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GST Audit

What is the GST Audit?

GST audit is a process through which a business’s compliance with the GST law is checked. The GST department conducts the audit and examines the business’s GST returns, records, and other documents. The purpose of the audit is to ensure that the company is correctly paying the GST and is not evading taxes.

The Need for GST Audit

A robust audit mechanism is required to verify that taxpayers have accurately self-assessed their tax liabilities. A GST audit is one of the government’s steps to administer GST correctly.

  • Taxpayers must self-evaluate their obligations, pay taxes, and file returns under the GST taxation framework.
  • In GST audits, records, returns, and other documents maintained by a GST-registered person are scrutinised.

The audit’s goal is to confirm all compliance with the GST Act requirements, including those related to the declared turnover, taxes paid, refunds requested, input tax credits utilised, and other compliances.

Types of GST Audit

Audit Type Conducted By Initiation details
Audit based on turnover Taxpayer-appointed chartered accountant or cost accountant The CGST Act mandates that the taxpayer have his books and records audited if his Turnover exceeds 2 crore.
Regular/General Audit CGST/SGST Commissioner or any other Officer designated by him Upon Commissioner’s direction with 15 days’ notice
Special audit Chartered accountant or cost accountant proposed by the commissioner Deputy/Assistant Commissioner’s order, with Commissioner’s prior approval

CGST Act Section 35 Turnover-based Audit (5)

A registered taxpayer must have their accounts audited by a Chartered Accountant or Cost Accountant each year if their annual revenue exceeds Rs. 2 crores. The 12 months from April of one calendar year to March of the following calendar year is a financial year.

Aggregate Turnover

The following formula is used to compute aggregate turnover:

Value of all taxable (interstate and intrastate) supply + exempt supplies + export supplies of all commodities and services = Aggregate turnover.

All business entities registered under GST for that PAN will be subject to a GST audit for a financial year once the turnover under that PAN exceeds Rs. 2 crores, as required under the PAN-based total turnover computation.

Items Included in Aggregate Turnover

  • All taxable (intrastate and interstate), excluding those for whom the reverse charge is applicable, supply
  • Transfers of goods between various economic sectors.
  • Products were given to or received directly from the principal by the job worker.
  • Value of all supplies with zero rating or for export.
  • Supplying agents or employees on the principal’s behalf.
  • Every exempt supply. For instance, the provision of farm products with branded ready-to-eat meals.
  • All taxes that are not GST-inclusive. An example would be the entertainment tax charged on movie ticket sales.

Items Excluded in Aggregate Turnover

  • Supplies received from outside the country are subject to reverse charge tax.
  • All CGST, SGST, or IGST taxes and cess, as well as the compensation cess, are levied under the Goods and Services Tax.
  • Goods that are given to or taken away from a job worker.
  • Activities not covered by schedule III of the CGST Act as either a supply of goods or a service

Steps for Conducting GST Audit & Issue of GST Audit Report

  • Appointment of a GST auditor

At the commencement of the fiscal year, a proprietor, partner, or board of directors, in the case of a company, should select a GST auditor.

  • Account Examination

An auditor will review the following accounts:

  • Purchase record
  • Stock ledger
  • Ledgers for the purchase register and expenses
  • Credit for input taxes claimed and used
  • Production tax due and paid
  • e-Way bills created within the audit period, provided they complied with the rules.
  • E-Invoices are made, and IRN records are maintained.
  • Any correspondence logs from the relevant year with the GST department.
  • Annual Return and GST Audit Forms
Taxpayer category Form Submission
Regardless of whether it relates to the GST Audit
Filing GSTR 1 and GSTR 3B as a regular taxpayer GSTR-9
A taxpayer subject to the Composition Scheme GSTR- 9A
Online business owner GSTR-9B(Not yet in action)
Auditable under GST
Taxpayers whose annual revenue exceeds Rs. 2 crore GSTR-9C
  • Review of the GST Auditor’s comments

Any unpaid tax debt discovered during the reconciliation process and through GST audit observations must be reported by the Auditor. The Auditor’s suggested tax settlement can be made by taxpayers using form DRC-03.

  • Submission of the annual return and the GST audit report

Any CA who did not perform the GST audit for that specific GSTIN may certify the finalised GSTR-9C, as long as they are not the same CA who performed the GST audit.

The GST auditor or the certifier must report and certify the following:

  • No matter if all necessary accounts or records are maintained.
  • Whether or not the financial statements were created using the books of accounts retained at the taxpayer’s primary or secondary place of business.
  • Verify the data in GSTR-9C is accurate.
  • List the audit’s findings, objections, and comments, if any.
  • Documents that the taxpayer must provide
  • Certified financial statements (which are PAN-based)
  • Form GSTR-9, annual report (for every GSTIN)
  • The audit report in Part B, coupled with the certified reconciliation statement in Form GSTR-9C, compares the values of the supplies and tax amounts reported in GSTR-9 to the audited financials in Part-A.

How to be ready for a GST Audit?

Here are some guidelines for preparing for a GST audit:

  • The auditors will scrutinise your quarterly and monthly returns. You must carry data in addition to the necessary supporting paperwork.
  • The auditor confirms whether any ITCs have been reversed for failing to pay within 180 days.
  • If you claim an additional input tax credit, you must pay 24% interest on the extra tax amount (ITC). The auditor will evaluate your organisation’s returns in these circumstances.
  • The auditor encourages you to make adjustments if there are any data gaps during the audit.
  • The GST department establishes guidelines for invoice format. For example, the invoice format must be utilised when submitting invoice information.
  • If the auditor finds that your business structure is different during the audit, they may urge you to modify it following GST requirements.
  • A 180-day window should not exist between the invoice and payment dates.
  • The other issue that has to be addressed is how E-way bills are assessed and how well they match up with invoices.
  • E-way bills are examined by auditors, who compare them to invoices to look for any quantity anomalies. An e-way bill’s inconsistency with an invoice can only be resolved within 24 hours.
  • It cannot be altered or eliminated. The auditor may fine you or keep your products until you pay the tax or penalty if you transport your goods without issuing an E-way bill.
  • The payment amount, including GST, must verify the invoice amount. If your payment is less than the sum stated on the invoice, the amount of any deficit will be deducted from your input tax credit (including GST).

The GST Audit Checklist

Here is a list of the paperwork that each taxpayer will require:

  • Checking and confirming the data on the invoice.
  • Input tax credit reversal for late payments made within 180 days.
  • E-way bill analysis and invoice comparison.
  • Ensuring the pending stock with employees on the job.
  • GSTR 3B evaluation using GSTR 1 and GSTR 2A. The procedure comprises GSTR Amendment, GST Penalties, and GST Interest.


What is the deadline for starting a special audit under the GST?

The auditor will have 90 days to produce the report. At the taxable person's or auditor's request, the tax officer may extend this period for another 90 days.

Who will be responsible for the costs of the special audit?

The Commissioner will determine and pay the costs of the inspection and audit, including the auditor's fee.

Who will be responsible for the costs of the special audit?

The Commissioner will determine and pay the costs of the inspection and audit, including the auditor's fee.