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The Goods and Services Tax (hereinafter referred to as GST), was introduced in India by way of the Goods and Services Act in 2017. It is a type of indirect tax, which seeks to subsume all the other types of indirect taxes in itself. The three types of GST are Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST) and Integrated Goods and Services Tax (GST).
Written by:
Antim Amlan
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What Does GST Audit Mean?

Section 2 (13) of the GST Act, 2017(1) defines Audit as under:

“Audit means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder.”

The process of audit is a process of verification by the authorities which has been delegated with these powers under the GST Act, 2017, of the various documents, which might be related to tax returns, etc. The primary objective of such verification and cross-checking is to make sure that the provisions of the GST Act, 2017 are being complied with. This is necessary in a democracy so as to tackle the problem of tax evasion.

Consult: Top Lawyers for Tax Audit

Types of GST Audits

As of now, the GST Act, 2017 prescribes for three types of GST audits, the names of which have been enumerated under:

  1. GST audit by an independent chartered accountant

  2. GST audit by tax authorities

  3. Special GST Audit

Top Read: Everything you need to know about GST Invoice

GST Audit by Independent Chartered Accountant

GST audit may only be done for an income person that is taxable, whose annual turnover in the relevant financial year is more than 2 crores. This is the minimum GST audit limit and any business entity whose annual turnover is below this GST audit limit is not eligible for GST audit. Such a person must be a registered dealer. He/She must ensure that they get his/her books of account and tax return audited by an independent chartered accountant. The said audit must be submitted to the tax authorities online over the GST portal, by filling in the Forms GSTR 9 and GSTR 9C(2). The deadline that has currently been prescribed for such submission is the last day of December of the next financial year. Provided below is the GST audit checklist which, it is advisable for the auditee to keep in hand while doing the online submission:

  1. Entire Books of Account

  2. Account of the number of goods produced or manufactured

  3. The details pertaining to incoming of goods or services or both

  4. The details pertaining to outgoing goods or services or both

  5. The Input tax credit availed if any

  6. The Stock of goods

The taxpayer, along with the above documents, is also obliged to submit the reconciliation form and the statement of the auditor and therefore these two must not be forgotten while preparing the GST audit checklist.

The GST Act, 2017 also provides for a possibility to rectify errors and omissions, in case the auditee identifies some post submission of the audit of the chartered accountant online. But, in these cases, the auditee is liable to pay a certain amount of interest.

Featured Read: Applicability of GST on Legal Services in India and its Impact


GST Audit by Tax Authorities

The Commissioner of CGST or SGST, or any other person authorized by such officer, is authorized to conduct the GST audit for an eligible taxpayer. However, such an audit may only be commenced if the taxpayer has been duly notified, i.e, 15 days prior to the commencement of the audit. The GST audit due date or the time period that is available to such a tax authority for preparing his GST audit report is three months or 90 days from the day of commencement of the audit. The GST Act, 2017, does provide for the extension of the said time limit in exceptional circumstances. The tax authority may extend the time by a period of six months; however, in that case, he/she is also obliged to furnish in writing, the reasons for the same.

Since there are no prescribed documents under the GST Act, 2017 for such an audit, in that, it is carried out at the discretion of the taxpayer, therefore the taxpayer is obliged to furnish all those documents for verification, that the authority may ask for. One of the major obligations on the taxpayer in such situations is to coordinate with the tax authority in order to enable timely completion of the entire process of the audit.

However, the taxpayer is such cases, is also entitled to know the findings of the auditor and the reasons for the same, within a month after the completion of the entire process of the GST audit.

Further Read: Everything GST - Its Registration, Filing Returns & Others

Special GST Audit

The Central GST commissioner may authorize, in writing, the Central GST Assistant Commissioner to carry out a special GST audit. The Assistant Commissioner is to then further nominate another person, which may be chartered or a cost accountant, to actually carry out the special GST audit. The eligibility criteria for such an auditor is that he/ she must at least be a chartered accountant or a cost accountant. However, one restriction is that such auditor cannot, in parallel act as a registered GST practitioner.

Similar to an audit by the tax authorities, the auditor in the instant case also, shall have a time period of 3 months or ninety days in order to give in his or her GST audit report. In case of a special audit, the GST Commissioner undertakes to bear all the costs and expenses of the entire process, which also includes the remuneration to be provided to the chartered accountant or the cost accountant, as the case may be.

In case the auditor, during his examination, comes across instances of deviations and non-compliance, he/she is entitled to initiate actions for recovery. However, prior to this, the auditee has the right to be heard on the conclusions arrived at by the auditor.

The standard GST audit report format is as provided under Form GSTR 9.


External Links:

1. GST Act, 2017 - A detailed view of the GST Act, 2017.

2. Forms GSTR 9 - A pdf of the Forms GSTR 9.