GST Audit Service in India
What is GST Audit?
GST Audit is a process in which all the documents, records and returns maintained and filed by taxpayers is being examined by GST officials. It was introduced from July 2017 by the taxation authorities to keep a check that the registered entities are paying appropriate GST or proper refunds are being claimed or not.
GST Audits are being held for the purpose of verifying the authenticity of the documents and information furnished by the taxpayer regarding mentioned turnover, taxes paid, Input Tax Credits availed and the refunds claimed. It is done to check whether the taxpayer is compliant with the laid GST laws or not.
The provisions that have been laid down by GST Council for conducting and regulating GST Audit in India are –
- Section 2(13) of the CGST Act, 2017 defines the term ‘AUDIT’.
- Section 35(5) of the CGST Act, 2017 deals with turnover limit prescribed for conducting GST Audit.
- Section 65 in Chapter XIII of the CGST Act, 2017 deals with audit by tax authorities.
- Section 66 in Chapter XIII of the CGST Act, 2017 deals with special audit.
What are different Types of GST Audit?
Audit based on turnover
Under Section 35(5) of the Central Goods and Services Tax (CGST) Act, 2017 it is mandatory that a Chartered Accountant or Cost Accountant is appointed by the taxpayer, when the annual turnover exceeds 2 crores. It is initiated in order to get the accounts and records of the taxpayer audited.
General Audit/ Normal Audit
It is performed by the Commissioner of CGST/SGST office or any Officer authorized by him. General or normal audit are initiated on the passed order of the Commissioner by giving 15 days prior notice to the taxpayer.
Special Audit are conducted by a Chartered Accountant or Cost Accountant, who has been nominated by tax Commissioner. It is initiated or performed when an order from Deputy or Assistant Commissioner with prior approval of Commissioner is passed.
When GST Audit are required?
It is mandatory for the taxpayer or company to have GST Audit performed in the following scenarios-
- Every business owner having a turnover of the company above Rs. 2 Crores during a financial year is liable to have a GST Audit. The audit turnover limit is same for each and every registered taxpayer all over India. Since every state has a separate GST Act, the GST Audits are performed state wise as per the GST rules of that state.
- Normal/general audits are conducted by the CGST commissioner or SGST commissioner or a person appointed by him for each and every instance and situation, prescribed in the GST Act.
- The taxation department can conduct Special GST Audit whenever they feel right.
What Process is involved in GST Audit?
Normally, following are involved:
- With the help of a comprehensive GST Audit Checklist, the authorized officer and the officials check all the books and accounts of the taxpayer, during a GST Audit.
- They are required to verify each and every document, maintained records and books, returns and statements furnished by the taxpayer to check whether correct values are shown in returns, correct input tax has been claimed, calculation of GST has been properly done, returns have been filed within time limit, there is no loss to revenue and above all there has been no fraud conducted by the registered person.
- The authorities also need to verify whether proper books, challans, invoices prescribed under the Act and Rules have been maintained in case of normal dealers as well as in special cases like that of Exporters, Job Workers, Intermediaries etc.
- The GST Auditors have to analyse the information and interpret it. They have to record it in form of audit notes. Once all the information is recorded the same after auditing is to be provided to the taxpayer for future references.
Reconciliation of GST Return in GST Audit:
Every registered taxpayers have to file GST Returns within due date prescribed. GST Return filing is required to be done twice on monthly basis and once on annual basis in case of suppliers having total turnover of more than Rs 1.5 crore during a year. For small suppliers having annual Turnover below Rs 1.5 crore, GST return need to be filed on monthly and quarterly basis and no need to file annual return.
This means that total 25 GST Returns has to be filed by the taxpayer in a year having turnover more than Rs 1.5 crore and total 16 GST returns has to be filed by the taxpayers having turnover less than Rs 1.5 crore. The timelines of GST Returns to be filed are as follows:
- GST Return for outward supply is to be filed in GSTR-1 by 10thof every next month for large taxpayers.
- GST Return for outward supply is to be filed in GSTR-1 by 31st of next month after end of quarter for small taxpayers
- A combined monthly GST Return is to be filed in GSTR-3 by 20thof every next month.
- An annual GST Return in form GSTR-9 is to be filed on or before 31stDecember of each financial year.
During a GST Audit of the company or the firm, the auditor has to make sure that the returns filed by them in GSTR-1, GSTR-3 reconciles with each other as well as with GSTR-9. It is a very important step in GST Audit that the filed returns filed and shown amounts are matching with the information in each of them.
What are the List documents required for GST Audit?
In order to conduct proper GST Audit, following list of documents need to be verified:-
- Copies of GSTR-1 returns filed during a particular financial year.
- Copies of GSTR-3B returns filed during the fiscal year by the taxpayer.
- Copies of all the Debit and Credit notes.
- Copies of Bank statements for the entire fiscal year.
- Copy of Audited Annual Accounts.
- Reconciliation Statement reconciling the value of supplies declared in the Returns furnished for the financial year along with the audited Annual Financial Statements. Further, the aforesaid Reconciliation Statement shall be duly certified in Form GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.
- Copy of balance sheet along with notes.
- Copy of Profit and loss account along with necessary notes.
