The term ‘audit’ under GST means the examination of records, returns and other documents of a registered person to verify that the turnover declared, taxes paid, refund claimed and input tax credit availed are correct.
A Pictorial depiction of the types of audit under GST is shown below:
Types of Audit in GST
1. Annual audit by a CA or CWA
The GST Audit Applicability has been specified by the GST Council, as per the GST Audit limit. Every registered person whose turnover during a financial year crosses the GST Audit turnover limit of Rs. 2 Crores should get his accounts audited by a Chartered Accountant or Cost Accountant. While furnishing the annual return in Form GSTR-9, a copy of the audited accounts and a reconciliation statement (reconciling the value of supplies declared in the annual return with the audited financial statements) should be submitted.
2. Audit by GST authorities
Under General audit, the Commissioner or any officer authorised by him can undertake audit of any registered person.
General GST Audit process:
- The audit will be conducted at the registered person’s place of business or in his/her office.
- The person will be informed about the audit by a notice at least 15 working days prior to the date of audit.
- The GST audit due date will be 3 months from the date of commencement of audit, i.e. audit has to be completed within 90 days. This can be extended by another 6 months if the Commissioner feels that the audit cannot be completed in 3 months. The reasons for extension have to be recorded in writing.
- After the audit is completed, the Officer should inform the registered person, within 30 days, about the findings, reasons for the findings and his rights and obligations.
- If the audit results in detection of tax not paid or short paid or wrongly refunded or input tax credit wrongly availed or utilised, the Officer will initiate action for recovery of the tax.
During a process of scrutiny, enquiry or investigation, if an Officer feels that the value of tax has not been correctly declared or wrong credit has been availed, he can initiate a Special audit. Under Special audit, the registered person will be directed to get his accounts audited by a Chartered Accountant or Cost Accountant nominated by the Commissioner. The nominated Chartered Accountant or Cost Accountant should submit the GST Audit report within 90 days. This period can be extended by another 90 days, if required. If the audit results in detection of tax not paid or short paid or wrongly refunded or input tax credit wrongly availed or utilised, the Officer will initiate action for recovery of the tax.
Hence, the process of audit under GST is simple and structured. As a tax payer, it is important to practise good compliance in order to avoid audit by tax authorities. Also, tax payers whose turnover exceeds Rs. 2 Crores should get their accounts audited by a CA or CWA.