Applicability-

GST Audit will apply every year for those GST registered business (GSTIN) having turnover more than Rest 2 crores, by the sale of goods or services in the financial year.

Please note- For businesses with an annual turnover of less than Rs.5 crore, filing of GSTR-9C for FY 2018-19 and FY 2019-20 has been waived off. GSTR-9C can be self-certified by taxpayers with turnover less than or equal to Rs.5 crore from FY 2020-21 onwards. The reconciliation statement in FORM GSTR-9C for the FY 2020-21 will be required to be filed by taxpayers with annual aggregate turnover above Rs 5 Crore.

Latest Position is as follows:-

Annual turnover GSTR 9 GSTR 9C
Up to 2 Cr Optional N/A
More than 2Cr. – 5 Cr Filling is mandatory Optional (Benefit Given)
More than 5Cr Filling is mandatory Filling is mandatory

Need for Audit-

A GST audit entails the review of a GST registered person’s records, returns, and other documents. It also verifies the accuracy of the turnover declared, taxes paid, refunds claimed, and input tax credits claimed, as well as other GST Act compliances that must be verified by an authorized expert. GST is a trust-based taxation system in which a taxpayer must assess his or her own tax liability, pay taxes, and file returns. As a result, a comprehensive audit system is required to confirm that the taxpayer has appropriately self-assessed his tax burden. The government has taken a number of steps to ensure that GST is properly implemented, one of which is audit.

For More Information download the below attachment:

Types of GST Audit-

Types Performed By When Initiated
Turnover based Audit Chartered Accountant or Cost Accountant appointed by the taxpayer If the Turnover exceeds 2 crores” the taxpayer has to get his accounts & records audited
Normal audit/General Audit Commissioner of CGST/SGST or any Officer authorized by him On order of Commissioner by giving 15 days prior notice  
Special audit A Chartered Accountant or Cost Accountant, nominated by Commissione On order of Deputy/Assistant Commissioner with prior approval of Commissioner

Checklist for GST Audit-

1. Reconciliation with GSTR 1 & 3b

It should be ensured that monthly or quarterly returns are in sync with books of accounts before filing GSTR 9. In other words, it can be said that books of accounts through which financial statements are prepared should be cross verified with GSTR 1 & GSTR 3b. After that GSTR-9 should be filed, followed by GSTR-9C.

2. Taxes on Reverse Charge Mechanism (RCM)

GST payable on supply covered under Reversed Charged Mechanism (RCM) basis should be paid in cash. ITC for the same can be availed in the same month. Auditor needs to take care whether taxes on RCM has been paid in cash or not.

3. Interest on late payment of GST

Interest calculations on liability @ 18% p.a. is required to be made and auditor is required to check whether same has been deposited timely by the taxpayer. Also, if notices have been issued by department for the payment of interest, whether same has been properly dealt with. If claimed excess Input Tax Credit (ITC), payment of interest at 24% on the excess tax amount is required.

4. Reversal of Input Tax Credit for non— payment in 180 days

Date of invoice of supply and Date of payment should be checked that the difference does not exceed i8o days. ITC should be reversed for non-payment of invoice within 180 days and this should be checked by the auditor. This is most common mistake and need to be taken care of.

5. Requirement of E-Way Bill

Check that any E-way bill was issued or not, if required. If it’s issued, then check is it tallying with invoices issued. Is there any Goods which was sent on approval basis, and it’s exceeding the time limit of 6 months and not offered to tax?

6. Matching GST Audit Turnover with Income Tax Turnover

Disclosing Turnover under Goods and Service Tax and Income Tax is matter of confusion now-a-days. As GST Turnover definition is somewhat different from Income Tax Turnover. However, now both the department will exchange the information with each other. Therefore, one needs to take care in reporting turnover under Income Tax and GST.

7. GSTIN wise Audit

GST Audit is applicable when Total Turnover on PAN India basis exceeds 5 crores in FY 2018-19. However, GST Audit will be done GSTIN wise. Turnover will be checked on PAN basis that means all supplies made inclusive of exempted supplies made throughout the country either from 1 place or multiple branches will be considered, while checking turnover for GST audit.

8. Stock transfer

In case of multiple branches, stock transfers among branches must also be reconciled. The stock held as per books of accounts and the GST annual return must be the same. Stock transfer outside the state is considered as supply under GST.

9. Bifurcation of ITC availed

The ITC has to be bifurcated in purchases and different kind of expenses like Freight, Employee’s cost, Bank charges, Capital Goods, etc. From Profit and Loss Account, expenses can be identified easily, it should be classified in proper heads.

10. Other Points

  • The payment amount is equal to the invoice amount including GST. In case of any short payment, it would require ITC reversed to the extent of short payment, if payment amount is less than the amount of invoice plus GST.
  • Check whether both the inward supplies and outward supplies are charged with applicable rate or not.
  • Are there any supplies either inward or outward which contains exempted supplies?
  • Check if there’s any data gap, the auditor should inform the taxpayer.

******

Prepared By : Seshan Iyer | (Tax Research Intern UFAS)

Approved By : Reetika .S. Upadhyay | ( Founder UFAS)

Note: This working is as per our research and it cannot be considered as complete data. There can be addition in the contents of this working from time to time as and when required.

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Member Since: 26 Jun 2021 | Total Posts: 4
Reetika .S. Upadhyay is a qualified professional with Experience of around 8 years in Tax consultancy. Our primary goal is for our clients, community, and team to succeed. We measure our success by their success and we focus our resources on investing in the future. Our object is to provide a com View Full Profile

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7 Comments

  1. Ch. Swami Babu says:

    Respected Sir,

    I am ready to purchase a residential apartment to pay GST after Occupancy Certificate is ready with Builders.

    but please give clarity on GST. Because some people are told to me do not pay any GST to Occupancy Certificate is ready with Builder, if not ready Occupancy Certificate with Builder you may pay GST to Government.

    please give clear information.

    1. Reetika.S.Upadhyay says:

      Hello Mr. Ch Swami Babu,

      As far as I understood your query I think you are asking about Gst Applicability if building under construction and the builder is not having any occupancy certificate and Gst Applicability when builder having occupancy certificate after completion of building .
      Kindly take note of the points below for your queries:

      1) If building is under construction and you have paid any advance amount on the same then Gst is leviable on the amount paid as advance.

      2) If the construction of building is completed and builder has occupancy certificate then you don’t have to pay any Gst on the amount paid after the occupancy certificate is received of fully constructed building.

      Note: Gst for purchase of renovated building has a different criteria. Kindly refer the link below for more details.
      ( As per the current GST law, construction of a civil structure, complex, building intended for sale is considered a taxable service and liable for GST. However, GST is only applicable to the construction service if any part of the consideration is received before issuance of completion certificate. This simply means, GST is not applicable if the entire consideration is paid after the issue of the certificate of completion by a competent authority or after its first occupancy, whichever is earlier. For more details refer below link)
      https://taxguru.in/goods-and-service-tax/applicability-gst-completed-flats.html

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