Detail Guide on GST audit by CA/CMA
Detail Guide on GST audit by CA/CMA
Mandatory Audit under GST
Section 35(5) of CGST Act, provide for the GST audit of accounts for a taxpayer. This audit is to be conducted by a Chartered Accountant or Cost and Management Accountant. This section makes the taxpayers for Mandatory audit under GST by CA/CMA. As per the GST provisions, a copy of the following is to be required to be submitted each year:
- Audited annual Accounts
- The reconciliation statement under sub-section (2) of section 44
- Other Prescribed Documents Under Rule 80
GST audit report part I baisc info
Who is Liable for Mandatory audit in GST?
Turnover
Every registered person whose turnover during a financial year exceeds Rupees two crore shall get his accounts audited as specified under Section 35(5).
Under Section 35(5), “turnover” should be the same as the “turnover in the State”.
The term turnover in a state is defined u/s 2(112) of CGST Act. The definition is reproduced here:
“turnover in State” or “turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on a reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess”.
Aggregate Turnover
But in Rule 80(3) word “Aggregate Turnover” is mentioned which is defined in section 2(6) of CGST Act. The same is reproduced here:
“the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on a 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”
This anomaly in the language of Law creates an issue regarding the applicability of this provision.
Whether the turnover to be calculated for the GST Audit must include the Sale of all the persons registered under the same PAN? It will result in the inclusion of all the persons under the same PAN. Although the liability for audit should be checked per distinct person.
So, this creates the confusion that the turnover for raising the liability of tax shall be calculated as per the “turnover” or “aggregate turnover”.
The format for Audit Report and Annual return
The audit report will be reported under the FORM GSTR-9C. The Whole format is given with the form.
Meaning of Audit in GST
Now we need to analyses the provisions for GST Audit, let’s analyze the meaning of GST:
Section 2(13) of CGST Act defines the term Audit as:
“audit” means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder 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 to assess his compliance with the provisions of this Act or the rules made thereunder;
Accordingly, the scope of the GST audit will be:
- the examination of records, returns, and other documents
- by the registered person under this Act or the rules made thereunder 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
compliance with the provisions of this Act or the rules made thereunder.
Important points to take care of GST Audit:
Turnover: First-year audit if GST will be pretty cumbersome and will pose a lot of issues. There will be three tier matching of every item. Let us start with the turnover. In GST taxpayer was required to disclose his turnover in GSTR 3b and GSTR 3. Editing of GSTR 3b is not allowed in GST. There were many instances when the taxpayer entered the wrong turnover in GSTR 3b. The due date for filing of GSTR 1 was later than GSTR 3b. Now a mistake in GSTR 3b which was traced later on was corrected in GST 1. This gave rise to a mismatch in GSTR 3b and GSTR 1. The reconciliation of this turnover with the turnover declared in financial books is also required.
So, be careful and be attentive while doing your business. Also, comply with all the compliances under the GST and other Laws.
CA
