WHAT IS AUDIT UNDER GST?
GST Audit precisely means to examine the records, returns and various other relevant documents that are supposed to be maintained by the registered taxable person. Basically, the objective is to validate that the turnover as declared by the taxpayer, various taxes paid by him, claim for refund and all input tax credit availed are accurate and true.
NEED OF GST AUDIT
GST is a trust-based taxation regime wherein a taxpayer is required to self-assess his tax liability, pay taxes and file returns. Therefore, it is necessary to assess whether the taxpayer has correctly estimated his liability of tax for which a robust audit system is required. The Government is looking forward to taking various modes to implement the GST effectively an audit is one of these measures initiated by the government.
APPLICABILITY AND SCOPE OF GST AUDIT
As per the applicability provisions specified by the GST Council, every registered taxable person whose turnover during a financial year exceeds INR 2 Crore, it is mandatory for him to get his accounts audited by a chartered accountant or a cost accountant. Therefore, he will file online:
- The annual return i.e. Form GSTR-9 along with the reconciliation statement by 31st December of the next Financial Year
- A copy of the audited annual accounts
- A reconciliation statement, reconciling the value of supplies declared in the annual return with the audited annual financial statement
- Other details as given.
TYPES OF GST AUDIT
- Audit by Chartered Accountants / Cost Accountants u/s 35[5] of the CGST Act.
- Audit by Department u/s 65 of the CGST Act.
- Special Audit by Chartered Accountants / Cost Accountants u/s 66 of the CGST Act.
I. AUDIT OF ANNUAL ACCOUNTS
Every registered person whose turnover during the year exceeds Rs. 2 crores will get his accounts audited by Chartered Accountants / Cost Accountants u/s 35[5] of the CGST Act,2017. He will furnish a copy of audited annual accounts and reconciliation statement duly certified on Form –GSTR-9C on common Portal – Rules -80(3) of the CGST Rules, 2017.
II. AUDIT BY TAX AUTHORITIES
- Commissioner or any officer authorized by him in general or special order may exercise audit of any registered person for such a period.
- The period of audit may be a financial year or multiples thereof. Rule 101(1)
- The registered person shall be issued a notice at least 15 working days before the start of the audit as may be prescribed. Notice shall be issued on Form –GST ADT-01
- The audit above shall be completed within a period of 3 months from the start of the audit.
- Where the audit cannot be completed within 15 days, the commissioner may extend the same for a further period not exceeding six months to complete the same for reason written in writing.
- Authorized officers during the course of the audit may ask for the necessary facility to verify the books of accounts.
- After the conclusion of the audit, a proper officer within 30 days, inform the registered person of his finding, he’s right, and obligation. This shall be informed by Form GST ADT-02. Rule 101(5) of CGST Rules, 2017
- Where the audit results in tax short paid, not paid or mistakenly refunded or input tax credit is being wrongly availed or utilized, the concerned officer in charge may start proceeding u/s 73 or 74.
III. SPECIAL AUDIT
- If at any stage of scrutiny, inquiry, investigation or any other proceeding, the officer not below the rank of Asst. Commissioner, where he finds that value has not correctly declared, the credit availed is not within limits, may with the prior approval of the commissioner, direct the registered person by communication in writing to get his records and books audited by Chartered Accountant or Cost Accountants as nominated by the commissioner. Intimation to RP shall be provided on Form ADT-03 of Rules 102 of CGST Rules, 2017.
- Auditor, as mentioned above, will provide a report within 90 days duly signed to concerned Asst. commissioner.
- The registered person shall be informed of the finding of this report on Form- GST ADT 04. Rule 102 (2) of CGST Rules.
- The assistant commissioner may extend this period of 90 days for a further period of 90 days for reason in writing.
- Special audit under section 66 shall have effect despite the registered person is being audited under the provision of the Act or any other law for the time being in force.
- The expenses of audit and remuneration of special auditors shall be paid by the commissioner.
- If the observation of the special audit states less tax paid, or not paid at all or refunded irrelevantly or input tax credit is availed or utilized mistakenly with the incorrect amount, the concerned authority may start proceedings u/s 73 or 74.
