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All about GST Audit for taxpayers with Annual turnover above 2 crores

Updated on :  

08 min read.

GST Audit applies every year for those GST registered businesses (GSTIN) having turnover more than Rs.2 crore, by the sale of goods or services in the financial year. It is dealt under Sections 35(5) and 44(2) of the CGST Act.

As per the Finance Act, 2021, the requirement of GST audit and submission of GSTR-9C as certified by the CA/CMA is removed. It will come into force once notified by the CBIC. Meanwhile, as per the 43rd GST Council meeting that was held on 28th May 2021, the GST Council recommended that GSTR-9C may be still submitted as self-certified by taxpayers with annual aggregate turnover of equal to or more than Rs.5 crore. The same is yet to be notified by the CBIC as on 11th June 2021.

Latest Update on GSTR-9C

31st July 2021
The CBIC has exempted GST-registered taxpayers with annual aggregate turnover up to Rs.2 crore in FY 20-21 from filing Form GSTR-9.

30th July 2021
The CBIC has notified changes to Sections 35(5) and 44 of the CGST Act. The requirement to get a GST audit and certification done by a CA/CMA now stands removed. Taxpayers with a turnover exceeding Rs.5 crore in the previous financial year are required to file Form GSTR-9C on a self-certification basis. This change is applicable from FY 20-21 onwards. Further, Form GSTR-9C will be modified to support self-certification by the taxpayer.

28th May 2021
As per 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.

9th March 2021
The Form GSTR-9A has been disabled from FY 2019-20 onwards for composition taxpayers due to the introduction of GSTR-4 (Annual return). However, the GSTR-9A is optional and can be filed for FY 2017-18 and FY 2018-19.

28th February 2021
The due date to file GSTR-9 & GSTR-9C for the FY 2019-20 has been further extended up to 31st March 2021.

Need for GST Audit and meaning

Audit under GST involves examination of records, returns and other documents maintained by a GST registered person. It also ensures correctness of turnover declared, taxes paid, refund claimed, input tax credit availed and assess other such compliances under GST Act to be checked by an authorised expert. 

GST is a trust-based taxation regime wherein a taxpayer is required to self-assess his tax liability, pay taxes and file returns. Thus, to ensure whether the taxpayer has correctly self -assessed his tax liability a robust audit mechanism is a must. Various measures are taken by the government for proper implementation of GST and audit is one amongst them.  

Types of GST Audit

TypesPerformed ByWhen Initiated
Turnover based AuditChartered Accountant or Cost Accountant appointed by the taxpayerAs per the CGST Act, if the Turnover exceeds 2 crore,^ the taxpayer has to get his accounts & records audited
Normal audit/General AuditCommissioner of CGST/SGST or any Officer authorized by himOn order of Commissioner by giving 15 days prior notice
Special auditA Chartered Accountant or Cost Accountant, nominated by CommissionerOn order of Deputy/Assistant Commissioner with prior approval of Commissioner

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C up to FY 2019-20 is waived off via various CBIC notifications. The applicability of GST audit by CA/CMA is to be removed from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. However, it is yet to be notified as on 11th June 2021.

Turnover-based Audit under Section 35(5) of CGST Act

If the annual turnover of a registered taxpayer is more than Rs.2 crore^ in a financial year , he is required to get his accounts audited by a Chartered Accountant or Cost Accountant every year. A financial year covers the 12-month period beginning from April of a calendar year to March of the next calendar year. 

Special Note: For the purpose of finding out the turnover limit for Financial Year 2017-18, it has been clarified in the government’s press release dated 3rd July 2019. It shall cover the period 1st July 2017 to 31st March 2018 and excludes the first quarter of FY 2017-18^. For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off. 

Aggregate turnover is calculated as follows:

Aggregate turnover = Value of all taxable (inter-state and intra-state) supplies + exempt supplies + export supplies of all goods and services

The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than Rs. 2 crore^ all business entities registered under GST for that PAN will be liable for GST audit for a financial year. 

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C up to FY 2019-20 is waived off via various CBIC notifications. The applicability of GST audit by CA/CMA is to be removed from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. However, it is yet to be notified as on 11th June 2021.

Items included while calculating Aggregate Turnover

  • All taxable (inter-state and intra-state) supplies other than supplies on which reverse charge is applicable
  • Supplies between separate business verticals.
  • Goods supplied to/received from the job worker on a principal to principal basis.
  • Value of all export/zero-rated supplies.
  • Supplies of agents/job workers on behalf of the principal.
  • All exempt supplies. For example, agricultural produce supplied along with branded ready-to-eat food.
  • All taxes other than those covered under GST. For example, entertainment tax paid on the sale of movie tickets.

