GST Audit

GST Audit

Goods and Service Tax (GST) is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods and a lot more. The GST Law provides for self-assessment to facilitate easy compliance and payment of taxes. Audit is examination of records maintained by a registered dealer. The aim is to verify correctness of information declared and taxes paid and to assess tax compliances.

As per section 2(13) “audit” means

the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force
to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and
to assess his compliance with the provisions of this Act or the rules made thereunder;

Types of GST Audit-

GST Audit by a taxable person

As per section 35(5), every registered person whose turnover during a financial year exceeds the prescribed limit (presently two crore rupees) shall get his accounts audited by a Chartered Accountant or a Cost Accountant. He shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C. [Notf no. 49/2018-CT]

Form 9C is basically a reconciliation statement which needs to be duly audited. The reconciliation is required with annual financial statement of taxable person. The differences can be due to many reasons, such as-

Annual returns cover a period of July 2017 to March 2018 while Financial statements are for a period of April 2017 to March 2018.
Financial statement may include income or expense not covered in annual return.
Provisions made in Financial Statements as per Accounting Standards.

Audited Report and Audited Annual Accounts will be submitted along with annual return on or before 31st December following the end of financial year. We need to take into consider following points before finalizing GST Audit

Classification of Goods/Service.
Admissibility of Input Tax Credit
Verification of Place of Supply
Compliance of Reverse Charge Mechanism
Verification of Other Income
Creditors more than 180 days
Sale of assets
Unavailed Input Tax Credit
Transitional Credit under GST
Refund of GST

ICAI has clarified through an announcement dated 28 Sep 2018 that an internal auditor cannot undertake GST audit simultaneously.

GST audit by Tax Authorities/Department u/s 65

The Commissioner or any officer authorized by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed. The officers may conduct audit at the place of business of the registered person or in their office. The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed. The audit under sub-section shall be completed within a period of three months from the date of commencement of the audit.

Special GST Audit u/s 66 by a Chartered Accountant or Cost Accountant

If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner. The chartered accountant or cost accountant so nominated shall, within the period of ninety days, submit a report of such audit duly signed and certified by him to the said Assistant Commissioner.