GST Audit - Procedure & Requirements for Audit under GST

 Introduction

GST is a taxation system which is based on trust wherein the registered dealer is required to self- assess his returns and determine tax liability.

However, as a measure to aid stronger tax governance, the government has kept alive the concept of audit by professionals which would be in addition to the routine statutory or tax audits or self-assessment by taxpayers.

And, thereby government has introduced GST Annual Return (GSTR-9) and GST Audit (GSTR-9C) compliance forms in September which are due for submission on 31st December 2018.
 

What is audit under GST?

Audit under GST is the examination of records, GST Returns and other relevant documents maintained by the registered dealer to verify the correctness of turnover declared, taxes paid, gst refund claimed and input tax credit (ITC) availed and to assess the compliance with the provision of the act.
 

What are the documents required for GST Audit?

• Audited Financial Statements.
• Annual return in Form GSTR-9
• All GST1 and GST3B reconciliations
• Reconciliation statement, reconciling the value of supplies declared in the return fur­nished for the year with the audited annual financial statement in Form GSTR-9C.
   

Types of GST Audit

• Annual GST audit
• GST audit by tax authorities/department
• Special GST audit

Now let’s discuss in detail one by one the different types of GST audit.

• Annual GST Audit (If Turnover > 2 Crores)

Every registered person whose aggregate turnover during the financial year exceeds the minimum prescribe limit i.e., Rs. 2 Crores is required to get his accounts audited by a Chartered Accountant or Cost Accountant.

Such registered person shall submit a copy of audited annual accounts, the reconciliation statement and other documents along with the GST annual return (GSTR-9).
GSTR-9 is broadly an aggregation of the disclosure made in periodic returns filed throughout the year.

Further, under GST ‘aggregate turnover’ is computed on the basis of PAN (Permanent Account Number). An entity or registered person with an aggregate turnover exceeding Rs. 2 Crores is required to obtain a GSTIN registration in each state or union territory in which there is a place of business.

However, an audit will be required to be conducted for all GSTINs obtained for the PAN.

For example: if an entity has obtained 10 GSTINs on Single Pan, 10 GST audits will be required to be submitted if the aggregate turnover during the financial year exceeds Rs 2 crores on a PAN, on all India basis.
 

• GST Audit by Tax Authorities
   
  • Commissioner of GST or any officer authorised by him may undertake GST audit of any registered person.
     
  • Audit shall be conducted at the place of business of the registered person or in the office of Commissioner or officer authorised by him.
     
  • Notice will be sent to the registered person 15 days before the conduct of audi in Form GST ADT-01.
     
  • Audit shall be required to complete within 3 months from the commencement of audit. However, Commissioner can extend the period for a further period of 6 months with reasons recorded in writing.
     
  • The Auditee (i.e., registered person) shall provide to the officer who is conducting audit, necessary facilities to verify the books of account or other relevant documents, provide assistance and furnish such information as he may require.
     
  • Result of audit to be intimated by officer to the registered person within 30 days in Form GST ADT-02 and further proceeding for demand and recovery will be initiated if audit results in detection of unpaid/short paid tax or wrong refund or wrong input tax credit availed.

 

• Special Audit
   
  • If at any stage of scrutiny, inquiry and investigation etc, Assistant Commissioner or officer above the Assistant Commissioner rank is of the opinion that:
    
    - Value has not been correctly declared
    - Credit availed is not within the normal limits
    
    then he may, order special GST audit to be conducted by Chartered Accountant or Cost Accountant nominated by Commissioner of GST.
     
  • An Assistant Commissioner shall issue such direction in Form GST ADT-03 after commencement and before completion of scrutiny, investigation etc.
     
  • To issue such direction to taxable person prior approval of Commissioner is required.
     
  • Chartered Accountant (CA) or Cost Accountant (CWA) is to be nominated by Commissioner.
  •  
  • Audit report should be submitted by CA/CWA within 90 days in Form ADT-04 which should be duly signed and certified by him to the Assistant Commissioner.
     
  • If taxable person or CA or CWA is having sufficient and material reason then they can make an application to Assistant Commissioner for extension of period. However, Assistant Commissioner can permit extension for maximum further period of 90 days.
     
  • Opportunity of being heard shall be given to the registered person in respect of material gathered which is proposed to be used in any proceeding under this Act.
     
  • Expenses of audit including remuneration to be determined and paid by the Commissioner.
     
  • Where the audit conducted results in detection of
    • Tax not paid or
    • Short paid or
    • Erroneously refunded or
    • Input tax credit wrongly availed or utilized

then demand and recovery actions will be initiated.
 

Points to be considered

There are some points which require consideration by the taxpayer for Audit under GST:

• Taxpayer shall ensure reconciliations of output and input tax between the books of accounts, returns and e-way bills issued.
   
• The taxpayer shall review tax positions adopted by him and the same must be correctly reflected in documents maintained by him.
   
• Taxpayer shall review:

• Credit availed is correct
• No ineligible credit has been availed
• Completeness of credits
   

• Taxpayer shall also consider the provisions with respect to the valuation of goods/services, free of cost goods/services etc.

Hope the overview of GST Audit is helpful for you but still if you have any queries then contact us or email us at agam@hubco.in. We have the team of GST experts and can solve all your worries relating to GST compliances whether it is registration or filing of returns, GST Audit.