Items excluded while calculating turnover

  • Inward supplies on which tax is paid under reverse charge.
  • All taxes and cess charged under Goods and service tax like CGST, SGST or IGST, compensation cess.
  • Goods supplied to or received back from a job worker.
  • Activities which are neither supply of goods nor service under schedule III of CGST Act.

Qualification of GST Auditor & Eligibility 

Only a Chartered Accountant or a Cost Accountant can perform a GST Audit u/s 35. 

Points to Note:

  • An internal auditor cannot parallelly be appointed as a GST Auditor.
  • The GST Act does not allow a GST practitioner to perform the audit. The power to audit is granted only to a Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants. Therefore, a Chartered Accountant must not be registered as a GST practitioner for the purpose of issuing the Audit Report.
  • Where an organisation or an entity has multiple branches registered under GST in different states/UTs, the total aggregate turnover of all such branches is considered while calculating the threshold limit of Rs. 2 crores^. 

So, if the cumulative turnover of all the branches exceeds Rs. 2 crores^, then the GST audit is applicable to each of these branches, irrespective of whether the turnover of a particular branch is less than the threshold.In such cases, one can appoint either one dedicated auditor for all branches or separate auditor for each branch. 

Where multiple branches have different auditors, the Standards on Auditing: SA 299 — Responsibility of the Joint Auditors may apply for the purpose of reporting GST Audit observations & Reporting.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C up to FY 2019-20 is waived off via various CBIC notifications. The applicability of GST audit by CA/CMA is to be removed from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. However, it is yet to be notified as on 11th June 2021.

Conducting GST Audit & Issue of GST Audit report

Appointment of GST Auditor

A proprietor, partner or Board of Directors in case of a Company should appoint a GST Auditor at the beginning of the financial year.

Accounts to be to be reviewed by GST Auditor

Following are important accounts or records for review:

  • Sales register
  • Stock register
  • Purchase register and expenses ledgers
  • Input tax credit availed and utilised
  • Output tax payable and paid
  • e-Way bills generated during the period under audit, if in compliance with rules.
  • e-Invoices and IRN generated and kept on record
  • Any documents that record communications from the GST department relating to the year.

Forms for Annual return and GST Audit

Edit
Type of taxpayerForm to be filed
Whether or not applicable to GST Audit
A Regular taxpayer filing GSTR 1 and GSTR 3BGSTR-9
A Taxpayer under Composition SchemeGSTR-9A
E-commerce operatorGSTR-9B
(Yet to come into effect)
Applicable for GST Audit
Taxpayers whose turnover exceeds Rs. 2 crore^ in FYGSTR-9C

Review of comments by GST Auditor

The Auditor must report any tax liability pending for payment by the taxpayer, identified through the reconciliation exercise and observations made on GST audit. Taxpayers can settle taxes as recommended by the auditor in form DRC-03.

Submission of GST Audit report & Annual return

The finalised GSTR-9C can be certified by the same CA who conducted the GST audit or it can also be certified by any other CA who did not conduct the GST Audit for that particular GSTIN. The following must be reported and certified by the GST auditor or the certifier:

  • Whether or not all the requisite accounts or records are maintained.
  • Whether or not the financial statements are prepared as per the books of accounts maintained at the principal place of business or additional place of business of the taxpayer.
  • Certify the accuracy of information in GSTR-9C.
  • To list down the audit observations or reservations or comments, if any.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C up to FY 2019-20 is waived off via various CBIC notifications. The applicability of GST audit by CA/CMA is to be removed from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. However, it is yet to be notified as on 11th June 2021.

Read our article on Contents of GSTR-9C for further details.

Documents to be furnished by the taxpayer

  • Audited financial statements (which is PAN-based)
  • Annual return in form GSTR-9 (for every GSTIN)
  • Certified reconciliation statement in Form GSTR-9C, reflecting reconciled values of supplies and tax amounts declared in GSTR-9 compared to audited financials in Part-A, along with the audit report in Part-B.

Due dates for submission of GST Audit report

GSTR-9 and GSTR-9C are due on or before 31st December^ of the subsequent fiscal year. The due date can get extended through a CBIC notification.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C up to FY 2019-20 is waived off via various CBIC notifications. The applicability of GST audit by CA/CMA is to be removed from the financial year beginning from 1st April 2021 onwards, as per the Finance Act, 2021. However, it is yet to be notified as on 11th June 2021.

Penalty for not submitting GST Audit report

There is no specific provision. Hence, it is subject to a general penalty of Rs.25,000.

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