Summary: Upon receiving a GST audit notice, businesses should first review its scope, period, and legal basis. Key preparation involves verifying and reconciling filed GST returns like GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C with their financial books. Specific reconciliations needed include sales and purchase ledgers with returns, ITC claims against GSTR-2B, output tax with sales records, and ensuring e-invoice and e-way bill data match GSTR-1 and sales registers. Maintaining accurate stock and general ledgers is also essential. Businesses must organize necessary documents, including registration certificates, all returns, tax invoices, purchase/sales records, ledgers, financial statements, and bank statements. Auditors commonly focus on ITC mismatches, under-reported sales, valuation, RCM compliance, and tax on advances. Furthermore, auditors often check specific compliance points like ITC-04 filing for job work, inclusion of all bank accounts in GST records, HSN accuracy, GSTR-1 document summaries, updating place of business details, and matching e-invoice/e-way bill data with GSTR-1, as discrepancies in these areas can lead to penalties. Correcting past errors voluntarily via Form DRC-03 is an option. Businesses can represent themselves or use a qualified person, ensuring all responses are in writing. Familiarity with relevant legal sections (65, 66, 70, Rule 101) and systematic document organization can assist the process, and professional help is advisable for pre-audit review and support.
Client: What should I do first when I receive a GST audit notice?
CA: First, carefully read the audit notice to understand the scope, audit period, and any specific information requested. Make a note of the officer’s details, timelines, and the legal provision under which the audit is initiated (usually Section 65 or 66 of the CGST Act).
Client: Are there specific returns I should verify before the audit?
CA: Yes. Ensure you’ve filed and reconciled all GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C (if applicable). Focus on reconciliation between returns and your books of accounts.
Client: How should I prepare my books for the audit?
CA: Reconcile the following:
- Sales & Purchase ledgers with GST returns
- ITC claimed with the GSTR-2B
- Output tax with your sales register
- E-invoice and E-way bill with GSTR 1 and sales Register
- Also, make sure your stock register and general ledger reflect accurate and complete data.
Client: What documents do I need to keep ready?
CA: You’ll need:
- GST registration certificate
- All GST returns (monthly, annual)
- Tax invoices and e-way bills
- Purchase and sales registers
- Input and output tax ledgers
- Stock register, expense register
- Trial balance, P&L, and balance sheet
- Bank statements
- Any reconciliation workings or explanations you’ve prepared
Client: What areas do audit officers usually focus on?
CA: Common focus areas include:
- Excess ITC claimed or mismatch with GSTR-2B
- Payment to supplier within 180 Days or not, if not than Reversal of ITC made or not
- Undisclosed or under-reported supplies
- Valuation mismatches
- RCM (Reverse Charge Mechanism) compliance
- Tax on advances and time of supply
- Transactions with related parties
- Proper ITC apportionment for exempt or nil-rated supplies
Client: What if Officer don’t find any mismatches in above?
CA: Even officer had found or not found any discrepancies in above, officer will definitely check following things, on which there are direct penalties, these small things they check for heavy penalties.
- GST ITC – 04 (when you send goods on job work, this filing is compulsory) filled or not
- All bank accounts added or not in GST, if not there are 25k penalty on each bank account not attached
- All HSN updated? Max. 5 HSN you can update if any HSN not updated then also they demand penalty on the same
- While filing GSTR 1 HSN summary and documents list if not updated than also they are demand for general penalty
- Ensure Main place of business and Additional place of business updated. If there is any change and not updated within 30 days, then they demand for penalty.
- Further check if E-invoice applicable to you, then GSTR-1 and E-invoice should be match other per invoice mismatch they demand Penalty.
- Same way they are also checked for E-way bills.
Client: Can I correct past mistakes before the audit?
CA: Absolutely. If you discover errors or missed liabilities, you can voluntarily pay tax using Form DRC-03. This can show good faith and possibly reduce penalties or interest.
Client: Who can represent me in the audit?
CA: You can attend yourself or designate someone qualified, like your accounts head or GST consultant. Just ensure they are well-versed with your GST data and compliance history. And remember, always submit replies in writing and get them acknowledged.
Client: Is there any legal knowledge I should have before the audit?
CA: It helps to be aware of:
- Section 65 – Departmental audit
- Section 66 – Special audit by CA/CMA
- Section 70 – Power to summon
- Rule 101 – Audit procedure
You don’t need to be an expert, but understanding these provisions can help you respond confidently.
Client: Do I need to organize my files in a particular way?
CA: Yes, use a systematic filing method. Ideally, digitize and organize documents by GSTIN, financial year, and type (returns, invoices, reconciliations, etc.). This saves time and avoids confusion during the audit.
Client: Should I involve a professional for the audit?
CA: Definitely. A Chartered Accountant or GST expert can do a pre-audit review, run mock checks, and support you throughout the process. It greatly reduces risk and improves audit readiness.
Only for knowledge sharing.
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