GST Audit , Turnover Limit, Types of GST Audit

Need for GST Audit and meaning

Audit under GST involves examination of records, returns and other documents maintained by a GST registered person. It also ensures correctness of turnover declared, taxes paid, refund claimed, input tax credit availed and assess other such compliances under GST Act.

GST is a trust-based taxation regime wherein a taxpayer is required to self-assess his tax liability, pay taxes and file returns. Thus, to ensure whether the taxpayer has correctly self -assessed his tax liability a robust audit mechanism is a must. Various measures are taken by the government for proper implementation of GST and audit is one amongst them.

Types of GST Audit

Types	Performed By	When Initiated
Turnover based Audit	Chartered Accountant or Cost Accountant appointed by the taxpayer	As per the CGST Act, if the Turnover exceeds 2 crore,* the taxpayer has to get his accounts & records audited
Departmental GST Audit	Commissioner of CGST/SGST or any Officer authorized by him	On order of Commissioner by giving 15 days prior notice
Special audit	A Chartered Accountant or Cost Accountant, nominated by Commissioner	On order of Deputy/Assistant Commissioner with prior approval of Commissioner

*PLEASE NOTE:From FY 2020-21 onwards, the compulsory GST audit requirement by a CA/CMA for taxpayers with a turnover exceeding Rs.2 crore stands removed. The Form GSTR-9C is to now be self-certified and submitted by taxpayers with a turnover of more than Rs.5 crore from FY 2020-21 onwards. Notification No. 29/2021 – Central Tax, dated 30th July 2021

Turnover-based Audit under Section 35(5) of CGST Act

If the annual turnover of a registered taxpayer is more than Rs.2 crore^ in a financial year , he is required to get his accounts audited by a Chartered Accountant or Cost Accountant every year.

Aggregate turnover is calculated as follows:

Aggregate turnover = Value of all taxable (inter-state and intra-state) supplies + exempt supplies + export supplies of all goods and services

The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than Rs. 2 crore* all business entities registered under GST for that PAN will be liable for GST audit for a financial year.

* The applicability of GST audit by CA/CMA is removed from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. The CBIC notified this change in Notification No. 29/2021 – Central Tax, dated 30th July 2021.

Items included while calculating Aggregate Turnover

All taxable (inter-state and intra-state) supplies other than supplies on which reverse charge is applicable
Supplies between separate business verticals.
Goods supplied to/received from the job worker on a principal to principal basis.
Value of all export/zero-rated supplies.
Supplies of agents/job workers on behalf of the principal.
All exempt supplies. For example, agricultural produce supplied along with branded ready-to-eat food.
All taxes other than those covered under GST. For example, entertainment tax paid on the sale of movie tickets.

Items excluded while calculating turnover

Inward supplies on which tax is paid under reverse charge.
All taxes and cess charged under Goods and service tax like CGST, SGST or IGST, compensation cess.
Goods supplied to or received back from a job worker.
Activities which are neither supply of goods nor service under schedule III of CGST Act.

Qualification of GST Auditor & Eligibility

Only a Chartered Accountant or a Cost Accountant can perform a GST Audit u/s 35.

Note:

An internal auditor cannot simultaneously be appointed as a GST Auditor.
The GST Act does not allow a GST practitioner to perform the audit. The power to audit is granted only to a Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants. Therefore, a Chartered Accountant must not be registered as a GST practitioner for the purpose of issuing the Audit Report.
Where an organisation or an entity has multiple branches registered under GST in different states/UTs, the total aggregate turnover of all such branches is considered while calculating the threshold limit of Rs. 2 crores*.

So, if the cumulative turnover of all the branches exceeds Rs. 2 crores*, then the GST audit is applicable to each of these branches, irrespective of whether the turnover of a particular branch is less than the threshold limit.In such cases, one can appoint either one dedicated auditor for all branches or separate auditor for each branch.

Where multiple branches have different auditors, the Standards on Auditing: SA 299 — Responsibility of the Joint Auditors may apply for the purpose of reporting GST Audit observations & Reporting.

* The applicability of GST audit by CA/CMA is from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. The CBIC notified this change in Notification No. 29/2021 – Central Tax, dated 30th July 2021.

Departmental GST Audit by tax Authorities

As per section 65 and Rule 101(3) of GST Audit Rules

The place of business of registered person or in tax office
The commissioner or any officer authorized(CA/CMA) by him
The registered person shall be informed by way of a notice 15 working days prior to the conduct of audit in FORM GST ADT-01
The audit by tax authorities shall be completed within a period of 3 months from the date of commencement of the audit, and such period is further extendable for a period of 6 months by commissioner for the reasons to be recorded in writing.
The proper officer shall, within 30 days, inform the registered person, whose records are audit, about
- The findings
- His rights and obligations and
- The reasons for such findings in FORM GST ADT-02.

