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GST audit is necessary at times to maintain a check and examine whether correct GST is being paid and the refund claimed, especially for certain categories of taxpayers.
1st February 2021
Union Budget 2021:
GST audit requirement by specific professionals such as CAs and CMAs has been removed from the GST law. Section 35 and 44 were amended for this. As per the amendment, only GSTR-9-annual returns on a self-certification basis needs to be filed on the GST portal by taxpayers, completely removing the requirement for GSTR-9C -reconciliation statement.
However, the financial year and date of applicability of this removal are yet to be clarified by the government. Note that GSTR-9C submission for FY 2019-20 remains unchanged.
Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST.
The GST Audit can be of the different types as depicted in the flowchart given below:
Every GST registered taxable person whose turnover during a financial year exceeds the prescribed limit is subject to audit. As per the current notified GST Rules, the turnover limit is above Rs 2 crore^. Such businesses must get their books of accounts audited by a chartered accountant or a cost accountant. Such taxpayer shall electronically file:
^For businesses with an annual turnover of less than Rs.5 crore, filing of GSTR-9C for FY 2018-19 and FY 2019-20 has been waived off.
If any taxable person, after furnishing a GST return discovers any omission/incorrect details (from results of audit), he can rectify subject to payment of interest.
However, no rectification will be allowed after the earlier of:
(i) the due date for filing of return for the month of September or second quarter, (as the case may be), following the end of the financial year, or
(ii) the actual date of filing o the relevant annual return.
For example, Mr ‘X’ found during the audit that he has made a mistake in Oct 2020 return. X submitted an annual return for FY 2020-21 on 31st December 2021 along with audited accounts. He can rectify the Oct 2020 mistake within- 20th Oct 2021 (last date for filing September return) or 31st December 2021 ( the actual date of filing of relevant annual return), whichever is earlier, i.e., his last date for rectifying is
20th Oct 2021.
Such rectification will not be allowed where results are from scrutiny or audit by the tax authorities.
The taxable person will be required to:
On conclusion of an audit, the officer will inform the taxable person within 30 days of:
If the audit results in the detection of unpaid/short paid tax or wrong refund or wrong input tax credit availed, then demand and recovery actions will be initiated.
The Assistant Commissioner may initiate the special audit, considering the nature and complexity of the case and interest of revenue.
If he is of the opinion during any stage of scrutiny/ inquiry/investigation that the value has not been correctly declared or the wrong credit has been availed then a special audit can be initiated.
A special audit can be conducted even if the taxpayer’s books have already been audited before.
The Assistant Commissioner (with the prior approval of the Commissioner) can order for special audit (in writing). The special audit will be carried out by a chartered accountant or a cost accountant nominated by the Commissioner.
The auditor will have to submit the report within 90 days. This may be further extended by the tax officer for 90 days on an application made by the taxable person or the auditor.
The expenses for examination and audit including the auditor’s remuneration will be determined and paid by the Commissioner.
The taxable person will be given an opportunity of being heard in the findings of the special audit. If the audit results in detection of unpaid/short paid tax or wrong refund or input tax credit wrongly availed then demand and recovery actions will be initiated.
For further understanding, read our articles on GST audit: