Goods and Service Tax (GST) are structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods and a lot more. The GST Law provides for self-assessment to facilitate easy compliance and payment of taxes. It also explains the notices, the demand and recovery provisions when the taxes are unpaid, short paid and/or returns are not filed.
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According to the GST law, the assessed is required to self-assess his GST returns filed during any financial year. Thus, he must determine the tax liability without any intervention by the tax official. Other than this, the tax authorities may undertake to make GST audit at any point of time or period as per the existing law.
According to CGST Section 65(3), The GST registered person will get a notice in advance not less than fifteen working days prior to the conduct of GST audit. The notice will be in FORM GST ADT-01.
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Meaning of GST Audit
The meaning of GST Audit is the records of examination, returns and other documents maintained by the GST Registered person under the GST ACT. All these records are used to verify the correctness of turnover declared, taxes paid, refund claimed and the input tax credit availed.
According to GST law, Audit has a definition in section 2(13) of the CGST Act, 2017. GST Audit is conducted to assess the compliance of the Taxpayer with the provision of the GST Act and rules.
Whenever a taxpayer has the register under GST, all the records maintained by him would pass through GST audit. Here, the main importance is that to check the facts of the declaration of information in records and know compliance with the GST rules.
Types of GST Audits
There are three types of GST audits as per GST Law in India. Audit by Chartered Accountant, Normal Audit and Special Audit. Let us see them one by one.
- Audit by Chartered Accountant / Cost Accountant
The first GST audit is by a Chartered Accountant (CA) or a Cost Accountant. According to CGST rules every GST registered person whose aggregate turnover during the financial year exceeds Rs. 2 Crore shall get his accounts audited by a chartered accountant or a cost accountant.
Further, he shall file Audited annual accounts and reconciliation statement in Form GSTR 9C on GST portal online duly certified by Chartered Account or Cost accountant. GSTR 9C is all called as GST Audit Report.
- Normal Audit by GST officials
The GST commissioner or any officer with proper authority can undertake normal GST audit of any registered person for a specific period. However, the frequency and the manner of a GST audit will be decided by the commissioner or the proper officer in charge.
- Special Audit
The third type of audit under Goods and service Tax in India is the special audit. under special audit process the GST registered person can be instructed to bring his books of records including accounts.
Thus accounts examined and audited by the chartered accountant or a cost accountant can be demanded. Such directions can be given during any state of scrutiny, inquiry, investigation or any type of proceedings. The entire audit process depends upon the complexity of the case undertaken.
Important Rules of GST Audit:
As per the GST audit checklist, stricter rules are now in force that makes it absolutely necessary to make analysis of the data gaps between GST returns. It has strictly asked the business houses to conduct periodic checks and install internal controls. This would for sure do away with the data gaps and make sure the necessary compliance with the GST rules.
Mandatory Internal Audits:
GST authorities have now begun issuing show-cause notices to business houses for strict compliance of GST norms. Internal audit of the GST records could bring succor to a business in order to run check on the operating efficacy of internal financial controls and know important areas of risk and finally adopt necessary measures to minimize risks.
GST Audit Checklist:
The following are the mandatory GST Audit checklist that requires strict compliance:
- Checking of GSTR 3B in relation to GSTR 1 & GSTR 2A:
Two important points get covered under this heading:
- A) Interest and penalties in GST Act:
Under this recipient could claim extra input tax credit. And for this, it is compulsory for him to make a payment of interest @ 24%. This is applicable on the excess tax amount. Auditors need to reconcile the GSTR 3B with GSTR 2A to make sure that the organization would not claim extra tax credit. If it has been paid in excess, company would pay interest and the tax amount on the applicable date. When the GST authorities come to know about the data gaps between GSTR 3B and GSTR 2A, the tax payers might have to pay the interest and penalty.
- B) Amendment in GSTR:
When the auditor comes to know about the data gaps, he would recommend the management to make amendment of the invoices at summary levels in GSTR 1.
- Checking particulars of invoice:
It is very clear that there are specific rules related to the details in the invoices. If the format of the invoice varies, he would advise the management to make amendment of the invoice and include the requirements of the GST rules.
- Reversal of input tax credit for non-payment in 180 days:
At this stage the GST auditor has to check the following details:
- a) Difference between invoice date and date of payment. And this would not exceed 180 days.
- b) The amount of payment needs to remain equal with invoice amount and GST. If the payment amount is less than invoice amount plus GST, the input tax credit to the extent of short payment would get reversed.
- Reviewing e-way bill and matching with invoices:
This step consists of three stages, such as:
- a) Results of any mismatch shown in the e-way bill in relation to invoice. As it is a familiar fact that an e-way bill is not alterable and it is not possible to delete it. But it is permissible for cancellation within 24 hours of its generation. When the goods get shifted without e way bill, the designated authority could impose fine for this.
- b) Important points:
- Whenever it is necessary for business, e-way bill is quite unavoidable.
- And details given in the e-way bill need to match with invoice.
- c) Movement of goods in non-motorized vehicles:
Whenever transportation takes place in non-motorized vehicles, the necessity of issuing e-way bill does not arise. As some businesses are taking to this practice in order to avoid the e-way bills, internal auditors need to closely scrutinize the e-way bill is more worth more than fifty thousand rupees.
- Cross-checking the stock pending with job-workers on 30th June, 2017:
As it is mandatory that goods lying with job workers on 30th June 2017 need to get received within a period of one year. The capital goods lying with job workers require to be brought back before 30th June, 2019 (within a period of two years).