Essentials for GST Audit and Assessments in India

Three years ago, the Government of India definitively decided to implement Goods and Sales Tax (GST). It was unpopular for individual quarters, but eventually, everyone calmed down and approved it. After giving enough time for businesses through the supply chain to self-assess their tax liabilities and pay tax, it is now the time for audit and assessments. Let’s take a look at how and what are the essentials for GST audit and assessments India.

GST audit is a necessary review of records, returns and other documents maintained by a GST registered person or company.


What is It?

India implements GST to include all other taxes in the country. GST is a multistage tax, where each good or services gets taxed at every stage before reaching the consumer. GST is also claimable at every step, except for the consumer. Hence, all businesses have to file their GST claims on top of paying other taxes if any. There could be hits and misses as it is their first time dealing with GST. With the addition of GST, companies will need to undergo GST audit and assessment to ensure everything is up to par. The GST audit applies to GST registered business with a turnover of more than Rs 2 crores, through the sales of goods or services in their respective financial year.


GST Audit(S)

As mentioned in the GST law, GST registered business is subject to several audits such as the following:

  • Turnover based audit as part of the annual return process. Initiated when the turnover exceeds Rs 2 crores. Companies to hire external Chartered Accountant or Cost accountant to do the audit.
  • General audit as ordered by Commissioner through a notice 15 days in advance.
  • Special audit by a Chartered Accountant nominated by Commissioner. Initiated only on the order of Assistant Commissioner with prior approval of Commissioner. A special audit can take place even after a regular audit is done.


Preparing for Audit

GST audit is a necessary review of records, returns and other documents maintained by a GST registered person or company. It ensures an authorised expert checks every detail in complying with the GST Act. This includes turnover declared, taxes paid, refunds and input tax credit assessed. Typically, GST registered companies will have to file the following documents electronically:

  • annual returns using the form GSTR 9, an audited copy of the annual accounts,
  • a certified reconciliation statement using the form GSTR-9C – to reconcile the value of supplies declared in the returns with the audited annual financial report and;
  • other necessary details as needed.


But for companies with an annual turnover of less than Rs 5 crores, they do not need to file the GSTR-9C for the financial year 2018-2019.


Tax Authorities Audit

You might wonder how and why there is a need for a second audit by tax authorities. This is the first time for both the government and the traders themselves. A GST audit by tax authorities is necessary to ensure that all GST related matters are compiled, and all taxes due are paid. The tax authorities are sending out notices to companies to prepare for a GST Audit. Hence, traders or companies should prepare all financial documents and accommodate to further requests by the authorities. Such an audit will take three months to complete from the start of the inspection. The Commissioner can further extend the audit period to another six months with reasons in writing. Once the audit is concluded, the registered business or taxpayer will receive the findings, its causes and their rights and obligations. Should the review finds unpaid, short paid tax, wrong input tax credit or incorrect refund, companies should expect recovery actions.


Special Audit

A special audit is also another GST audit by tax authorities. A special audit is necessary based on the complexity of the case and interest of revenue. The Assistant Commissioner may initiate the audit if he or she finds that the value wrongly declared. He may voice this at any stage of the investigation. The Assistant Commissioner will order for a special audit in writing with the prior approval of the Commissioner. The Commissioner will nominate a chartered accountant or cost accountant to conduct the special review, and the Commissioner bears all costs. The auditor must submit the report in 90 days. A special audit allows the taxpayer to be heard in findings. Nevertheless, the taxpayer must comply with recovery actions when deemed necessary.

GST Audit and Assessments in India