Audit under GST Regime

In this Article, we will look into first audit under the regime of the Central Goods and

Services Tax Act, 2017 and the Rules made there under.

Introduction:

Goods and Service tax or GST will be one tax to subsume all taxes. It will bring in the

“One nation one tax” regime. To maintain a check and examine whether correct GST is

being paid and the refund is claimed, certain taxable persons will be subject to audit

under GST.

Audit under GST is the process of examination of records, returns and other

documents maintained by a taxable person. The purpose is to verify the correctness of

turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess

the compliance with the provisions of GST.

 Threshold for Audit

Every registered taxable person whose turnover during a financial year exceeds the

prescribed limit [as per the latest GST Rules, the turnover limit is above Rs 2 crore]

shall get his accounts audited by a chartered accountant or a cost accountant. He shall

electronically file:

1. an annual return using the Form GSTR 9B along with the reconciliation

statement by 31st December of the next Financial Year,

2. the audited copy of the annual accounts,
3. a reconciliation statement, reconciling the value of supplies declared in the return

with the audited annual financial statement,

4. and other particulars as prescribed.

Types of Audits under GST Laws

Audit by Tax Authorities : Commissioner or any officer authorized by him on general or

special order may exercise audit of any registered person. Period of audit may be

financial year or multiple thereof. Registered person shall be issued notice under Form

–GST ADT-01 at least 15 working days before the start of audit as may be prescribed

and it shall be completed within period of 3 months from the start of the audit. Where

the audit cannot be completed within 15 days, commissioner may extend the same for

further period not exceeding six months to complete the same for reason written in

writing.

Audit by Department – Special Audit by chartered accountant or a cost accountantas

nominated by the Deputy or Assistant Commissioner – If at any stage of the scrutiny,

inquiry or other proceedings the Commissioner, having regard to the nature and

complexity of the case and in the interest of revenue, is opinion on that

(i) the value has not been correctly declared, or

(ii) the input tax credit(ITC) availed is not within the normal limits , he may direct

such registered person in writing to get his accounts examined and audited by

a chartered accountant or cost accountant.

(iii) The chartered accountant or cost accountant shall within ninety days, submit

a report of such audit duly certified by him to the Commissioner orthe proper

officer, as the case may be.

(iv) The period of completion of an audit can be further extended by a further

period of ninety days under section 66 of the CGST.

Obligations of the Auditee:

Section 35 of the CGST Act, and rule 56 of the CGST Rules, mandates every

registered taxpayer to maintain a certain set of accounts and records under GST

registration. It is appropriate to note down that, in any case, a taxpayer having two

or more different GSTIN in different States or Union Territories, and then he must

maintain separate books accordingly. Expected accounts or records are follows :

 Production or manufacture of goods

 Inward and outward supply of goods or services or both as the case may be

 Stock of goods including the opening balance, receipt, supply, goods lost

or stolen in transit, goods destroyed, gift, samples of raw materials, etc.

 Details of input tax availed, tax liability and payment of periodical tax as output

tax

 Details of inward supplies under reverse charge mechanism

 Details pertaining to all suppliers, advances received or paid and adjustment

made thereof, if any

 Details of e-way bills generated and received, the taxes paid thereon.

 It is presumed to maintain that all tax invoices, bill of supply, debit notes,

credit notes, etc, during the year at its principal place of business along

with records pertain to an additional place of businesses, if any.

The taxable person will be required to provide the necessary facility to verify the books

of account/other documents as required to give information and assistance for timely

completion of the audit.

GST Annual Audit Form(GSTR 9C):

The Central Government notifies Form GSTR 9C for annual GST Audit. The said Form

is in the form of a reconciliation statement where turnover, input tax credits and tax

payments will be reconciled with the standard books of account maintained by the

taxpayer. It may be summarized as follows:

 Gross turnover including taxable and non-taxable

 Taxable turnover

 Tax liability and payments with tax rate wise

 Input tax credit availment

GST Audit Checklist:

Following is the checklist of GST audit

 General profile with brief nature of the trade or business of the taxpayer

 GST Registration details including additional places of business, multiple

registrations in other States, if any

 Authorised Signatories of the businesses

 List of ledgers maintained online and offline mode

 Details of inward supplies, outward supplies, exports, supplies to SEZ

 Details of Job or works contracts, composite supplies, mixed supplies and

continuous supplies made during the year

 Details of availment of credits, ineligible credit reversal, exemptions availed etc

 Payment of taxes and refunds claimed

 Communications received from the Department including notices, etc.

 Taxable person having single PAN –

(I )‘Taxable Supplies and Exempt Supplies’, revenue

recognition with corresponding profit and loss account, or income and

expenditure account, as the as may be,

(ii) ‘Zero Rated Supply’, whether classified as export of goods or services or

goods supplied to Special Economic Zone Unit or Developer, export of

goods or services or both.

Thus, GST is a completely new tax regime already taking India by storm. Since new

indirect tax came into force with effective from 1st July, 2017, thus with mid-financial

year implementation it will pose severe challenges for both taxpayers as well as

taxprofessionals while reconciling.