Introduction:
The GST audit is an annual requirement for GST-registered businesses with turnovers exceeding 2 crores INR. It involves scrutinizing records, returns, and documents to verify the accuracy of turnover, taxes, refunds, and compliance with GST Act regulations. Chartered Accountants play a pivotal role, in ensuring meticulous review and alignment with the complex GST framework. This audit ensures transparent financial reporting and contributes to the trust-based taxation system’s integrity.
ROI vs. Non-ROI: Comparison in GST Audit:
| Aspect | ROI (Regular Input Output) | Non-ROI (Composition Scheme) |
| Eligibility | Any registered taxpayer | Businesses opting for the composition scheme |
| Taxation | Regular tax payments based on invoices | Pay a fixed percentage of turnover |
| Input Tax Credit (ITC) | Eligible to claim ITC on purchases | Not eligible for ITC |
| Annual Return Form | GSTR-9 | GSTR-9A |
| Reconciliation Form | GSTR-9C required for turnover above Rs. 2 crore | Not applicable |
| Compliance Complexity | More complex due to ITC calculations and other requirements | Simpler due to fixed turnover percentage |
| Audit | Required to submit GSTR-9C with reconciliation | Not required to submit GSTR-9C |
| Cost Implication | Potentially higher tax liability due to ITC | Lower tax liability, but without ITC benefits |
| Record Keeping | Need to maintain detailed records for ITC claims | Simpler record keeping |
| Flexibility | Greater flexibility in business operations | Limited flexibility due to turnover restrictions |
Types of Audit :
| Types | Performed By | When Initiated |
| Turnover based Audit | Chartered Accountant or Cost Accountant appointed by the taxpayer | As per the CGST Act, if the Turnover exceeds 2 crore,^ the taxpayer has to get his accounts & records audited |
| Normal audit/General Audit | Commissioner of CGST/SGST or any Officer authorized by him | On order of Commissioner by giving 15 days prior notice |
| Special audit | A Chartered Accountant or Cost Accountant, nominated by Commissioner | On order of Deputy/Assistant Commissioner with prior approval of Commissioner |
Step-by-Step Guide to a Successful GST Audit:
Pre-Audit Preparation:
The initiation of the GST audit process begins with the meticulous collection of crucial documents, including financial statements, GST returns (GSTR-1, GSTR-3B), invoices, and ledgers. This preparatory stage sets the foundation for a comprehensive audit. Gathering these essential documents not only serves as a cornerstone but also allows for a discerning analysis of compliance history. This proactive approach aids in identifying potential discrepancies or irregularities, ensuring a thorough and effective audit.
Verification of GST Returns:
Delving into the heart of the process, Chartered Accountants conduct a meticulous examination of the taxpayer’s GST returns. This critical step involves intricately comparing the values declared in the returns with the original source documents—namely, invoices and ledgers. Discrepancies identified during this process prompt further investigation. By meticulously cross-referencing the figures provided in the GST returns (Form GSTR-1, GSTR-2A, GSTR-3B) with the corresponding invoices and ledgers, CAs ensure the precision of returns while uncovering any irregularities that may arise.
Input Tax Credit (ITC) Reconciliation:
Central to the GST audit process is a meticulous reconciliation of the Input Tax Credit (ITC) claimed in returns with the corresponding purchase invoices and supporting records. The goal is to ensure alignment between the claimed ITC and the eligible credits as per Form GSTR-2A. This step aims to unveil any disparities or discrepancies between the claimed ITC and the rightful credits the taxpayer is entitled to.
Sales and Output Tax Verification:
The validation of sales figures in GST returns (Form GSTR-1) is a process that enhances precision and accuracy. Chartered Accountants (CAs) ensure the correctness of reported sales figures by meticulously cross-referencing them with the sales ledger and supporting invoices. This meticulous scrutiny extends to verifying that the declared output tax liability aligns seamlessly with calculations derived from documented evidence.
Reconciliation with Financial Statements:
Harmonize GST-related data with the taxpayer’s financial statements. Conduct a meticulous comparison between GST figures in the returns and the corresponding entries in financial records. Thoroughly investigate and address any discrepancies that come to light.
Exempt and Non-GST Supplies:
Pay close attention to supplies falling under exempt or non-GST categories. Accurately classify and duly report these supplies in the GST returns (Form GSTR-1) to ensure compliance with classification norms and prevent potential issues.
GST Audit Forms and Steps:
| GST Audit Form | Description | Steps |
| GSTR-9 | Annual Return | 1. Access the GST portal. 2. Navigate to ‘Returns Dashboard’. 3. Select the financial year and ‘Annual Return’ tab. 4. Fill in the required information. 5. Review and submit. |
| GSTR-9A | Simplified Annual Return (Composition Taxpayers) | 1. Log in to the GST portal. 2. Go to ‘Returns Dashboard’. 3. Choose the financial year and ‘Annual Return’ tab. 4. Complete the necessary details. 5. Review and file. |
| GSTR-9C | Reconciliation Statement and Certification | 1. Access the GST portal. 2. Navigate to ‘Returns Dashboard’. 3. Select ‘Annual Return’ and ‘Audit’ tabs. 4. Fill in GSTR-9C details and reconcile financial statements. 5. Get certification from a chartered accountant or cost accountant. 6. Review and file. |
Valuation of Goods and Services:
Precision in valuation underpins accurate GST calculations. CAs meticulously verify the application of the correct valuation methods, considering factors such as discounts, free supplies, and other variables that can influence the valuation of goods and services.
Compliance with Reverse Charge Mechanism:
A critical check lies in reviewing whether the taxpayer has adhered to the reverse charge mechanism—especially when dealing with services provided by unregistered suppliers. Non-compliance with this mechanism can lead to penalties.
Documentation and Record-Keeping:
Solid documentation is the backbone of compliance. CAs maintain comprehensive records of every audit procedure, discovery, and resolution. This documentation not only facilitates verification but also serves as a historical reference.
Submission of Audit Report:
The crescendo of the process is the preparation of a meticulous audit report. This report encapsulates the audit findings, the discrepancies unearthed, and the corrective actions initiated. This formal document may be submitted to GST authorities as mandated by regulatory requirements.
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Conclusion:
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