As per section 2(13) of the CGST Act, 2017, “audit” is an examination of returns, records and other such documents furnished by you for verifying the correctness of taxes paid, Input Tax Credit (ITC) availed, refund claimed, turnover declared, and assessment of your compliance under the provisions of this Act.
There are three types of audit under GST:
15 days prior notice is given to you before initiating the audit and it is generally completed within 3 months from the date of start or extended to six months by the Commissioner with due reasons.
The GST audit requires preparation both from the auditor as well as you. It requires:
A show cause notice can be issued by GST authority to your business for compliance as per the GST norms. Therefore, an internal auditor is mandatory as he can bring relief to your business and run a check on the operating efficiency of internal financial controls, know about the main risk areas and implement required measures to mitigate those risks.
SIDE NOTE: The show cause notice is issued by the GST authority if they detect any fraudulent activities like availing excess ITC, suppression of facts, claimed the wrong refund, etc.
The following steps require strict fulfilment to GST Audit and need to be taken both by the internal auditor and you.
The auditor needs to make sure that your business is complying with provisions of the e-way bill and suggest effective measures to avoid any legal complications.
You need to maintain values of the following in order to comply with GST Rules for turnover based audit in case your annual turnover exceeds Rs 2 Crore.
There is no specific law which deals with not getting your accounts audited by a Chartered Accountant. Therefore, as per section 125 of CGST Act,2017 you are subjected to a penalty up to Rs 25,000.
Your audit can be conducted by the Commissioner of CGST/SGST (or an officer authorized by him) in frequency and manner as prescribed. The officer will audit the following:
Within 30 days of the audit the officer will inform you about:
SIDE NOTE: If there is a detection of any unpaid/ short paid tax, wrong input tax credit, wrong refund, then a demand and recovery action will be initiated.
A special audit can be initiated by the Assistant Commissioner considering the complexity and nature of the instance and interest of revenue. If he finds out that during any step of investigation/ scrutiny/ inquiry that the figures have been declared incorrectly or you have availed wrong credit, then a special audit may be initiated.
The Assistant Commissioner can order for special audit (in writing) and is carried out by a chartered/ cost accountant who is nominated by the Commissioner.
The auditor is required to submit the report in 90 days which can further be extended by the officer for another 90 days by an application made either by you or the auditor.
The Commissioner will determine and pay the expenses for the examination and audit which will include auditor’s fee.
You will have an opportunity to be heard in respect of any material collected as per the basis of the special audit. If there is any unpaid/ short paid tax detected, wrong refund or ITC claimed, then a recovery and demand action will be initiated.
If you discover that there are any details which are incorrect or omitted in the returns you furnished, you can rectify it subject to payment of interest. However, there will be no rectification allowed after filing a return for the second quarter or the month of September following the financial year end or the actual filing date of the annual return, whichever is earlier.
Example: You find out during the audit that you made an error in return of December 2017 and submitted the annual return on 31st August 2018 for FY 2017-18 with the audited accounts.
You can now rectify that error by:
20 October 2018 (Last due date for filing September return)
31 August 2018 (the actual date of filing of relevant annual return)
Whichever comes earlier.
In this case, it is on 31 August 2018
SIDE NOTE: You cannot rectify results from scrutiny or an audit done by tax authorities.
GST audit is mandatory for your business having a turnover above Rs 2 Crore and the next step to take after getting the audit done is to file the GSTR-9C form which is a reconciliation statement before the due date.
|Components||Section 65||Section 66|
|Nature of Audit||In this section, we have a departmental audit||In this section, we have a special audit|
|Conducted by||It is conducted by officers of the department authorised by the commissioner||It is conducted by Chartered accountant/cost accountant nominated by the commissioner|
|Prior Notice||Prior notice of 15 days is required||o such notice/intimation is required|
|Time for the conclusion of the audit||The conclusion of the audit is given in 3 months, further extension of 6 months is allowed||The conclusion of the audit is given in 90 days, further extension of 90 days is allowed|
|Audit Findings/Report||Audit reports should be intimated soon upon completion of the audit||Audit reports should be shown to deputy/assistant commissioner|
|The opportunity of being heard||No specific provision||Yes, where material gathered during the audit is to be used in any proceedings against the auditee|
|Action based on a report||Yes, under section 73 by the issuance of SCN (Show Cause Notice)||Yes, under section 73 by the issuance of SCN (Show Cause Notice)|
GST law has taken care of the strong audit mechanism, but some ambiguity is still unanswered:
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