Audit under GST- When You Might Get Audited by Tax Officers?

Goods and Services Tax (GST) is a comprehensive indirect tax system that has been implemented in India since July 2017. GST has replaced many indirect taxes and has simplified the entire taxation system. However, with the implementation of GST, many businesses and entrepreneurs have had to deal with auditing, which has become an integral part of the GST regime.

A GST audit is an examination of the records, returns, and other relevant documents of a registered taxpayer to verify the correctness of the tax liability, tax paid, refund claimed, and input tax credit availed by the taxpayer. The audit under GST is conducted by the tax authorities of the GST department, and it can be of two types:

Mandatory Audit: It is conducted by the tax authorities every year for businesses with an annual turnover of more than Rs. 2 crores.
Special Audit: It is conducted when the tax authorities feel the need to examine the records of a registered taxpayer to ensure that the correct amount of tax has been paid, and the correct amount of input tax credit (ITC) has been claimed.

In this article, we will discuss in detail about the circumstances when a taxpayer might get audited by the tax officers and the process of the special audit under GST in India.

When Might You Get Audited by the Tax Officers?

As mentioned earlier, businesses with an annual turnover of over Rs. 2 crores are required to undergo a mandatory audit by the GST department. However, there are certain circumstances when businesses with an annual turnover of under Rs. 2 crores might also get audited by the tax officers:

Non-Filing of Returns: If a taxpayer fails to file their GST returns for a specified period, they might get audited by the tax officers.
Inconsistencies in Returns: If there are any inconsistencies or discrepancies found in the GST returns filed by the taxpayer, it can trigger an audit by the tax officers.
Incomplete Records: If the tax officers find that the records maintained by the taxpayer are incomplete, they might initiate an audit to ascertain the correct tax liability.
Unexplained Increase in Turnover: If there is an unexplained increase in the turnover of the taxpayer, it might trigger an audit by the tax officers to verify the correctness of the tax paid and the input tax credit claimed by the taxpayer.
Tax Evasion: If the tax officers suspect that the taxpayer is involved in tax evasion or has suppressed turnover or claimed false input tax credit, they might initiate an audit.

It is important to note that the tax officers can initiate an audit at any time, and the taxpayer will be given a notice of the same, specifying the period to be audited.

Special Audit under GST

As mentioned earlier, a special audit is conducted when the tax authorities feel the need to examine the records of a registered taxpayer to ensure that the correct amount of tax has been paid, and the correct amount of input tax credit (ITC) has been claimed. The special audit can be initiated by the Assistant Commissioner or the Commissioner of GST, and it is mandatory for the taxpayer to comply with the same.

The special audit is conducted by a chartered accountant or a cost accountant nominated by the taxpayer and approved by the tax authorities. The special auditor is required to submit a report of the audit to the tax authorities within 90 days from the date of the order.

In case the special auditor finds any discrepancies in the records of the taxpayer, they are required to inform the taxpayer and the tax authorities about the same.

Conclusion

In conclusion, GST audit is an important part of the GST regime, and every registered taxpayer should ensure that they comply with the provisions of the GST law. In case of any discrepancies or inconsistencies found in the records, the taxpayer should take corrective action and ensure that the correct amount of tax is paid and the correct amount of input tax credit is claimed.