Upon the conclusion of the audit, the authorized officer shall inform the finding, rights and obligations, and the reasons for the given findings to the registered person, within a period of 30 days in FORM GST ADT-02.

Special Audit by Tax Authorities (u/s 66)

As per section 66 and Rule 102 of GST Audit Rules:-

The registered person can be directed to get their records that include books of Account.
It shall be examined and audited by a chartered account or a cost account nominated by commissioner.
This examination can take place during any stage of scrutiny, inquiry, investigation or any other proceedings.
An authorized officer (not below the rank of Assistant commissioner) can order for special audit. The commissioner will nominate the CA who will carry out the special audit.
The CA has to submit a report of the audit within 90 days. The assistant commissioner can also extend the period over 90 days for the application person for any sufficient reason.
In this procedure results in
- Detection of tax not paid
- Short paid
- ITC wrongly availed or utilized
The taxable person will be given an opportunity of being heard in the findings of special audit. If the result in detection of unpaid/ wrong refund etc .The recovery will start against the registered person after this auditing.

Who will bear the expenses of the special audit?

The expenses for examination and audit including the auditor’s remuneration will be determined and paid by the commissioner

Conducting GST Audit & Issue of GST Audit report

Documents to be to be reviewed by GST Auditor

Following are important accounts or records for review:

Sales register
Stock register
Cash Book
Purchase register and expenses ledgers
Input tax credit availed and utilised
Output tax payable and paid
e-Way bills generated during the period, if in compliance with rules.
e-Invoices and IRN generated and kept on record
Any documents or record which necessitate for the GST department relating to the year.

Forms for Annual return and GST Audit

Type of taxpayer	Form to be filed
Whether or not applicable to GST Audit
A Regular taxpayer filing GSTR 1 and GSTR 3B	GSTR-9
A Taxpayer under Composition Scheme	GSTR-9A
E-commerce operator	GSTR-9B (Yet to come into effect)
Applicable for GST Audit
Taxpayers whose turnover exceeds Rs. 2 crore^ in FY	GSTR-9C

Review of comments by GST Auditor

The Auditor must report any tax liability pending for payment by the taxpayer, identified through the reconciliation exercise and observations made on GST audit. Taxpayers can settle taxes as recommended by the auditor in form DRC-03.

Submission of GST Audit report & Annual return

The finalized GSTR-9C can be certified by the same CA who conducted the GST audit or it can also be certified by any other CA who did not conduct the GST Audit for that particular GSTIN. The following must be reported and certified by the GST auditor or the certifier:

Whether or not all the requisite accounts or records are maintained.
Whether or not the financial statements are prepared as per the books of accounts maintained at the principal place of business or additional place of business of the taxpayer.
Certify the accuracy of information in GSTR-9C.
To list down the audit observations or reservations or comments, if any.

Documents to be furnished by the taxpayer

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 compared to audited financials in Part-A, along with the audit report in Part-B.

Due dates for submission of GST Audit report

GSTR-9 and GSTR-9C are due on or before 31st December of the subsequent fiscal year. The due date can get extended through a CBIC notification.

Penalty for not submitting GST Audit report

There is no specific provision. Hence, it is subject to a general penalty of Rs.25,000.

Frequently asked questions(FAQs)

What is audit under CGST?

Audit under CGST involves examination of records, returns and documents related to input tax credit and refunds to validate tax payments and compliance.

Which documents are examined during audit?

Documents maintained by taxpayer, furnished by taxpayer under GST laws or any other law are examined.

Where can a taxpayer’s audit be conducted?

Audit can be done at tax authority’s office or taxpayer’s business premises. Desk-based audit mandated for small taxpayers.

What are the timelines for a GST audit?

15 days notice through FORM GST ADT-01. Entire process to be completed in 3 months extendable by 6 months.

What documents are required from taxpayers for GST audit?

Inward/outward supply details, goods produced, ITC availed, output tax payable/paid have to be submitted.

Where to Download GSTR 9C Offline Utility?

GSTR-9C can be downloaded from www.gst.gov.in, from offline tools under download tab

What are the documents to be enclosed along with GSTR 9C?

Audited financial statements are required to be enclosed along with audit report in Form GSTR-9C

Should the Form GSTR 9 and Form GSTR 9C get filed separately?

Yes, Form GSRT-9 & GSTR 9C needs to be filled separately.GSTR-9C is certified and digitally signed by a CA or Cost Accountant.

Will a Registered Taxpayer who has exclusively exempted supply of goods or services exceeding Rs. 2 crores, would require to fill the GSTR 9C form?

The definition of Turnover is defined in GST Act. It includes exempt supplies as well hence in the above case,GSTR-9C is required to be filled

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