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Account and Audit under GST

Accounts To Be Maintained Under Goods and Services Tax Law

Under the new GST regime, businesses are required to maintain various accounts for the purpose of Audit as well as for ready verification by an authorised GST Authority.

A taxable person is required to maintain accounts along with all invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply etc.

Also GST accounts and records must be kept at every related place of business mentioned in the certificate of registration.

Records to be maintained – Sections 35 of CGST Act

All taxable persons under GST are required to maintain the following records at their principal place of business:

Account/Records Information Required
Register of Goods Produced/manufacture Account should contain detail of goods manufactured in a factory or production house (in case of a manufacturer).
Purchase Register All the purchases made within a tax period for manufacturing of goods or provision of services.
Sales Register Account of all the sales made within a tax period.
Stock Register This register should contain stock of inventory available at any given point of time.
Input Tax Credit (ITC) Availed This register should maintain the details of Input Tax Credit availed for a given tax period.
Output Tax Liability This register should maintain the details of GST liability outstanding to be adjusted against input credit or paid out directly.
Output Tax Paid It shall contains the the details of GST paid for a particular tax period
Other Records Specified Government can further specify by way of a notification, additional records and accounts to be maintained

 

Audit under GST

Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person. The purpose of audit is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to check whether the compliances are with the provisions of GST.

The government has taken various measures for proper implementation of GST and audit is one amongst them.

Types of GST Audit

There are three types of audit under GST:

  1. Turnover based audit – Section 35(5) of CGST Act

Who is required to conduct audit: Every registered taxable person whose aggregate turnover exceeds Rs 2 Crore by sale of goods or services in a financial year is required to get the accounts audited.

Who conducts audit: Audit is conducted by chartered or cost accountant.

Reports to be submitted electronically:

  • Annual returns,
  • Copy of Audited Statement of Account,
  • Reconciliation Statement that reconciles the value of supplies furnished in the annual return with the audited financial statements

Note: In case an organization or an entity has multiple branches registered under GST in different states or union territories, the total aggregate turnover of all such branches is taken together for calculating the threshold limit of Rs. 2 crores. Therefore, if the total turnover of all the branches exceeds Rs. 2 crores, then the GST audit is applicable to each of these branches, irrespective of whether the turnover of a particular branch is less than the threshold.

  1. Audit by tax authorities – Section 65 of CGST Act

Who conduct Audit: Under this, the audit is undertaken by the Commissioner of CGST/SGST or any officer authorized by him. However, the frequency and manner of audit shall prescribe later.

 

Prior requirements: In such Audit, a notice atleast 15 days prior to initiate the audit is served.

Time limit of completion of Audit: It is generally completed within 3 months from the date of commencement of audit and can be extended to six months by the Commissioner with due reasons.

Action by officer: On conclusion of an audit, the findings, reasons and the taxable person’s rights and obligations are informed by the officer to the taxable person within 30 days audit.

If the audit results in detection of unpaid/short paid tax or wrong refund or wrong input tax credit availed, then demand and recovery actions will be initiated.

  1. Special audit – Section 66 of CGST Act

Who conduct Special audit: This audit is conducted by a chartered accountant as per the instructions are given by the GST Officer who is not lower than the rank of Assistant Commissioner.

Note: It can be conducted even if the taxpayer’s books have already been audited before.

When special audit is initiated: The Assistant Commissioner may initiate the special audit, considering the nature and complexity of the case and interest of revenue. If the officer finds out that you have not declared the values correctly or availed wrong input tax credit, then the special audit can be initiated.

Prior requirements: An order of Deputy/Assistant Commissioner with prior approval of Commissioner is required.

Time limit of completion of Audit: The auditor is required to submit the report within 90 days. However, it may be further extended by the tax officer for 90 days with due reasons.

Action by officer: The taxable person will be given an opportunity of being heard in findings of the special audit.

If the audit results in detection of unpaid/short paid tax or wrong refund or input tax credit wrongly availed then demand and recovery actions will be initiated.

Qualification of GST Auditor & Eligibility

  • Only a Chartered Accountant or a Cost Accountant can perform a GST Audit under section 35.
  • An internal auditor cannot be appointed as a GST Auditor.
  • The GST Act does not allow a GST practitioner to undertake the audit. However, a Chartered Accountant need not be registered as a GST practitioner for the purpose of performing audit functions and issuing the Audit Report.

Forms for Annual return and GST Audit

Type of taxpayer Form to be filed
Whether or not applicable to GST Audit
A Regular taxpayer filing GSTR 1 and GSTR 3B GSTR-9
A Taxpayer under Composition Scheme GSTR-9A
An E-commerce operator GSTR-9B
Applicable for GST Audit
Taxpayers whose turnover exceeds Rs. 2 crores in FY GSTR-9C

 

Penalty for not submitting GST Audit report:

There is no specific provision. Hence, as per section 125 of CGST Act, 2017 it is subject to a general penalty up to Rs 25,000.

 

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