- Copy of invoices of sales, purchase and expenses bill.
- In case of imports, a copy of imported bills of entry, shipping bills, IGMs.
- In case of initiated export, a copy of export bills, EGMs etc.
- Delivery challans, invoices for goods sent for job work.
- Copy of stock register
- Other mandated documents in prescribed form and manner.
GST Auditor is a person who is appointed by the taxation authorities or by a taxpayer when the necessary conditions to conduct a GST Audit is met. The person must be qualified and skilled and should have proper experience in order to be appointed as a GST Auditor as the GST laws and rules. Generally, practicing chartered accountants and Cost Accountants are appointed for conducting GST audit by registered person.
What areas need to be covered under GST Audit service?
Since GST is a new legislation and normally taxpayers are not conversant with all the rules and regulations, there is bound to be some non-compliance or unintended mistakes in recording of transactions or computation of tax or filing of returns, therefore, it is very important that these should be highlighted at time of GST Audit.
Typically, GST Audit service should cover following:
- Checking the invoices on test check basis to determine whether HSN code, Place of supply, rate, serial no; of invoices etc have been correctly mentioned.
- Whether Transitional provisions have been complied properly. Whether the person have filed TRANS-1 and the said form has carried forward all the accumulated credits appearing as closing balance in the service tax returns/Excise /VAT returns ?
- Registration certificate properly displayed along with GSTIN
- Whether depreciation has been claimed on fixed assets or ITC claimed
- Whether ITC has been properly claimed on basis of duty paying documents and only for business purpose. Whether registered recipient has made payment to registered supplier within 6 months.
- Whether Input tax credit has been used in respect of supplies taxable supplies only.
- Matching of month wise ITC availed with GSTR3B.
- Whether Month wise reconciliation of ITC (B2B) availed in GSTR 3B Vs. ITC auto-populated in Form GSTR 2A has been done. Any variance should be adjusted in Form GSTR 3B for March’2018 or in subsequent months GSTR 3B return.
- Whether Timing difference and value difference has been identified and appropriate action taken.
- Analysis of payment of GST at time of export and import of goods.
- In case of job work whether ITC-4 has been filed in time
- List of books of accounts maintained and place where such accounts are kept.
- Analysis of GST returns to determine whether GST returns are filed on due Date. The total turnover of outward supplies declared in the returns including all the outward supplies taxable under GST Act effected during the year. The total turnover of inward supplies declared in the returns including all the inward supplies taxable under GST Act made during the year.
- Whether provisions of reverse charge properly applied.
- Whether anti-profiteering guidelines issued under Section 171 of CGST Act 2017 complied?
- Whether all the annexures relating to GST audit report has been prepared properly.
How can we help as GST Audit Consultant?
With our expert team of chartered accountants, we assist our clients in conducting GST audit in a professional manner covering entire gamut of GST Act, GST laws and circulars and notifications.
Our Approach as GST Audit Consultants
We, at Ezybiz India Consulting LLP, as a trusted GST Audit Consultant help our clients with following services:
- Analysis of nature of business of clients and requirement for GST registration etc
- Checking whether invoices have been prepared correctly with correct HSN/SAC code, correct rate of taxes and correct identification of tax heads. In case of any discrepancy, advising them how to rectify the same.
- Checking whether input tax credit has been claimed correctly
- Analyzing whether all prescribed books of accounts have been prepared and maintained
- Checking whether all GST returns have been filed within due dates and all invoices are properly recorded in GST returns
- Checking whether proper reconciliations have been done between GSTR-1, GSTR2A, GSTR3B, GSTR-9 as well as with financial statements and providing guidance for future reference.
- In case of reverse charge, whether proper invoices prepared and ITC claimed/reversed correctly.
- Checking compliance with anti-profiteering guidelines.
- Checking whether ITC has been correctly claimed and only in respect of taxable supplies
- Assisting clients in overall compliance of GST annual return and GST audit
EZYBIZ India Consulting LLP uses professional approach while conducting GST Audit. Our team follows the highest degree of integrity and professional standards. We have assisted both multinational and domestic clients with GST implementation, GST compliance, preparation and filing of annual GST return and GST Audit
GST Audit is required to be conducted by every registered person through Chartered Accountant or Cost Accountant in case turnover during a financial year exceeds Rs. 2 Crore.
Here, “turnover” means “aggregate turnover”.
“Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods and services or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes Central tax, State tax, Union Territory tax, integrated tax and cess.
The following qualified persons can be appointed as GST Auditor to conduct GST Audit in a company-
- Practicing Chartered Accountants.
- Practicing Cost Accountants.
- Two or more chartered accountants who are acting as joint auditors.
- Statutory auditors can be appointed as GST Auditor.
- Different auditors can be appointed for different divisions/units/branches.
The following persons cannot perform GST Audit and are disqualified from being appointed as GST Auditor-
- Chartered Accountants not holding a practicing certificate.
- Part time practicing Chartered Accountants.
- Any relative or employee of the registered person (bound to have GST Audit).
- The Internal Auditors of company or organization.
Any Chartered accountants who are indebted or owes a sum of more than Rs. 10,000 to the company or the registered taxpayer.