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

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.

Recent Updates on Audits under GST

29th December 2021
The due date to file GSTR-9 & self-certified GSTR-9C for the FY 2020-21 has been extended up to 28th February 2022.

28th May 2021
As per the 43rd GST Council meeting outcome, GSTR-9 shall continue to be optional for taxpayers with turnover up to Rs.2 crore, whereas GSTR-9C can be self-certified by taxpayers with turnover less than or equal to Rs.5 crore from FY 2020-21 onwards.

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.

Introduction to GST Audit

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:

Threshold Limit for Audit under GST by CA/CMA

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:

1. An annual return using the Form GSTR 9 by 31st December of the next Financial Year
2. The audited copy of the annual accounts
3. A certified reconciliation statement in the form GSTR-9C, reconciling the value of supplies declared in the return with the audited annual financial statement
4. Any other particulars as prescribed

^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.

Rectifications to Returns After GST Audit

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.

Audit by Tax Authorities

• The Commissioner of CGST/SGST (or any officer authorized by him) may conduct an audit of a taxpayer. The frequency and manner of an audit will be prescribed later.
• A notice will be sent to the auditee at least 15 days before.
• The audit will be completed within 3 months from the date of commencement of the audit.
• The Commissioner can extend the audit period for a further six months with reasons recorded in writing.

Obligations of the Auditee

The taxable person will be required to:

1. provide the necessary facility to verify the books of account/other documents as required
2. to give information and assistance for timely completion of the audit.

Findings of Audit

On conclusion of an audit, the officer will inform the taxable person within 30 days of:

• the findings,
• their reasons, and
• the taxable person’s rights and obligations

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.

Special Audit under GST

When can a special audit 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. 

Who will order and conduct a special audit?

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.

What is the time limit to initiate a special audit under GST?

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. 

Who will bear the expenses of the special audit?

The expenses for examination and audit including the auditor’s remuneration will be determined and paid by the Commissioner.

How are the findings of the special audit dealt with?

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:

• Turnover based Audit under GST
• All about GSTR-9C- Reconciliation Statement under GST
• Introduction to Assessments, Advance Rulings & Demand and Recovery