What is GST Audit to whom GST Audit is Applicable

What is 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.

Audit has been defined in section 2(13) of the CGST Act, 2017 and it means the examination of records, returns and other documents maintained or furnished by the registered person under the GST Acts or the rules made there under or 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 toassess his compliance with the provisions of the GST Acts or the rules made thereunder.

When is Audit under Goods and service tax regime is required to be conducted

1.) If Turnover crosses the threshold limit of Rs. 2 cr (In this case tax payer is supposed to File Audited Return + Audited Accounts + Reconciliation Statements)

[Those taxpayers having an annual turnover of up to Rs 2 crore in FY 2017-18 or FY 2018-19, may choose to not file GSTR-9, from the date to be notified by CBIC. However, they must continue to file annual returns for FY 2019-2020 onwards.]

2.) Audit by GST Authorities

a.) General Audit

b.) Special Audit by CA nominated by GST Authorities

Requirement of audit under Goods and service tax regime (GST)

To whom GST Audit is Applicable

Sub-section 5 of section 35 of the CGST Act, sub-section (2) of the CGST Act and sub-rule (3) of rule 80 are the applicable section is respect of GST annual audit, which prescribes the basic criteria such as:

– turnover limit to identify the person whose accounts are liable to get audited under GST;
– period for which audit is to be conducted;
– time limit by when audit report is to be furnished;
– documents or other information like reconciliation statement to be furnished along with audit report in desired format as will be notified soon

The relevant provisions in respect of GST have been provided below:
GST Audit Section 35(5): Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub- section (2) of section 44 and such other documents in such form and manner as may be prescribed.

Annual ReturnSection 44(2): Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.

Annual Return Rule 80(3): Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

Sec. 2(6) of the CGST Act: Aggregate Turnover

Aggregate Turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Aggregate turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Lets assume, a Company is registered in three different states with same PAN, engaged in making taxable supplies, exempt supply, export and interstate supply. Total turnover of different registration is Rs.2 cr., 50 lakhs and 10 lakhs respectively. Here, aggregate turnover will be computed on all India basis and it shall be computed as Rs.2 cr. 60 Lakhs (viz. 2 cr. + 50 lakhs + 10 lakhs). Thus, in accordance with above mentioned provisions, the company is required to comply with GST Audit in all three states.
It is also to be noted here that registered person majorly affecting exempt supply and having turnover Rs.2.5 cr. (comprising exempt supply of Rs.2.4 cr. and taxable supply Rs.10 lakhs), is also required to comply with GST Audit, eg: school, hospitals etc.

The matter of discussion here is whether first GST audit is to be conducted for FY April 2017 to March 2018 or July 2017 to March 2018. We are of the view that GST has been implemented from 1st day of July, hence, audit under GST should be conducted for period covered under GST regime and aggregate turnover should also be computed for July 2017 to March 2018.
In accordance with the above mentioned provisions, due date of furnishing of annual return and audit for a financial year is 31st of December of succeeding financial year. Also, the maximum period for rectification of invoices and other relevant documents for the benefit of ITC is due date of furnishing of return of the month of September of succeeding financial year. Further, it is pertinent to mention here that in Income Tax Laws, due date of furnishing of tax audit and income tax return is 30th September respectively and hence, period beyond this date has of no relevance after finalization of accounts. Therefore, GST audit should also be completed by that date only.

Time limit on Completion of Audit

The chartered accountant or cost accountant shall, within the period of ninety days, submit a report of such audit duly signed and certified by him to the said Commissioner.

In case the Authorities want to extend the time period of Audit on request of taxable person or his auditor they have to provide reasons in writing. Also this period can further be extended for upto 90 days only.

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Requirement of audit under Goods and service tax regime (GST)

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