Goods and Service Tax (GST) came into force on 1st July 2017. It is considered as one of the most crucial Tax Reforms in the nation. It is an indirect tax levied on multiple goods and services. The goal of GST is to eliminate the cascading effect of various taxes that existed before its introduction.
It’s a self-assessment tax, and hence, staying compliant with it is both crucial and complex. The concept of Audit under GST is introduced to eliminate any discrepancies in the record & help businesses stay compliant with the law.
I will try to help you understand the complete mechanism of Audit under GST in this piece of information.
Let’s get going!
What is Audit?
It’s the process of scrutinizing (inspecting) the accuracy of multiple details like turnover declared, Input Tax Credit claimed, Refunds claimed, & Taxes paid by a registered taxpayer. Auditing also includes the process of assessing whether the taxpayer is staying in compliance with the existing GST laws.
A taxpayer has to maintain all the documents, invoices, returns, and every other record necessary for filing. Depending on the type of Audit, the taxpayer himself/herself or any tax authority can perform the process of Audit.
When is the GST audit necessary?
If the aggregate turnover of a business exceeds the value of INR 2 crore, the taxpayer has to get his/her accounts and books audited by a certified CA or a Cost Accountant. The copy of this audit report has to be submitted with a certified reconciliation statement in form GSTR 9C before 31st December.
Apart from this condition, if the tax authority feels the need to audit any taxpayer, the Audit will be conducted by the authorities themselves, even if the business’s annual turnover is below two crores.
Type of Audit
- GST audit by the taxpayer
A taxpayer will be liable to get his/her accounts and books audited by a certified CA or Cost accountant if the aggregate turnover exceeds INR 2 crore. This return has to be filed on or before 31st December of the next financial year.
If the taxpayer fails to get their books audited on or before this date, a late fee of INR 200 is levied until the audit report is submitted. (the maximum late fee charged can be 0.25% of the aggregate turnover).
The document necessary for the Audit
- Form GSTR 9, the annual return
- Reconciliation statement in Form 9C, duly certified by CA or Cost Accountant
- Audited Copy of Annual Accounts
- Any other documents necessary
- General Audit
Commissioner has the authority to commence this Audit. Either Commissioner or any other authorized person appointed by him/her can conduct this Audit. Authorities have to complete this Audit within three months of commencing it. But, a commissioner can extend the term of this auditing by another six months by giving the reason in writing.
The Process of Audit
- Before the Audit commences, the taxpayer is notified through an official 15 days advance notice.
- Once the process starts, the taxpayer must any and every relevant document demanded by the authority to complete the auditing process.
- Once the Audit is complete, all the auditing authority has to inform about it to the taxpayer within 30 days.
- If no discrepancies are found in the records, the Audit is declared completed.
- In case of any discrepancy, default, or non-compliance, the process of recovery will be initiated by the respective authority.
- Special Audit
As the name suggests, this Audit is conducted in special cases only.
The officer, not below the assistant commissioner’s rank, can direct a taxpayer for this Audit after the prior approval from Commissioner.
The Process of Audit
- This Audit is initiated in a case when the authority feels that the financial information declared in the returns is not correct, or ITC claimed is not under the specified limits.
- A special Audit is conducted by a CA or Cost Accountant appointed by the Commissioner, and all the expenses will be handled by the authority.
- The time limit for the completion of this Special Audit is within 90 days of the commencement. Although, there is a provision for extending the auditing term by another 90 days if the CA or Cost accountant requests the same in writing to the Commissioner.
- In case of any discrepancy, default, or non-compliance, the recovery process or proceedings will be initiated.
- Before the proceedings, the taxable person will be given sufficient opportunity to put forward his/her explanation for any sort of non-compliance.
Conclusive thoughts
Although GST is meant to simplify India’s tax regime, numerous businesses are still struggling to align themselves with the long list of rules and compliances.
The process is complex and needs assistance from GST experts to avoid any discrepancies and non-compliance. Moreover, if your turnover is above INR 2 crore, it’s mandatory to get your books audited by CA or Cost Accountant.
So, it’s better to hire a team of experts who can handle all your compliances when you focus on your core business!
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