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Here is everything you should know about the Audit Process under GST

Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person to verify the correctness of turnover, tax paid, refund claimed and input tax credit availed by the taxpayer.

There are three types of audit under GST:

  1. Audit by CA or CMA:

As per the provisions of CGST Act,2017, every taxable person who is registered under GST and whose turnover is more than INR 2 crore during a financial year, shall get his accounts audited by a Chartered Accountant (CA) or a Cost and Management Accountant (CMA). The taxable person shall electronically file through the common GSTN portal an annual return in form GSTR-9B along with a copy of audited annual accounts, reconciliation statement and such other particulars as may be prescribed.

  • Audit by tax authorities:

A taxpayer may get his accounts audited by the Commissioner of CGST/SGST or any officer authorized by the Commissioner. In such a case, a notice in FORM GST ADT-01 shall be sent to the registered person to inform him about the audit. The notice must be sent to the taxpayer at least 15 days before the date of commencement of an audit.The audit shall be completed within 3 months from the date of commencement and the said period may be extended for further 6 months provided the reason for the extension of such period is recorded in writing. The registered person is informed about the findings of the audit, the reasons behind the findings and the rights and duties of the registered person by the tax authorities within 30 days in FORM GST ADT-02.

  • Special audit:

If at any time during the course of GST audit, the Commissioner or any other proper officer authorized by him, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, then he may after prior approval of the Commissioner may initiate special audit and direct the registered person to get his accounts and records audited by a chartered accountant or a cost accountant or such other person as may be nominated by the Commissioner. The nominated person must submit the audit report duly signed and certified by him within 90 days from the date he is nominated for conducting the special audit. The period of 90 days may be further extended by another 90 days for a genuine reason and all the expenses of the special audit shall be paid by the commissioner. The result of the special audit is communicated to the registered person audit in the form GST ADT-04.

It is the duty of every registered taxpayer to provide all such information and accounts to the auditor that assists the auditor to ensure him about the correctness of production and supply of goods, tax paid and credit availed etc. until the completion of the audit and helps the auditor to reach at a true and fair conclusion. If any error or omission is found in the accounts of the taxpayer, it can be rectified only in the annual return along with any payment due as an interest by the taxpayer.

Assessment under GST:

Assessment under GST means verification of tax liability as per provisions of CGST Act, 2017. It is divided into the following five types:

  1. Self-assessment- Tax liability is assessed by the registered taxable person himself.
  2.  Provisional assessment- Taxes to be payable by the assessee is determined by a proper officer.
  3. Scrutiny assessment- Under this process, a GST officer may on his own or if instructed by the authorities, can scrutinize the GST return filed by the taxpayer and related particulars to check the validity and verify its correctness and can ask for any explanation or additional documents.
  4. Summary assessment- A summary assessment is applicable when the assessing officer has suitable evidence that the tax liability of a person will adversely affect revenue.
  5.  Best judgments assessment- If a registered taxable person fails to furnish his return even after getting a notice under Section 46 or a taxable person who is liable to pay tax but has not obtained a GST registration yet or the registration of the person has been cancelled, then a GST officer to the best of his judgment can assess the tax liability of the person for the relevant tax periods and a show cause notice will be sent to the concerned person.

Demand and Recovery of GST tax:

The demand and recovery for the tax can be raised by the authorized officer of GST under the following situations:

  1. When the tax has been paid incorrectly.
  2. No tax has been paid by the assessee.
  3. When a taxpayer collects tax but does not deposit the same to the government
  4. When cgst or sgst was paid on an IGST applicable supply and vice versa.
  5. Incorrect refund or ITC is claimed by the registered dealer.

A show cause notice will be issued to the taxpayer by the proper officer and if demands are not paid even after the notice, the GST authority can start tax recovery proceedings.


What is GST filing audit process and its procedure ?

GST filing audit process requires scrutiny of books and accounts of the individual who is registered to pay tax. The examination is done to ensure the validity of the information given, refund claims, input tax credit availed and tax liability. An individual whose turnover during the financial year is more than 2 crores needs to hire the chartered accountant for auditing the accounts. One can also hire the Cost Management Accountant for auditing the process.

Under section 35(5), a taxable person who has to get his accounts audited should offer the Annual return electronically in addition to the copy of an audited statement along with the reconciliation statement. The reconciliation statement should have the reconciling the values of the supplies mentioned in the return furnished for the financial year with the audited annual financial statement. A taxable individual should also present the audited annual financial statement, certified audited annual accounts in Form GSTR-9C with annual return. The process is conducted by the commissioner or any individual authorized by the commissioner. There are few terms that an individual doing audit should take care of.
• A notice should be given 15 days before conducting the audit
• It is mandatory to complete the audit within 3 months from the date of starting the audit.
• However, it is in the authority of the commissioner of CGST/SGST to increase the time limit more than six months.

Procedure of GST Audit
Those having the authority to audit the books on the registered Individual should verify all the documents, books maintained, statements and returns furnished as per the act. It is the duty of the audit officer to verify the accuracy of the statement and information provided in line with the act. Officer and his team should check the precision of the tax rate levied on the supply of goods and services, deductions claimed, and exemptions given, refunds claimed, and the input tax credit availed among other things.
It is also the duty of the auditee to furnish all the information, documents and statements as and when demanded by the auditor. The officer in charge might ask for other related documents if required and the auditee should support in that. In case the auditing officer comes across any issues or discrepancies in the documents and filings, he would inform the same to the registered individual. The registered taxpayer will then have to file his reply and the officer would then proceed with the audit after considering the response of the auditee.

Finalizing the Audit
The officer in charge should conclude the GST filing audit after examining the reply of the registered taxpayer and thereafter audit the findings occurred during the course of the audit. The authorized officer should inform the registered person about the observation and the reasons of these findings along with the rights and obligations. If the proper officer finds any issues related to the unpaid due or wrong refunds due, it would require the demand and recovery actions.

Difference between GST filing Audit under Section 65 and Section 66