GST Audit
One of approaching GST compliance is GST Audit. The last date to file GST Annual return for July 2017- March 2018 is 30th June 2019.
1. What is an Audit as per Goods and Services Tax?
Sec 2(13) of the CGST Act 2017 defines the term audit as mentioned below.
It means-
- the examination of records, returns and other documents maintained or furnished by the registered person under the GST Acts
- 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 the GST Acts or the rules made thereunder.
GST Rules – Chapter 8 –Returns Sec 80 Annual Return
The different types of returns which are applicable to various assesses are summarized as follows-
| GST Return Form | Assessee |
| GSTR 9 | Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person |
| GSTR 9A | Person paying the tax under Sec 10 i.e. a composition dealer |
| GSTR 9B | Electronic commerce operators who have to pay tax at source |
| GSTR 9C | Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement |
2. Types of Audits under the provisions of Goods and Services Tax
As per the provisions of law, there are two types of GST audits which are to be done, as explained below-
A. Sec 35 of the CGST Act requires the audit to be conducted by the taxable person himself
B. Sec 65 & 66 of the CGST Act requires the audit to be conducted by the authorities in respective circumstances
3. ELIGIBILITY CRITERIA FOR GST AUDITS
Section 35 of the CGST ACT- GST Audit by the Taxable Person
As per Sec 35 of the CGST Act 2017, every registered person whose aggregate turnover during a financial year exceeds Rs. 2 crores shall get his accounts audited.
Section 2(6) of the CGST Act/ SGST Act: 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 or 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
4. Key Points one must keep in mind before filing of Annual Return
Key Points one must keep in mind before filing of Annual Return and the aspects which should be precisely be checked by the GST Auditors
- Reconciliation of the books of accounts and tax invoices issued since inception of GST in July 2017 till March 2018
- The above reconciliation should match with the annual turnover declared by the businessmen in their audited financial statements.
- Matching of the stock transfers in between the units and branches of the company with the books of accounts
- E way bill data should be matched with the tax invoices issued since inception of GST i.e. July 2017 till March 2018.
- Proper and correct availment of Input tax Credit should be ensured.
- The purchase and service invoices should be accounted for properly
- The purchase data by the suppliers should have been uploaded by the suppliers properly which will be reflected in GSTR 2A form
- Quarterly and monthly reconciliation of all the GST Returns with the books of accounts to avoid any disparity.
- Input Tax Credit should have been paid only on such invoives on which payment to suppliers has been made within 180 days of the invoices
- Relevant and applicable provisions of Reverse Charge Mechanism should also be taken into account
5. PROCEDURE FOR CONDUCTING AUDITS UNDER RESPECTIVE SECTIONS OF LAW
Who will conduct Audit as per Sec 35 of the CGST Act 2017? Can a Cost Accountant do GST Audit?
The law has given equal rights to the professionals , hence a Chartered Accountant or a Cost Accountant can do the GST audit of the eligible assesse.
SEC 65 of the CGST ACT 2017- GST AUDIT BY TAX AUTHORITIES
Following detailed provisions have been laid done in the CGST Act regarding the GST Audit to be conducted by the Tax Authorities. This audit is exclusively done as per the orders of the commissioner in terms of the provisions stated below-
| Sec 65(1) | Audit by Tax Authorities |
| Who can exercise the power | – A commissioner
– Or any officer authorized by him |
| Sec 65(2) | Place of Conduct of Audit |
| Place of conducting audit | – at the place of business of the registered person or in their office. |
| Sec 65(3) | Intimation |
| Information to the assessee | – by way of a notice not less than fifteen working days prior to the conduct of audit |
| Sec 65(4) | Period of Completion |
| Time period | – within a period of three months from the date of commencement of the audit |
| Extension of the period by | – Commissioner |
| Reasons of extension | – Completion in 3 months not possible as per satisfaction of commissioner |
| Period of Extension | – Further period not exceeding six months |
| Sec 65(5) | Obligation of Auditee |
| Facilities to be provided to the auditor by the assessee | – For verifying the books/ documents
– Furnishing information as required – Rendering assistance for timely completion of audit |
| Sec 65(6) | Audit Report |
| Information to assesse after completion of audit
When |
– Within 30 days of the completion |
| Information about | – Findings, rights, obligations & reasons for such findings |
Can a Cost Accountant do GST Audit under SEC 66 of the CGST ACT 2017- GST AUDIT BY TAX AUTHORITIES- SPECIAL GST AUDIT BY CA/ CMA APPOINTED BY TAX AUTHORITIES
Following detailed provisions have been laid done in the CGST Act regarding the GST Audit to be conducted by the Tax Authorities under special circumstances. This audit is exclusively done by CA/ CMA appointed by the Tax authorities.
- When will be conducted???
