file a reply to Income Tax Notice

·         Notice under Section 148:

An Income Tax Notice under Section 148 of the Income Tax Act, 1961 is served to the taxpayer for the purpose of reassessment in case where the proper officer has a reason to believe that the income of the taxpayer has escaped a particular assessment. Such a notice can be served by the officer for up to six years from the date of such assessment year for which the income has escaped the assessment.  The taxpayer is liable to file a return for the income that has been asked about in the notice. If the taxpayer wants to appeal against the notice then, he can ask for a copy of reasons for issuing such a notice from the taxation department.

·         Notice under Section 156:

Notice under Section 156 of the act is another type of demand notice that is sent to the taxpayers for the payment of due taxes, interests, penalty or fine that they must pay. The taxpayer must pay the dues within 30 days of receipt of the income tax notice under section 156. One can pay the dues by going to e-file facility in the tax department’s website and then click on the Respond to Outstanding Demand, to clear the due amount.

GST Audit and Annual Return

Under the GST Laws implemented in the year 2017 as per the new Goods and Services Tax (GST) Regime, there are these different types of GST Audit-

1. Audit under Section 35 of CGST ACT, 2017: This to be conducted by a Cost Accountant or Chartered Accountant in case the aggregate turnover of the registered person exceeds the limit provided in the said provision.
2. Departmental Audit or GST Audit by Tax Authorities:

·         Special an audit conducted as per the provisions of Section 66 of the CGST Act, 2017.

·         Audit to be done by Commissioner or any other officer authorized by the commissioner as per Section 65 of the CGST Act, 2017.

Provisions for GST Audit and Annual Return in CGST Act:

Under the GST Regime these following provisions have been prescribed for regulating the GST Audit Service and Annual Return-

1.       Section 44(1) of the CGST Act, 2017: It states that

“Every a registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.”

2.       Section 35(5) of the CGST Act, 2017: It states that

“Every registered person whose turnover during a financial year exceeds the prescribed the limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.”

3.       Rule 80 (3) of the CGST Rules, 2017: It provides that

“Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.”

What is turnover and aggregate turnover for GST Audit?

For the purpose of conducting GST Audit for a registered person Section 35(5) uses the term ‘turnover and Rule 80(3) uses the term ‘aggregate turnover’. In the CGST Act, 2017 the definition of aggregate turnover has been defined. Differentiation in both the terms can create a lot of chaos while conducting the GST Audit, but it is to be noted that a limit of turnover has been specified in the act to avoid any chaos or problem. It has been specified that any person or company having a GST Registration and a turnover exceeding Rs. 2 Crore in a financial year is liable to be audited under the act.

Related Articles: Who can do GST Audit- Some FAQs

Annual Returns:

Annual Returns are an additional reporting requirement for the company or the registered person. As per Section 44 of CGST Act, 2017 are to be filed by every registered the person on or before 31^st December of each year. It has been notified that all the normal taxpayers have to file in Form GSTR-9 and taxpayers under the composition scheme has to file the Form GSTR-9A.

Mandatory conduct of an Internal Audit

Internal audit is an evaluation process for companies or organization that is performed by internal auditors. It is a tool that is used to examine the company’s financial as well as non-financial activities and operations. Through the internal audit process, a company is made aware about the prospective risk, compliance status, and operative loopholes and also recommended about the measures and steps that it can take to improve efficiency and effectiveness. The internal audit in India is governed by the Companies Act, 2013, just like cost audit, tax audit, secretarial audit and transfer pricing audit.

Who must have Internal Audit?

The Companies Act, 2013 mandates all the listed companies and certain unlisted public companies to have the internal audit conducted. The following classes of unlisted companies are required to have internal audit:

·         Having paid-up capital exceeding Rs. 500 million in the previous financial year.

·         Having turnover of Rs.2 billion or above in the previous financial year.

·         Having outstanding loans and liabilities exceeding Rs.1 billion

·         Having outstanding deposits for Rs. 250 million

Also, the following classes of Private Companies are required to conduct internal audit-

·         Having turnover of Rs.2 billion or above in the previous financial year.

·         Having outstanding loans and liabilities exceeding Rs.1 billion in the previous financial year.

Who should conduct an internal audit?

For the purpose of conducting Internal Audit in a company, it is recommended to appoint a chartered accountant or a cost accountant as internal auditor to perform the audit.

Related Articles: Major Challenges of Internal Auditing in Future

Is there a penalty for non-compliance of Internal Audit?

