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 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.