GST Audit applicability for Government Companies

Under Sec 139 of the companies Act 2013 (earlier section 619 of the Companies Act 1956) in case of Government Company, the Comptroller and auditor General of India (C&AG of India ) shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies, within a period of 180 days from the commencement of the financial year, who shall hold the office till the conclusions of the general meeting.

Government Company means any Company in which not less than 51% (fifty one per cent) of the paid-up share capital is held by:-

1)    The Central Government, or

2)    Any State Government or Governments, or

3)    Partly by the Central Government and partly by one or more State Governments, or

4)    includes a Company which is a Subsidiary Company of such a Government Company (such subsidiary company may be private Limited company as well as public limited company)

We know that under Sec 35(5) of CGST (Central Goods and Service Tax) Act 2017, every registered person whose turnover during a financial year exceeds the prescribed limit (Rs 2 crore) 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.

As per sec 44(2) of CGST Act 2017, every registered person who is required to get his accounts audited in accordance with the provisions section 35(5) 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.

Beside it under Rule 80(3) of CGST Rules 2017, every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under section 35(5) 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.

So on combined reading of sec 35(5), Sec 44(2), and rule 80(3), it can be conclude that every registered dealer under GST is required to get GST audit done if its turnover is > Rs 2 crore.

However recently (on 30.08.2018) by way of Central Goods and Services Tax (Amendment) Bill, 2018, proviso has been inserted in sec 35(5) which provides as below:

“that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.”

As we know that Govt companies (where 51% or more holding lies with Govt, eg PSUs) accounts are required to be audited by Comptroller and Auditor-General of India under section 139 of the companies Act 2013, so they are exempted from GST audit requirement u/s 35(5) of CGST Act 2017.

The same view has also been given by National Academy of Customs, Indirect Taxes and Narcotics (NACIN),as can be seen below-

Hope the readers will find it useful.

Checkout the Last Date To File Income Tax Return