Let’s Understand GST Audit Process in Detail
The earlier indirect tax laws restricted audit by a chartered accountant to State VAT and Central State Tax laws of certain states. Likewise, Special Audit was suggested in the Central Excise and Service Tax. This took place only in cases where there was a doubt regarding undervaluation or excessive credit by the taxpayer.
These cases leading to audit by Chartered Accountants apply to the current GST law as well. Thus, the focus of the GST regime on self-assessment brings along multiple challenges. These challenges in the new GST law makes taxpayers prone to errors. This further leads to unintentional drain of the government’s revenue.
So, the numerous compliances and the challenging tax laws in India make auditing of records necessary under various laws. GST too necessitates audit beyond certain turnover limits by tax professionals.
So let’s understand the meaning of GST audit, types of audit and persons who are required to get their accounts audited under GST.
Meaning of Audit
According to section 13(2) of CGST Act, the term “Audit” refers to the examination of:
- Records, returns, and other documents kept or filed by the registered person under the Act
- Rules or guidelines under GST or any other law for the time being in force
This examination is undertaken to check the correctness of the turnover mentioned, taxes paid, refund claimed and ITC availed. Further, this scrutiny is undertaken to evaluate the taxpayer’s compliance with the provisions of the Act.
Persons Liable For GST Audit Turnover Limit
Registered persons with an aggregate turnover exceeding the prescribed GST audit turnover limit of Rs 2 Crore during a financial year are liable for GST Audit. These persons must get their accounts audited by a Chartered Accountant or a Cost Accountant.
Now, the term Aggregate Turnover is defined in section 2(6) as “All India PAN-based turnover for a particular financial year”. This includes:
- Inter-State Supplies
- Exempt Supplies
- Stock Transfers etc.
The above supplies of transfers forming a part of the Aggregate Turnover are exclusive of GST and Compensation CESS.
“Further, the gat audit turnover limit of Rs 2 Crore is the same for the registered tax persons across all States and UTs. Thus, no separate turnover limit is defined for the Special Category States for GST Audit.”
In addition to this, each State GST Act provides appropriate provisions regarding GST Audit. Therefore, the GST Audit is undertaken state-wise. Further, a separate audit is undertaken for each of the unique registrations under the same PAN.
Types of Audit
GST law provides three types of audits that can be undertaken. These include:
GST Audit Under Section 35(5)
A registered person with an aggregate turnover exceeding the prescribed limit of Rs 2 Crore needs to get his accounts audited by a Chartered Accountant or a Cost Accountant. This registered person needs to furnish electronically:
- Annual Return as per section 44 of the GST Act
- Copy of Audited Statement of Accounts
- Reconciliation Statement that reconciles the value of supplies furnished in the annual return with the audited financial statements. The annual return, audited annual accounts and the reconciliation statement in Form GSTR 9C shall be furnished by the registered taxpayer. Further, the term turnover mentioned above relates to “Aggregate Turnover” and not turnover in State. As defined in the previous section, “Aggregate Turnover” is calculated on all India basis having the same PAN. Say a registered person is liable to get the accounts audited under section 35 of the GST Act. Hence, each registration acquired under the same PAN would also be liable for GST Audit in this case.
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GSTR 9A: Filing, Due Date and Format
GST Audit by the Tax Authorities Under Section 65
The Commissioner or an officer authorized by him undertakes the audit of the registered person under section 65 of the CGST Act. This is done for such period, at such intervals and in a manner as specified in the general or specific order. The concerned officers may carry out this audit at the place of business of the registered person or his office.
Further, the tax authorities must intimate the registered taxable person of such an audit through a notice. This notice must be sent to the registered person not less than 15 days before initiating such an audit in Form GST ADT-01.
Also, such an audit must be completed within 3 months from the date of commencement of the audit. However, the Commissioner can choose to extend the time period if he believes that the audit cannot be completed within 3 months. Further, he can choose to extend the period of such an audit to a maximum of 6 months. Thus, he can do so after he records the reasons for such an extension in writing.
Finally, the concerned officer will intimate the registered person about his final findings of the audit in Form ADT-02.
Special GST Audit Under Section 66
Any officer not below the rank of Assistant Commissioner may demand an audit under Section 66 of the CGST Act. This he can do if he believes during the time of scrutiny that:
- the value of supply is not accurately declared or
- input tax credit availed by the registered taxpayer exceeds the credit actually due
Thus, the assessing authority takes the approval of the commissioner to undertake such an audit. Hence, on such approval, the assessing authority guides the registered person to get the books audited by a Chartered Accountant or a Cost Accountant. And the Assistant Commissioner himself suggests this accountant.
Further, the Commissioner issues such a direction in Form GST ADT-03 to the registered person. Thus, the Chartered Accountant or Cost Accountant selected by the officer then submits the Report of Audit duly signed and certified by him to the Assistant Commissioner. This is done within a period of 90 days. And this period can be extended by another 90 days if there is a delay.
Furthermore, the Officer can demand such an audit even if the accounts of the registered person have been audited under any other law. These laws may include The Company Act 2013 and the Income Tax Act 1961.