GST Audit

What is GST Audit?

GST audit is a comprehensive examination that goes beyond just financial records. It involves scrutinizing statements, records, returns, and related documents submitted by registered persons. The audit aims to ensure the accuracy and integrity of the information provided in these documents. Specifically, it verifies whether the details such as sales, output tax paid, input tax refund claimed, and input tax credit (ITC) availed, as stated in the annual report, are indeed true and fair.

For whom GST Audit is compulsory?

In January 2022, according to Section 35(5) of the Central Goods and Services Tax (CGST) Act, 2017 in India, every registered person whose aggregate turnover in a financial year exceeds the prescribed limit (which is Rs. 2 crores) is required to get their accounts audited by a Chartered Accountant (CA) or a Cost and Management Accountant (CMA). This provision is applicable to both Central GST (CGST) and State GST (SGST) or Union Territory GST (UTGST).

Basic Documents Required for GST Audit

Here is the list of documents to be asked from the taxpayer to start the GST Audit through ADT-01. Although depending on the nature of business, other documents may also be asked for GST Audit.

* Balance Sheet and Profit and loss account with schedules
* Trial balance for particular GSTIN
* Income Tax audit Report (including Form 3CA, 3CD etc.)
* Statutory Auditor’s report
* Cost Audit report, if applicable
* GST Returns (1, 3b, 2A/2B, 9, 9C etc.)

ITC Taken Data Invoice/BOE wise breakup

What is the checklist for GST Audit?

A GST audit checklist helps ensure that all relevant aspects of GST compliance are thoroughly examined during the audit process. Here’s a more detailed breakdown of the checklist you’ve provided:

1 Registration Certificate:

Verify the validity of the GST registration certificate. Confirm the accuracy of the details on the certificate, including business name, address, and other particulars.

2 Invoicing and related Documentations

* Whether Tax Invoice or Bill of Supply issued as per the provisions contained in GST law
* Whether receipt vouchers issued in case of receipt of advance
* Whether proper credit note/debit note issued as per GST provisions
* Check correctness of Invoicing.
* Whether delivery challan/e-way bills issued and maintained properly
* Whether transport documents properly maintained and verified
* Whether a unique series of invoicing is given as per the requirements of the law.

3 Supply

Examine the nature of supplies (taxable, exempt, zero-rated, etc.).

Confirm that the supplies are appropriately classified as per GST regulations.

Proper classification of supply, i.e. supply of goods or supply of services

Transactions related to goods sent for job work

Whether supply falls under negative list.

4 Time of Supply:

Ensure that the time of supply for goods and services is correctly determined as per GST rules.

5 Input Tax Credit:

Verify the eligibility and correctness of input tax credit claimed. Cross-check invoices and supporting documents for authenticity.

6 Classifications:

Confirm the accurate classification of goods and services under the appropriate GST rate.

7 Input Service Distributor:

If applicable, verify the distribution of input tax credit by the Input Service Distributor.

8 Returns:

Check the timely filing of GST returns, including GSTR-1, GSTR-3B, and others as applicable. Ensure reconciliation between GSTR-2A (auto-populated details) and books of accounts.

9 GST Collections and Payments:

Confirm that the correct amount of GST is collected from customers and paid to the government. Reconcile GST liability with the books of accounts.

10 Reverse Charge:

Verify compliance with reverse charge provisions, if applicable. Confirm accurate reporting of reverse charge transactions.

11 Value of Supply:

Ensure that the correct value of supply is considered for GST calculation.

12 Place of Supply:

Confirm the accurate determination of the place of supply for goods and services.

13 Refunds:

Verify eligibility and correctness of refund claims, if any. Ensure proper documentation for refund applications.

14 Inward Supplies:

Cross-verify inward supplies with purchase records. Confirm the correctness of GST paid on inward supplies.

15 Maintenance of Books of Accounts:

Check if the taxpayer is maintaining the required books of accounts and records as per GST laws.

16 General:

Confirm compliance with other general provisions of GST laws. Ensure the availability of necessary documents and records for audit purposes.

Submission of GST Audit report

An auditor shall report the following things:

Whether records and transactions correctly kept and maintained

Whether Financial Statements prepared, conform with the books of accounts

To confirm the authenticity of the information in GSTR-9C.

To mention any observations or comments in report thereof.

Penalty for GST Audit

In accordance with the GST Act, the annual return and audit deadlines are set for December 31 of the subsequent fiscal year. The legislation, however, does not explicitly outline penalties for non-compliance with these deadlines. Consequently, any failure to meet these requirements would be subject to the general penalty stipulated under the GST regulations, which amounts to Rs. 25,000.

Conclusion

You do not require an audit if your business’s sales and gross receipts for any given fiscal year amount less than ₹2 crores. However, it’s necessary to comply with the GST audit if your yearly turnover is above ₹5 crores. It is essential to adhere to the GST audit checklist and the necessary audit types.