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Expertise in GST Advisory

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Then, our experts collect documents & file the application for auditing

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An Overview of GST Audit

Audit under GST refers to the detailed vetting of GST-related records, returns, and other allied documents maintained by the person or an entity falling under the GST regime. The latest notification has mandated businesses to approach professionals like Chartered Accountants or Cost Accountants for GST auditing. While auditing, these professionals will look out for the areas like declared turnover, paid taxes, claimed refunds, secured ITC (input tax credit), and so on.

From FY 2020-21 onwards, the tax authority has relieved taxpayers with a yearly turnover of more than Rs 2 crore from the GST auditing performed by the CA/CMA. Presently, taxpayers with turnover over Rs 5 crores are required to furnish the self-certified form GSTR 9C.

Types of Audits falling under the GST Regime

Listed below are the types of audits falling under the GST regime:

  1. Section 65- Audit by tax authorities
  2. Section 66- Special Audit

Let’s unveil what these audit types contain and their respective requirements

Audit by tax authorities u/s 65

  1. Audit u/s 65 is not mandatory and shall only come into effect when the concerned authorities authenticate the same. It shall be performed by the commissioner or any designated officer assigned by him.
  2. The registered individual should be made aware of the audit at least 15 days before by the respective authority.
  3. The maximum timeline of audit completion is three months from the starting date. However, the said timeline can be stretched up to not more than 6 months as per the case-wise scenario.

Assistance by the registered person:

  1. The registered person must abide by the auditor’s directions and provide him with a facility for seamless vetting of books and accounts, as and when required.
  2. He is liable to furnish all the information to the auditor till the completion of the audit.
  3. Post audit completion, the officer must share his findings or errors, if any, with the registered person within 30 days.

Special Audit u/s 66

  1. If at any phase of the vetting, any designated officer comes across any error on account of revenue declaration or credit availed, he may direct the registered individual to get his accounts vetted by the Cost Accountant or Charted Accountant as recommended by the commissioner.
  1. The audit report should be shared with the commissioner within a timeline of 90 days. However, the assistant commissioner can stretch this timeline for any apt reason.
  2. Audit under this section can come into effect even if the accounts of the respective taxpayer have already been through the auditing as per the Act.
  3. The commissioner will be the one who figures out the expenses concerning the audit and the remuneration of auditing officials.

Who is mandatorily required to abide by the Audit under GST?

As per section 35(5) of the GST Act, every registered person or individual whose turnover during the FY surpasses the given threshold falls under the GST auditioning requirement and thus will be required to vet his accounts by the Cost Accountant or Chartered Accountant. Further, such a person is also required to share a copy of the financial statement or other allied documents with the concerned department.

However, nothing entailed in this section shall encompass any department or authority which is subject to auditing requirements overseen by the controller and auditor general.

Important Amendment: The Finance Bill 2021 came as a relief for taxpayers as it omitted section 35(5) which provides for the vetting of annual accounts via special professionals.

Clause 102 has been added wherein every registered taxpayer except the Input tax distributor is liable to furnish a self-certified yearly return along with a self-certified reconciliation statement showing the reconciliation of the supplies’ valuation declared in the return submitted for FY. Apart from these, the taxpayer should also submit an audited annual financial statement for every FY online within the prescribed timeline.

GST Auditing Checklist leveraged by the CorpBiz’s Tax Experts

Since most taxpayers aren’t used to the GST regime as it is relatively new and has undergone various amendments, auditor intervention becomes an absolute necessity for errorless scrutiny of tax records. Here’s the GST auditing checklist leveraged by Corpbiz’s tax experts cum auditors.

  1. Auditee intimation about the GST applicability and auditing requirements.
  2. Contacting the auditee, issuing quotations, and securing advisory dates.
  3. Drill down of auditee’s business, products, and service
  4. Rendering advice on the maintenance of tax-related records including account books.
  5. Fetching queries around areas of interest and activities.
  6. Outlining audit program based on timing, nature, and scope of the audit.
  7. Jotting down the list of records for verification.
  8. Secure all the necessary reconciliations.

Guidelines to be followed by Auditees for hassle-free audit

  1. The client must arrange all the documents falling under the scope of auditing requirements.
  2. Be ready to share any data gaps intimated by the auditor during the inspection.
  3. Get aware of rules underpinned by tax authorities concerning the method of preparation and dispensing of the invoice.
  4. Be ready to alter the invoice format as per the auditor’s recommendation.
  5. Be watchful while claiming ITC i.e, Input Tax Credit. Authority can impose the interest @ 24 percent on the excess amount claimed.

Any excess claimed shall be exposed to the

  1. Get aware of the deadlines around return filing, and issuance of e-way bills and invoices. Bear in mind that late filing can incur harsh interest charges or penalties.
  2. The timeline between the release of the invoice and payment should remain under 180 days.
  3. The auditor will also affirm the conformity concerning ITC reversal and its deadline, which is 180 days.
  4. Be watchful while generating E-way bills. Fix any mismatch between the e-way bill and the original invoice to avoid its cancellation.

Leverage Corpbiz’s expertise to stay atop tax auditing requirements

Auditing under GST is a complicated process that involves thorough inspections of account books and other allied documents. One error or mismatching between accounts can incur severe penalties for the business owner. This won’t be an issue for someone with strong taxation background. But if you are a novice, you have no choice other than to proceed cautiously. At Corpbiz, we make sure that our clients do not have direct confrontations with auditing requirements as our experts are here to help.

While going through the auditee’s records, an inexperienced auditor can make a costly mistake by overlooking errors that are too obvious or complicated to identify. This is where an experienced professional comes into play. CorpBiz is home to experienced and proactive tax professionals with a strong taxation background. These experts keep a tap on the ever-changing tax legislation to render top-tier auditing services to clients.

Frequently Asked Questions

GST auditing Checklist generally enclosed entails steps such as Turnover-based audit, special audit, general audit, verification GSTR 3B with GSTR 1 & GSTR 2A, checking Invoice format, ITC reversal verification, etc.

Provisional assessment, scrutiny assessment, self-assessment, summary assessment.

According to the GST Act 2017, taxpayers and businesses with a yearly revenue above Rs 2 crore fall under GST auditing requirements. Registered taxpayers should vet their accounts via professionals like Charted Accountants or Cost Accountants.

It is a taxation regime where the taxpayer can assess their tax liability, file an Income Tax Return (ITR) & pay the tax. Therefore, to check that the taxpayer has assessed it correctly, an audit under GST is required.

Every GST-registered taxable person is liable for audit if their turnover during the given FY surpasses the underlying limit. The businesses that fall under auditing requirements must vet their accounts or tax-related records by the chartered accountant or a cost accountant.

The GSTR-9 is an annual return form to be filed by taxpayers falling under the GST regime. Meanwhile, the GSTR-9C refers to the GST reconciliation statement to be provided on or before 31 Dec. The registered companies must verify GSTR-9C by a CA if their turnover is more than 5 Crores.

Vetting your tax records beforehand via a professional firm is the best way to avert any chance of being flagged by the authority during the inspection. Also, it will help you better understand GST applicability and its fundamentals.

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