It has been more than a year since the launch of Goods and Services Tax (GST) in India. GST is now implemented everywhere in the nation, and taxpayers have begun to understand it and comply with it to a great extent. India has surpassed the stage of inception for GST and it is the right time to apply the provision of GST Audit across the country. To do so, it becomes necessary to know everything about auditing under GST for everyone involved.
Auditing is basically the examination of documents to verify the accuracy of the information disclosed in them. Audit under CGST Act, 2017 is defined as the examination of records, returns, and other documents maintained by a person registered under GST or any other law. Audit under GST is carried out for verifying the correctness of the declared turnover, paid taxes, claimed refunds, and availed Input Tax Credit (ITC), and for assessing the dealer’s compliance to GST provisions and rules.
1. CA or CMA: A registered dealer with an annual turnover of more than Rs. 2 crore is required to audit his/her accounts by a CA or CMA. An internal auditor cannot simultaneously undertake the GST audit.
2. GST Tax Authorities: When tax authorities carry out the audit, it can be divided into two:
a. General Audit: An audit conducted by the Commissioner, or an officer under his orders, is known as general audit.
b. Special Audit: Due to case complexity and interest of revenue, the tax department may conduct a special audit by appointing a CA or CMA through the Commissioner.
Four forms of audit are usually developed depending on the situation: Form GST ADT 01, ADT 02, ADT 03, and ADT 04. An audit report is to be completed and submitted to the respective Commissioner within ninety days of conducting the audit. However, the assessee is required to keep the following documents ready before getting the accounts audited by a CA or CMA:
• Goods production and manufacture account
• Details of inward and outward supplies
• Records of stocked goods
• Account of availed ITC
• Details of paid and payable output tax
A copy of the GST Annual Return with reconciliation statement, audited annual accounts, and a copy of reconciliation statement must be electronically filed by the registered dealer. The reconciliation statement will include statement for reconciled value of supplies which is declared in the financial year’s furnished returns, along with the audited annual financial statements according to the terms stated in CGST Act Section 44(2),2017.
Under CGST Act Section 35, 2017, every registered dealer with an aggregate turnover of more than Rs. 2 crore in one financial year, is eligible for getting accounts audited. Aggregate turnover includes values of all taxable and exempt supplies (except inward supplies), interstate supplies, and exports made under the same PAN throughout India.
The job of an auditor is to examine every possibility of tax evasion. Thus, auditors have to work as watchdogs of the taxation system to ensure that everything is done under compliance. To formulate a constructive approach, auditors can include parameters like:
• Is GST paid in the right manner?
• Is ITC availed in the right way?
• Are documents and records maintained correctly?
• Are returns filed accurately?
• Are exhaustive reconciliations of purchases and supplies in place?
These are the main parameters which can be further sub-divided to ensure efficient auditing. To make sure that dealers comply with GST, the auditors may need to refer to the provisions listed in the law.
Audit is an integral part of any taxation system including GST. The job of auditing under GST requires being unbiased and extremely aware at all times. The interests of both, the assesse as well as the revenue, must be kept in mind while auditing accounts. Every single aspect must be taken into consideration to complete the task according to the provisions made in GST Act. In this way, the criteria for GST audit can be fulfilled.