What is an audit under GST?
Audit is the verification of the information provided by the registered entity; the entity’s records, input tax credit availed, tax paid, refunds claimed, and turnover declared are checked for compliance under GST Act.
GST Council has implemented several measures, to ensure Compliance under GST Law and Audit is one of them. The term Audit is defined under Section 2(13) of CGST Act 2017 which requires audit of the tax records to validate the information declared.
According to the CGST Act, 2017 there are 3 types of audit under GST:
Audit by the tax authorities.
Special audit on request by the higher GST officials
Audit by CA/CMA
Audit of Accounts by CA/CMA
According to the GST Act, any registered tax payer who has an annual turnover exceeding Audit Limit or Threshold Limit under GST i.e., 2 Crore Rupees must seek assistance of a Chartered Accountant or Cost and Management Accountant (CMA) to audit their accounts.
The audit limit stated in Rule 80(3) of the CGST Rules 2017 is that the registered person must submit a copy of the audited statement of accounts and reconciliation statement documents, which shows the reconciling value
of the supplied declared in the returns furnished for that fiscal year.
Every entity registered under the GST Law has to assist with the audit and is advised to have a copy and maintain his/her accounts as a proof to show correctness in regard to:
Production of the goods. Taxable Inward supply of goods and/or service or both Taxable Outward supply of goods and/or services or both
Stock of goods
Input tax credit availed
Output tax payable and paid
Audit by Tax Authorities
An audit is conducted by Tax Authorities to ensure GST Compliance with minimal discrepancies. According to Section 65 of the CGST Act 2017, GST officers have the right to conduct the audit or can grant authorization to
other GST officials to conduct the audit at the office premises or at the registered business location. GST officials inform the registered person 15 days prior to conduct the audit. The audit can take anywhere between three
months from the date the audit commences and can extend up to a period not exceeding six months.
The registered taxpayer shall be intimated within 30 days of audit completion. Once the audit is done and all the reasons have been evaluated, the officials must intimate the tax payer regarding the rights and
obligations within 30 days of the audit.
Based on the audit report and findings under Section 73 or Section 74 under the CGST Act 2017, the officials have the right to take immediate action against miscredit or underpaid tax or wrong refund or nonpayment of tax
Special audit by the higher GST officials
As per Section 66 of CGST Act, 2017 at any given stage if the audit or any proceedings by any officer not below the rank of the Assistant Commissioner feels that
the audit is incomplete,
or any discrepancies are observed in the liability with the intention to evade tax
or if the value has not been declared properly (incorrect Revenue Declaration)
In such situation with prior approval of the GST official, he might assign a CA or CMS to audit the records and accounts as proposed by the Commissioner. CA has to submit audit report to the concerned Assistant Commissioner within 90 days.
Special audits can be conducted to evaluate the expense incurred and the audit records calculated and paid by the GST Commissioner, which also includes the payment of the CA, scrutiny, proceedings and allotting third
party auditors to investigate the case where the taxpayer under audit is proven guilty or convicted of tax fraud.
GST has been rolled out to accomplish the mission “One Nation, One Tax”. GST to pass stringent laws and take strict actions including penalties and prosecution against entities violating GST Compliance. This transition
causes some friction and might not be easy to accept for the SMEs and business owners who are not yet familiar with GST provisions. GST is still in its first year of GST Indirect Tax Law implementation. Audit is not an
intention to threaten taxpayers but it’s one of the methods to pave a path to achieve transparency in the complex GST Tax System.
We have a team of experts at uBooks to assist you to file your GST returns and avoid complex audits.
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