During the course of any scrutiny / investigation etc., if the Assistant Commissioner (AC) feels that the Taxable value has not been correctly declared or wrong credit has been availed,
then the AC may direct a Special Audit to be carried out by a Chartered Accountant or a Cost Accountant nominated by the Commissioner.
| Sec 66(1) | Audit by Tax Authorities |
| Who can exercise the power | – any officer not below the rank of Assistant Commissioner with prior permission of Commissioner |
| When can this be exercised | – Depending upon the nature and complexity of the case
– the interest of revenue |
| Triggers | – the value has not been correctly declared or
– the credit availed is not within the normal limits |
| Intimation to Assessee | – a communication in writing to get his records including books of account examined and audited |
| Audited by whom | – by a chartered accountant or a cost accountant as may be nominated by the Commissioner |
| Sec 66(2) | Period of completion |
| Submission of report by CA/ CMA appointed | – within the period of ninety days of start |
| Mode of report | – duly signed and certified by CA/ CMA appointed |
| Report to whom | – Assistant Commissioner |
| Extension in period by Assistant Commissioner | – Further period of 90 days |
| Sec 66(3) | Effective notwithstanding that the accounts of the registered person have been audited under any other provision of this Act or any other law for the time being in force. |
| Sec 66(4) | Opportunity of heard to Assessee after completion of audit |
| Sec 66(5) | Expenses of Audit and submission of Audit Report |
| Inclusions | – All incidental expenses of conducting audit
– All direct expenses of conducting audit – Remuneration of auditors |
| Determined & Paid by | – Commissioner |
* Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts.
** Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts.
DOCUMENTATION USED IN GST AUDIT
Following formats are used during the respective audits being done under various sections as explained above
| GST ADT 01 | Form of notice to be issued by the officer while conducting audit of the assesse as per terms of Sec 65 of the CGST Act 2017 |
| GST ADT 02 | Informing the findings of audit to the registered person in as conducted as per provisions of Section 65 |
| GST ADT 03 | the direction to the registered person to get his records audited by a chartered accountant or a cost accountant specified in the said direction as per terms of Sec 66 of the CGST Act 2017 |
| GST ADT 04 | Information of the findings of the Special Audit to the registered person |
6. DOCUMENTATION/ RECORDS TO BE REVIEWED WHILE CONDUCTING GST AUDIT
Records to be kept by the assesse who is required to get his accounts audited by a CA or CMA under Section 35/ 66 or under Section 65
- Account of Production or manufacture of goods
- Details of inward supplies and outwards supplies of goods and services
- Records of stock of goods
- Account of Input Tax Credit availed
- Details of Output Tax Payable and paid
The registered person shall submit a copy of the audited annual accounts along with the copy of reconciliation statement. The reconciliation statement here includes the statement reconciling the the value of supplies declared in the return furnished for the financial year with the audited annual financial statements , in terms of Sec 44(2) of the CGST Act 2017.
Development of GST AUDIT REPORT formats by The Institute of Chartered Accountants of India
ICAI has issued sample formats for conducting GST Audits covered in the above laid done sections. Though the proposed formats are yet to be finalized but they have been circulated across various websites and are being studied by the various professional firms for their use. There are Form GSTR 9C & GSTR 9D Form GSTR 9C is like Form 3CA of Income Tax Audit and Form GSTR –9D is akin to Form 3CD of Income Tax.
7. CONSEQUENCES OF QUALIFICATIONS FOUND DURING AUDIT
A. In case of Audit conducted by Tax Authorities under Sec 65
| Sec 65(7) | Consequences |
| Results based consequences | – Where the audit conducted results in detection of
§ tax not paid or § such short paid or § erroneously refunded, or § input tax credit wrongly availed or utilized, the proper officer may initiate action under Section 73* or 74** |
B. In case of Special Audit conducted by Tax Authorities under Sec 66
| Sec 66(6) | Consequences |
| Results based consequences | – Where the audit conducted results in detection of
§ tax not paid or § such short paid or § erroneously refunded, or § input tax credit wrongly availed or utilized, the proper officer may initiate action under Section 73* or 74** |
8. AUDITOR’S APPROACH FOR CONDUCTING GST AUDIT
As it is a well known fact that an auditor is a watchdog and not a bloodhound. Still keeping its skepticism and analytical approach well in place, an auditor has to look into every possibility of evasion of tax. The approach of the auditor has to be constructive throughout the audit and the basis parameters which can be visited during the review can be the following-
- Whether duty(GST) has been rightly paid?
- Whether credit(Input Tax Credit) has been correctly taken?
- Whether records/ documents has been correctly maintained?
- Whether returns have been accurately filed?
- Whether exhaustive reconciliations of supplies and purchases are in place?
There can be various subdivision of the above categories i.e. an auditor might have to look into various provisions of the law for ensuring all the compliances. In fact the documentation proposed by ICAI (more than 50 page report) consists of all these provisions.
Needless to say that an auditor has to keep his eyes and ears always open and has to work diligently to in the interest of both parties i.e. assesse as well as revenue. In this way he has to complete his task in an exhaustive manner covering each single aspect of the provisions mentioned under Goods and Services Tax Act.