There are no specific penal provisions that have been specified by the Companies Act, 2013 for the non-compliance of internal audits in a company or organization. Any sort of non-compliance is prosecuted as per Section 450 of the act, as there is no punishment specified for not conducting an internal audit. In case there is any non-compliance by the auditor or the company, both are liable to pay a fine of Rs.10000.

Are there any key guidelines for conducting an internal audit?

The Securities and Exchange Board of India (SEBI) through Clause 49 of the Listing Agreement has introduced mandatory corporate regulatory governance that is applicable to the listed companies only. As per the clause an audit committee of the company is required to review the following while internal audit:

·         Internal audit report that relates to the internal control weaknesses.

·         Whether the internal audit has been made functional in a proper order after thoroughly reviewing the internal audit department’s structure, frequency of audits, seniority of the officer heading the department, recruitment of the personnel and the remuneration terms of the chief internal auditor.

·         The suspicion of the fraud or forgery or internal control system failure that have been found in the investigation in the internal audit service provided by the internal auditor.

·         The acceptance of responsibility for internal controls effectiveness, disclosure made to the auditor, any deficiencies in the operations and its rectification by the board of directors is to be certified by the Chief Executive Officer (CEO) or the Chief Financial Officer (CFO).

Want to do remittance of Income- Must know about Form 15CA and 15CB

In recent years, remittances of funds between the Indian Residents and Non-Resident Indians have become a common thing. It becomes difficult to collect taxes and track cases on later stages from NRIs, therefore for the same Form 15CA and 15CB are widely used. It is a tool for collecting taxes and keeping a proper track of the remittance of funds done outside India.

Form 15CA:

It is used a measure or tool for gathering and collecting information about all the payments and remittance of funds that are chargeable with taxes in the hands of the Non-Resident Indian. The remitter uses this form as a declaration regarding the tax liabilities that have arisen during the made payments.

Through Form 15CA the Income Tax Department can easily keep a check on the all the remittance of funds made to foreign and can determine the nature of the payments to calculate the tax liability on the income.

Is Form 15CA compulsory?

It is compulsory for the NRIs to file Form 15CA for all the remittance of funds and payments that exceed Rs.5 Lakh in a financial year.

The taxation authorities have made it very clear that this form is not required in cases where the amount of the remittance is not chargeable with taxes. Rule 37BB gives a detailed list of all the income accrued from various sources for which no Form 15CA and 15CB is required to be filed.

Form 15CB:

Form 15CB is used in the remittance of funds and payments where double taxes have to be avoided under the Double Tax Avoidance Agreement (DTAA). It is also used to determine any tax deductions provided by the Income Tax Rules. Form 15CB can be said as a certificate issued by a Chartered Accountant after thorough examination of such payments. It includes the details of the remitter, remit tee, nature of the remittance of funds and other necessary details.

Related Articles- Does Form 15CB is required for payment for purchases?

Procedure for Filling Form 15CA and 15CB:

The Form 15CA has to be filed through online mode on the official website of the income tax authority. It is necessary to furnish all the details of the remitter and the remit tee in the form. Also, to file the form a person must have a valid PAN or Tan Number. Form 15CA has four parts that must be duly filled. These four parts areas follows-

·         PART A: This is filled in when the aggregate of the remittance of funds does not exceed Rs.5 Lakh in a particular financial year either taxable or not.

·         PART B: This filed when a nil rate or lower rate certificate in order as per section 195(2), section 195(3) and section 197 of the Income Tax Act, 1961, has been issued by the Assessing Officer.

·         PART C: It is filed when the remittance of funds or its aggregate exceeds Rs.5 Lakh in a particular financial year.

·         PART D: This is to be filled in where the remittance is not chargeable with domestic law taxes.

Common Myths Regarding Loan against Property

Loan against Property or LAP has always been a popular way of getting extra funds for so many purposes such as for financial crunch or business or any other reason. But there are so many myths that revolve around the concept of Loan against property. In this article, we will burst these myths or some common misconceptions about loans against Property for better understanding related to LAP.

·         Myth 1: Taking loan at higher rates is better than pledging property or home as security

In case the loan the applicant has a very good credit score and history and has the property of worth the value then the Loan against Property can be a really good deal. It offers the person to avail larger amount of funds or loan amount at lower and better rate of interest that the person can easily pay in the form of monthly installments or EMIs. Compared to other loans LAP is more beneficial and have a lower rate of interests proving it the most valuable financial tool.

