Understanding GST Audit by Tax Authorities in India

Goods and Services Tax (GST) has overhauled the entire indirect tax system in India. GST is a comprehensive tax regime, which subsumed a number of indirect taxes levied on goods and services. One of the important features of GST is the GST audit.

GST audit is conducted by the tax authorities to ensure that the taxpayers have correctly calculated and paid the GST liability. In this article, we will discuss the various aspects of GST audit by the tax authorities.

What is GST Audit?

GST audit is conducted by the tax authorities to ensure that the GST returns filed by the taxpayers are correct and complete. It helps in verifying the accuracy of the GST returns filed, and ensures that the correct amount of tax has been paid to the government.

Who can be Audited?

Any person registered under GST can be selected for GST audit. The selection of taxpayers for GST audit is done based on certain criteria such as the value of the turnover, the amount of tax paid, the nature of the business, the past compliance record, and any other factor that the tax authorities may deem fit.

Types of GST Audit

There are three types of GST audit:

Mandatory Audit: A taxpayer whose turnover exceeds Rs. 2 crores in a financial year is compulsorily required to get his accounts audited by a Chartered Accountant or a Cost Accountant. This audit is known as the statutory audit. The GST audit for such taxpayers is also mandatory.
Special Audit: The tax authorities may order a special audit in cases where they suspect tax evasion or where there are complexities in the accounts or where the taxpayer fails to provide adequate information. The special audit is conducted by a Chartered Accountant or a Cost Accountant.
Departmental Audit: The tax authorities may conduct a departmental audit to verify the correctness of the GST returns filed by the taxpayer. This audit is conducted by the GST officials themselves.

Procedure for GST Audit

The procedure for GST audit is as follows:

Selection of the Taxpayer: The tax authorities select the taxpayer for GST audit based on certain criteria as mentioned earlier.
Issue of Notice: The tax authorities issue a notice to the taxpayer for conducting the GST audit. The notice specifies the date, time, and place of the audit.
Conduct of Audit: The GST audit is conducted by the Chartered Accountant or Cost Accountant appointed by the taxpayer or by the GST officials themselves. The auditor verifies the correctness and completeness of the GST returns filed, and examines the books of accounts and other relevant documents.
Preparation of Audit Report: After the completion of the audit, the auditor prepares an audit report. The audit report contains the findings of the auditor, and any discrepancies or non-compliances found in the GST returns filed or books of accounts.
Submission of Audit Report: The auditor submits the audit report to the tax authorities within 30 days of the completion of the audit.
Response by the Taxpayer: After the receipt of the audit report, the tax authorities may issue a notice to the taxpayer for the discrepancies or non-compliances found in the audit report. The taxpayer is required to respond to the notice within the specified time, and take appropriate action to rectify the errors or non-compliances.

Penalty for Non-Compliance

If the taxpayer fails to comply with the notice issued by the tax authorities, or if he does not rectify the errors or non-compliances pointed out in the audit report, then he may be liable to pay a penalty. The penalty may be in the form of a monetary fine, or cancellation of registration, or suspension of the registration.

Conclusion

GST audit is an important tool for the tax authorities to ensure that the taxpayers are complying with the GST law. It helps in identifying the discrepancies and non-compliances in the GST returns filed, and ensures that the correct amount of tax is paid to the government. It is therefore advisable for the taxpayers to maintain proper records and comply with the GST law to avoid any penalty or legal action.