REQUIREMENT OF GST AUDITOR & HIS ELIGIBILITY
GST Audit u/s 35 can only be performed by a Chartered Accountant or a Cost Accountant
Key points to consider:
- GST Auditor cannot function as an internal auditor simultaneously.
- GST practitioner is not allowed to perform the audit as per the GST Act. Only those Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants have the power to audit. That’s why; CAs should not be registered as a GST practitioner for issuance of the Audit report.
- If any organization or unit has multiple branches that are registered under GST in various states/UTs, the gross cumulative turnover of all branches will be measured at the time of calculation of the threshold limit of Rs. 2 crores. In case the aggregate turnover of all these branches is more than 2 crores, then the GST audit will be mandatory for all these branches, irrelevant of the fact whether the specific’s branch turnover is lesser than the threshold.
In these types of cases, we can either appoint one full time committed auditor for all the respective branches or a different auditor for every branch. In case there are separate auditors are there for separate branches, the Standards on Auditing: SA 299 — i.e. it will be the joint responsibility of all the auditors for GST Audit observations & Reporting.
EXECUTING GST AUDIT AND ISSUANCE OF AUDIT REPORT
RECRUITMENT OF GST AUDITOR:
GST Auditor is appointed by a proprietor, partner or Board of Directors in case of a Company at the beginning of the financial year.
ACCOUNTS TO BE TO BE RE-EXAMINED BY GST AUDITOR:
Following mentioned below are important accounts or records for review:
- Stock Register
- Sales Register
- Purchase Register and Expenses ledgers
- Input tax credit availed and used
- Output tax due and paid
- E-way bills originated during the time under Audit, if not in accordance with rules.
- Any documents that maintain communications with the GST department relevant to the specific year.
DOCUMENTS TO BE PROVIDE BY THE TAXPAYER FOR GST AUDIT:
- Audited financial statements (which is PAN-based)
- Annual return in form GSTR-9 (for every GSTIN)
- Certified reconciliation statement in Form GSTR-9C, reflecting reconciled values of supplies and tax amounts declared in GSTR-9 in comparison of the audited financials in Part-A, side by side with the Audit report in Part-B.
FORMS FOR ANNUAL RETURN AND GST AUDIT:
| CATEGORY OF TAXPAYER | WHICH TYPE OF FORM HAS TO BE FILLED? |
| GST AUDIT APPLICABILITY | |
| A Regular taxpayer filing GSTR 1 and GSTR 3B | GSTR-9 |
| A Taxpayer under Composition Scheme | GSTR-9A |
| E-commerce operator | GSTR-9B |
| Applicable for GST Audit | |
| Taxpayers whose turnover exceeds Rs. 2 crores in FY | GSTR-9C |
REPORTING BY GST AUDITOR:
Any tax liability pending for payment by the taxpayer, recognized by the reconciliation exercise and observations made on the GST audit, must be duly reported by the GST auditor. Taxes can be settled by taxpayers as suggested by the auditor in Form DRC-03.
SUBMISSION OF GST AUDIT REPORT & ANNUAL RETURN:
The CA who conducted the GST audit can certify the finalized GSTR-9C or it can also be certified by any other CA who did not conduct the GST Audit for that specific GSTIN.
THE FOLLOWING MUST BE CERTIFIED AND REPORTED BY THE GST AUDITOR OR THE CERTIFIER:
- All the mandatory accounts or records are maintained or not?
- All Financial Statements are being prepared in accordance with the books of accounts maintained at the primary location of the business or at some other location of business of the taxpayer.
- Accurateness of details furnished in GSTR-9C.
- To note down the observations of audit or reservations or comments, if any.
GST AUDIT REPORT’S SUBMISSION LAST DATES:
GSTR-9 and GSTR-9C have to be filed positively on or before 31st December of the subsequent fiscal year.
- Special Note: For FY 2017-18, the last date for filing GSTR 9 and GSTR-9C has been extended to 30th June 2019, by an order.
FINE OR PENALTY FOR NON SUBMISSION OF GST AUDIT REPORT: There are no such laws stating an indication of any penalty for the same. That’s why it is being subjected to the general penalty of Rs.25, 0