According to the 2021 Finance Act, the requirement for a GST audit and the GSTR-9C submission certified by the CA or CMA was abolished. The GST Council recommended that taxpayers with an average yearly aggregate turnover of Rs.5 crore or more should continue to submit GSTR-9C as self-certified at the 43rd GST Council meeting on May 28, 2021.
On July 30, 2021, CBIC announced the change in Notification No. 29/2021 for the fiscal year 2021-22. However, the same has been following ever since and in 2023. So, read further to understand the GST audit process.
A GST audit examines records, returns, and other documents possessed by a GST-registered person. It also assures the accuracy of declared turnover, taxes paid, refund claimed, and input tax credit availed and assesses other such GST Act requirements to be reviewed by an authorized expert.
GST is a trust-based income tax regime in which taxpayers self-assess their tax liability, pay taxes, and file returns. As a result, a robust audit framework is a must to ensure that the taxpayers have appropriately self-assessed their tax liability. The government takes various measures to ensure proper GST implementation, one of which is an audit.
Only a Cost Accountant or a Chartered Accountant can undertake a GST audit u/s 35.
Essential points to consider knowing:
1. Simultaneously, an internal auditor cannot be a GST auditor.
2. The GST Act forbids a GST practitioner from conducting an audit. Only a Chartered Accountant or Cost Accountant in practice or a staff of a company of Chartered Accountants or Cost Accountants has the authority to perform a GST audit. As a result, a Chartered Accountant cannot be enlisted as a GST practitioner to issue the Audit Report.
3. When an organization or entity has branch offices GST registered in different locations or states, the total gross revenue of all branches comes into account when calculating the Rs. 2 crores threshold limit.
4. As a result, if the total turnover of all branches exceeds Rs. 2 crores, the GST audit applies to all of these branches, regardless if the revenue of a specific branch office is less than the limit.
5. In such cases, businesses can appoint a dedicated auditor for all branches or a separate auditor for each one separately.
6. When several branches have various accountants, the Standards on Auditing: SA 299 — Responsibility of the Joint Auditors could apply for reporting GST Audit observations & Reporting.
There are 3 types of GST audits, each focusing on different business stages.
Only a chartered or cost accountant appointed by the taxpayer can perform the turnover-based GST audit. If a registered taxpayer's annual turnover exceeds 2 crore INR in a fiscal year, they must have their accounts audited by a Chartered Accountant or Cost Accountant. A fiscal year is 12 months beginning in April of one calendar year and ending in March of the following calendar year.
Aggregate turnover gets calculated in the following way.
Aggregate turnover = all taxable (inter-state and intra-state) supplies value + excused stockpiles + export collections of all goods and services.
Total turnover must get calculated on a PAN basis, which means that once the turnover under the PAN exceeds 2 crores INR, all business entities' GST registered for that PAN will be subject to GST audit for the fiscal year.
1. All taxable (interstate and intrastate) supplies except those subject to reverse charge
2. Exchanged supplies between different business sectors.
3. Goods supplied or received from the job employee on a one-to-one basis.
4. The total cost of all export or zero-rated materials.
5. Provision of agents or workers on behalf of the client.
6. All exempt supplies. For instance, agricultural produce is delivered alongside branded ready-to-eat food.
7. Taxes that are not covered by GST. For example, the entertainment tax levied on the special offer of movie tickets.
1. Inward supplies are subject to reverse charge taxation.
2. All taxes and cess levied under the Goods and Services Tax, such as CGST, SGST, or IGST, and compensation cess.
3. Goods supplied to or returned by a job worker.
4. Activities that do not fall under the purview of Schedule III of the CGST Act.
Only a CGST or SGST commissioner or any other official authorized by the commissioner can perform the audit. Businesses undergo the general audit following the orders given by the commissioner within 15 days before issuing the notice.
A cost or chartered accountant appointed by the commissioner can perform the special audit. CA performs the audit followed by the orders given by the deputy or assistant commissioner before the commissioner's approval.
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