Internal Audit under GST

Prakash Matre
Prakash Matre at January 31, 2023

GST Internal Audit 

Internal audit under GST is a process under which the accounts and records of the registered taxable person get audited by the certified accountant. Internal audit is carried out by examining the GST paid or payable, Input Tax Credit claimed, GST refund availed as well as by verifying the turnover of the taxpayer.

How internal audit under GST can be helpful?

Internal audit under GST can be helpful as it will

  1. Enhance business management
  2. Improve leadership
  3. Decrease losses and risks
  4. Help in obtaining insights

Applicability of Internal Audit

Here are the three types of organizations where Internal audits will be applicable.

  1. Organizations listed on stock exchange
  2. The organization whose shares are not listed in the stock exchange and has an annual turnover of 200 crores INR or more.
  3. The organization whose shares are not listed in the stock exchange and has a paid-up equity of 50 crores INR for that FY (Financial Year).
  4. The organization whose shares are not listed in the stock exchange and has a borrowed loan of more than 100 Crores INR or more during the previous FY (Financial Year).
  5. The organization whose shares are not listed in the stock exchange and has unpaid deposits amounting over 250 Crores INR during the earlier FY (Financial Year).
  6. Any private organization that has an annual turnover of 200 Crores INR or more.


Internal audit certification

The GST internal audit certification depends on the person who is carrying out the internal audit. The internal auditor can be a chartered accountant (CA) or a Cost and Work Accountant (CWA). Moreover, as per section 35 of the Central Goods and Services Tax (CGST) Act, 2017 any taxpayer who has a turnover of 2 Crore INR or more needs to get their accounts audited by a Chartered Accountant (CA) or Cost and Work Accountant (CWA).

Internal audit report

As per the audited accounts, an internal audit report is prepared. This audit report is prepared by the internal auditor who has examined the account and records of the taxpayer. The audit report prepared by the internal auditor is submitted to the top management. It contains all the discrepancies found and also states how sound the financial health of the organization is. After all the findings are reported by the auditor, he or she also shares his recommendations and the solution for the same. Here are the points on which the audit report is based upon:

  1. Identification of problems
  2. Criteria on which the problems are based upon The Reason behind the problem occurred
  3. What consequences will be there because of this problem
  4. What corrective measures can be taken by the organization
  5. Auditor’s opinion to ease the problem

What facts shall be checked by the auditor?

Here are the following facts that an auditor checks at the time of preparing the internal audit report:

  1. If the taxpayer has paid the GST?
  2. If the taxpayer has claimed any Input Tax Credit (ITC)?
  3. Whether the taxpayer has maintained the records and accounts properly?
  4. If the taxpayer has furnished all the GST Returns (monthly/quarterly or annually) on time?
  5. If the purchases and sales accounts have been reconciled?
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