What is GST Audit and How it is done?

Introduction

According to Section 35 (5) of the CGST Act, registered taxpayers in India with an aggregate turnover of more than 2 crores in a financial year must have their accounts book audited by an authorized Cost Accountant or a Chartered Accountant. A copy of the GST audit report, financial statements, and reconciliation statement must be submitted by the taxpayer registered under GST using Form GSTR 9C. The concerned taxpayer is required to submit reports to the tax department once per fiscal year. Do not be concerned if you are unfamiliar with GST audit; this blog will provide you with  all the information on “What is GST Audit and How to Prepare GST Audit?”

What is GST Audit?

An audit under GST is the process of examining a taxable person’s records, returns, and other documents. The goal is to verify the accuracy of the turnover declared, taxes paid, refund claimed, and ITC (Input Tax Credit) claimed, as well as to assess compliance with GST (Goods and Service Tax) provisions.

Different types of audit under GST (Goods and Service Tax)

GST audits are classified into three types. These audits and their specifications are as follows:

1. GST Turnover Audit: This type of audit is conducted by a Cost Accountant or Chartered Accountant appointed/hired by the taxpayer. According to the CGST Act, this audit is performed when the taxpayer’s turnover exceeds the limit of 2 crores and they need audits for their records and accounts.
2. General GST Audit: The CGST/SGST Commissioner or any other officer accredited by them conducts the normal/general GST audit. It is carried out on the Commissioner’s order, with the taxpayer given 15 days’ notice.
3. Special audit under GST: A Cost Accountant or a Chartered Accountant accredited by the Commissioner conducts the Special GST Audit. It is carried out on the order of the Assistant or Deputy Commissioner, with the Commissioner’s prior approval.

Motive behind GST Audit under Law

The GST audit has the following objectives, according to the audit definition in section 2(13) of the Central Goods and Services Tax (CGST) Act:

• An audit is a thorough examination of returns, records, and other similar documents.
• The examination is carried out in order to verify paid amount of taxes, availed ITC, declared turnover and other.
• Returns, records, and other documents must be issued or maintained in accordance with GST or other GST Laws.

Entity that are liable for GST Audit

Every GST registered taxable person whose turnover exceeds the prescribed limit during a fiscal year is subject to audit. The current notified GST Rules set the turnover limit at more than INR 2 crore. Such companies must have their books audited by a chartered accountant or a cost accountant. This taxpayer must electronically file:

• An annual return using Form GSTR 9C by December 31st of the following Financial Year (FY).
• The annual accounts have been audited.
• GSTR-9C certified reconciliation statement reconciling the value of supplies declared in the return with the audited annual financial statement.
• Any other information that is required.

How to Prepare Goods and Service Tax (GST) Audit?

To begin the preparation, the auditor should consider the following points:

• Inform the auditee of the GST audit’s applicability.
• Confirm the auditee’s eligibility to become a GST auditor in accordance with the ICAI guidelines.
• Confirm the appointment by issuing quotations, followed by an engagement letter.
• Once appointed, begin gathering information about the auditee’s nature of business, products, and services provided, and advise the auditee to keep proper books, accounts, and records.
• Create a questionnaire with key areas and activities in mind. It not only ensures that no detail is overlooked, but it also guides you through the audit process.
• Create an audit programme that specifies the nature, timing, and scope of the audit.
• Prepare a list of records to be verified and notify the auditee so that they can be kept ready for use during the audit.
• Obtain all required reconciliation.

Required documents for Goods and Service Tax Audit

For the GST audit, the taxpayer must provide a few documents in front of the auditee. The following are the documents:

• Financial Audited Statements Based on PAN.
• Annual Return led by GSTIN-based Form GSTR-9
• Form GSTR 9C is used to obtain a Reconciliation Statement Certificate. The certificate should reconcile the value of the supplies, the tax, and the declared sum in Form GSTR 9 with the financial audited in Part A and the audited reports in Part B.

Due date and Penalty for Late filing of GST Audit Report

The GST Audit limit and submission due date is December 31st of the preceding fiscal year. The CBIC notice can be used to extend the due date for registered taxpayers.

There is currently no specific provision for the GST Audit report. However, a fine of 25,000 must be paid to the authority as a penalty. The penalty, however, does not apply to taxpayers whose annual turnover is less than 5 crores and whose GST return filing has been waived off in Form GSTR 9C from financial year 2018-19.

Final Thoughts

Compliance with GST rules and audits of returns, records, and documents is critical. It is critical to schedule an audit appointment well in advance or at the start of a financial year. It is also critical that the GST audit reports are unbiased and not completed by a registered GST payer to save yourself from hefty penalties.