GST Audit: A Complete Overview

GST Audit is the process of examining and verifying the records, returns, and other documents maintained by a registered person under the Goods and Services Tax (GST) system. It ensures compliance with GST laws and the accuracy of declared turnover, taxes paid, refunds claimed, and input tax credits availed.

What is GST Audit?

A GST audit involves:

  1. Verification of Records: Ensuring the accuracy of books of accounts, GST returns, and other documents.
  2. Compliance Check: Confirming adherence to GST rules and regulations.
  3. Tax Liability Assessment: Identifying underpayment, overpayment, or errors in tax calculation.

Who is Required to Undergo a GST Audit?

  1. Turnover-Based Audit:

    • Registered taxpayers with an aggregate turnover exceeding ₹2 crore in a financial year.
    • This threshold includes all taxable, exempt, export, and inter-state supplies.

  2. Departmental Audit:

    • Conducted by GST officers under Section 65 of the GST Act.

  3. Special Audit:

    • Directed by the GST Commissioner when discrepancies are found in returns under Section 66 of the GST Act.

Types of GST Audits

TypeConducted ByTrigger
Turnover-BasedChartered Accountant (CA) or Cost Accountant (CMA)Annual turnover exceeds ₹2 crore.
DepartmentalGST officersRegular compliance verification by the department.
Special AuditNominated CA or CMADirected by the Commissioner for discrepancies.

Steps in GST Audit

  1. Review of Financial Records:

    • Cross-check the turnover, tax liability, input tax credit, and GST returns.

  2. Reconciliation:

    • Match GST returns with financial statements and tax invoices.

  3. Verification of ITC Claims:

    • Ensure compliance with input tax credit rules, especially for blocked credits under Section 17(5).

  4. Assessment of Tax Payments:

    • Check the accuracy of tax paid, including Reverse Charge Mechanism (RCM).

  5. Reporting:

    • Prepare and submit the audit report in Form GSTR-9C, along with the reconciliation statement.

Documents Required for GST Audit

  1. GST Returns: GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C.
  2. Financial Statements: Balance sheet, profit & loss account, and trial balance.
  3. Tax Invoices: Sales and purchase invoices.
  4. ITC Ledger: Input tax credit details claimed and reconciled.
  5. E-Way Bills: For verification of goods movement.

Important Forms for GST Audit

FormDescription
GSTR-9Annual return containing summary details of sales, purchases, and tax liability.
GSTR-9CReconciliation statement and audit report prepared by a CA or CMA.

Benefits of GST Audit

  1. Ensures Compliance: Identifies discrepancies and ensures adherence to GST laws.
  2. Prevents Penalties: Early detection of errors can help avoid future penalties.
  3. Enhances Accuracy: Improves accuracy in tax reporting and filings.
  4. Builds Credibility: Demonstrates good governance and accountability to stakeholders.

Consequences of Non-Compliance

  1. Penalties:

    • Late filing of GSTR-9C can attract late fees of ₹200 per day (₹100 CGST + ₹100 SGST).
    • Fines for discrepancies identified during the audit.

  2. Prosecution:

    • Severe cases of fraud or tax evasion may lead to legal actions.

If you need assistance with GST audits, reconciliation, or filing GSTR-9C, feel free to contact AK Mehta & Associates 😊

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