Can’t stop worrying about the annual audit? Relax! You can take care of everything related to GST audit by keeping in mind the basics.
Post-independence, GST is known as the biggest tax reformation system in India. The concept of traditional goods and services tax has been changed entirely, leading to some confusion in the minds of entrepreneurs.
In this blog, you will get an overview of a GST audit, its procedures and all the rules and regulations.
What Is A GST Audit?
For some particular categories of the taxpayers, they are required to go through the annual GST audit process. The individual or the company registered under GST having an annual turnover exceeding Rs 2 crores needs to get the accounts audited and submit GSTR 9C duly certified once in every financial year.
You have to consult a practising chartered firm or a chartered accountant practitioner for annual auditing and submit the copy. You can also take the help of apps like Khatabook, whose expert chartered accountants will guide you in every way and submit the copy of the audited accounts.
GST Composition Scheme
It is a simple scheme for the small taxpayers registered under GST to get rid of the complex and tedious GST formalities. The gst composition scheme turnover limit is 1 crore. It means you have to pay a fixed rate on your annual turnover if turnover is less than 1 crore.
GST Audit Procedure
The GST audit procedure is of three types – self-audit, general audit and special audit.
If the annual turnover crosses Rs 2 crores, the taxpayer is liable to appoint a CA or CMA for the audit of the accounts registered under GST.
If required, an audit officer or even the commissioner can carry out an audit of all the registered traders.
For complex cases, the department conducts special audit by appointing CA or CMA for the audits.
GST Audit Law
As per GST law, audits are mandatory for the taxpayers with a turnover of more than 2 crores. However, when a financial year ends, you have to file annual returns regardless of your annual income. This rule is for every registered taxpayer.
A crucial point to note is that your aggregate annual turnover will be evaluated based on your Permanent Account Number (PAN). Still, audits will be made for each GSTIN registered against the certain PAN.
You must submit the GSTR 9C form noticed by the Central Tax Notification for the audit. This 10-page form is the primary concern of the entrepreneurs due to its complexity. It has 2 parts, which are
- Part 1 – Reconciliation statement
- Part 2 – Certification from the auditor
How To Prepare For The GST Audit?
If you want to prepare for GST audit, you need to follow these methods:
Annual Return Form Filing
The audit form is essential to check any flaws between the monetary statement and the yearly return. The annual return form is needed to cross-check the aggregation of the quarterly filed return files.
This is why the annual return form is prerequisite for the yearly audit for any registered taxpayer. Both the annual return and GST audit have the same deadline. But for hassle-free audits, try to submit the return form a few weeks earlier.
Preparation For Annual Return Filing And GST Audit Reporting
You need to file multiple reconciliation statements for bifurcated ITC claims to be determined based on nature and expense of ITC claims.
For GST registration and annual return filing, you can use gst emsigner. This is a digital signing tool for your paperwork and is also helpful for sending, tracking and managing smart documents. Moreover, it allows you to encrypt the data to ensure the security of the information you are furnishing.
Annual Turnover Calculation
The return and audit solely depend on annual turnover. As a business owner, you should have the basic knowledge of how the turnover is calculated:
Aggregate turnover = value of all taxable supplies + export supplies for all goods and services + exempt supplies
Items Included In The Turnover Calculation:
- All the interstate and intrastate taxable supplies in addition to the supplies on which reverse charge is to be applied
- Goods supplied or received on principal to principal basis.
- Supplies between different businesses
- All exempt supplies
- Value of all export supplies
- Taxes not covered by GST
- Supplies of agents/job workers
Items Excluded In Turnover Calculation
- Inward supplies (Tax under reverse charge)
- All the taxes and cess charged under GST (CGST, IGST, SGST or compensation cess)
- Goods supplied to or received back from the job worker
- Activities don’t come under the category of goods or services
GST Audit Compliances
When it comes to choosing a GST Auditor, there are some eligibility criteria that you need to keep in mind.
- Only a chartered accountant or cost accountant who practices or works in a CA firm has the power to audit.
- You cannot appoint an internal auditor as GST auditor.
- As per the GST act, no GST practitioner can perform the audit.
To calculate the threshold limit 2 crores for any organisation having multiple offices in various locations, you must consider the aggregate turnover. If the turnover exceeds the 2-crore limit, then the audit will be performed for each of the branches.
You, as the business owner, can appoint one auditor for all branches or separate auditors for each one. All the auditors will be responsible for reporting the observations needed for GST audit.
Conducting A GST Audit
If you are a proprietor, a partner, or one of the Board of Directors of a company, then you can appoint a CA at the beginning of a financial year for auditing the registered accounts.
The auditors observe the important accounts while performing audits like stock register, purchase register, expense ledger, and sales register. Additionally, they also check input tax credit received and utilised and output tax paid, e-way bills, documents containing records and communications to the GST department.
Reviews Of Auditor
The GST auditor must mention any pending tax liabilities which the taxpayer can settle. The finalised form, along with the furnished documents, must be duly certified by the CA.
For the non-submission of the audit report, the taxpayer will be penalised.