·         Myth 2: One cannot use the property pledged

It is one of the most common beliefs that once a property has been pledged by the loan applicant to the bank or financial institutions for availing loan, it cannot be used till the amount is repaid. This is not true because till the time of the tenure of the repayment of loan against property is not completed the property is the sole property of the person and the bank. In case the person fails to repay the loan, then the bank or the financial institution can undertake the property and sell it to recover the debt.

·         Myth 3: One can borrow the full value of the property as loan amount

It is a myth that a person can avail the full value of the property as the loan amount, but this is incorrect. The banks or financial institutions provide only 70 to 90% of the total of the property. Therefore, it is advisable to the applicant to always estimate the value of the property before applying for the loan against property.

·         Myth 4: One can only pledge residential property

This is a myth and not a fact. All the lenders provide loan against property to the applicant based on the property that is residential or commercial. Some banks or NBFCs also provide Flexi Loans on the pledged property.

Also read: Which is better Loan against Property or Gold Loan

·         Myth 5: A high-income level or bracket is required for the loan application

While applying for the Loan against Property, income brackets or levels of the applicant is not usually determined by the lenders and neither this affects the loan application. The value of the property is what is determined in the loan application.

·         Myth 6: High rates of interest

It is usually considered by loan applicants, availing a Loan against property that the rate of interest on such loan is quite high, which is far away from the truth. Since LAP is a secured loan, therefore, the lenders provide this loan on lower rates of interest.

 

ROC Compliance- An Introduction

Meaning of ROC Compliance:

In the Ministry of Corporate Affairs (MCA), there is an office called as the Registrar of Companies (ROC) that is empowered to administrate and regulate the provisions of the Companies Act, 2013. An ROC is appointed as per the Section 609 of the Companies Act in various states and Union Territories in India. it has been vested with the role and responsibility to ensure that different company registrations in the country are fulfilling the statutory requirements on annual basis or not.

Every year most of the companies are required to fulfill certain compliances to be compliant with the mandated rules and regulations. For this purpose, they are mandated to file certain forms and along with relevant documents with the ROC. This is called as ROC Compliance process.

Related Articles: ROC Compliance Checklist for Small Companies in India

Items included in ROC Compliance:

The following points or items are included in the ROC Compliance checklist for most of the company registrations in India-

·         Board Report

·         Compliance by Director

·         Annual Report

·         Updated Statutory Registers maintained by the company

·         Drafting of Notices to be issued

·         Annual Filing and related documentation

Procedure to file ROC Compliances

The procedure to file is quite easy and can be done by the company or applicant on the MCA portal itself or with the Registrar of Companies (ROC). It includes the following steps-

1.       Fill in the form: The applicant is required to fill in their complete details and personal information on the portal.

2.       Submission of documents: The person is required to submit along all the necessary documents and proof to support the information and data provided by them during ROC Filing.

3.       Document Verification: All the required documents, forms and prepared returns are verified for its authenticity and correctness.

4.       Filing the forms: The forms are required to be filled in along with the updated records and returns with the ROC.

5.       Submitting the form: Once the return is filed, the applicant is required to attach their Digital Signature Certificate (DSC) and submit the same.

Documents required for ROC Compliance:

1.       Memorandum of Association (MOA) of company

2.       Articles of Association (AOA) of the company

3.       Certificate of Incorporation or Registration Certificate of the company

Documents required to be filed for ROC Compliance annually:

The forms and documents below are to be furnished to the Registrar of Companies for ROC filing and fulfilling the ROC Compliance requirements-

1.       Form MGT-7 to be filed for furnishing Annual Return to complete ROC Compliance. The following details are to be provided in this form-

·         Details of registered office or place of business of the company.

·         Particulars related to holdings of the company.

·         Details of Associate companies.

·         Information about principal business and activities of the company.

·         Debentures and shares.

·         Securities and pattern of shareholdings in the company.

·         List of debenture holders and members with any recent changes.

·         Indebtedness

·         Details of members meetings

·         List of promoters, key managerial personnel, and directors.

·         Remuneration details of the directors and the key managerial personnel.

·         Compliance matter related certifications

·         Other relevant information as required in the form.

2.       Form AOC-4 to be filed for furnishing the Financial Statements & Other Documents for ROC Compliance. Most of the company registration in India has to file in their financial statements and related documents through the Form AOC-4 on an annual basis. These financial statements to be filed for annual ROC Compliance are to be adopted in the Annual General Meeting (AGM) of the company. In case it wasn’t adopted in the meeting then a un-adopted statement of financials has to be filed with the ROC within 30 days of the date of conclusion of the AGM.

If the financial statements of the company are not adopted in an Annual General Meeting then un-adopted financial statements should be filed within 30 days of the date of AGM.