GST audits are phenomenally different from traditional tax audits, which are subsumed in GST such as VAT, excise, service tax, and other similar audits. The compliances, the procedure and the penalties for not complying the same are also different.
Who are liable for GST AUDIT?
GST audit is required to track and examine whether correct GST is being paid and refunds are being claimed, particularly for specific categories of taxpayers.
A GST audit entails the examination of records, returns, and other documents kept by a GST registered person. It also ensures the correctness of turnover declared, taxes paid, and refund claimed. In addition, the input tax credit is availed, and other such GST audit applicability compliances are evaluated to be checked by an authorised expert.
Every taxpayer, whose turnover of a business exceeds Rs 2 Crore in a given financial year, needs to get their books of accounts audited every year by either a chartered or a cost accountant and submit a copy of it with their annual returns.
Also either Commissioner of CGST/SGST or any officer authorized by him can ask the required person for an audit even though they are not liable for the same. 15 days prior notice will be given before initiating the audit and it is generally completed within 3 months from the date of commencement and can be extended till six months by the Commissioner by giving genuine reasons.
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There is a misconception among most of us. A professional, a Chartered or Cost Accountant thinks that it’s the responsibility of a businessman to get their audit done whereas businessmen thinks it’s the responsibility of Chartered or Cost Accountant to do audit properly.
But in reality it’s the responsibility of both the auditors and businessman for getting GST audit done keeping certain things in mind which may brings trouble in future for both of them.
Checklist for GST Audit
Here are the following points which needs attention by the auditor and person while conducting audit-:
- GST audit for the financial year 17-18 comprise only of nine months, that is from July 2017 to March 2018. Taxpayers will need to bifurcate nine months’ worth of data from their total turnover. The next following year 18-19 will comprise of 12 months from April 2018 – March 2019.
- It should be ensured that monthly or quarterly returns are in sync with books of accounts before filing GSTR 9. The GSTR 9 once filed cannot be revised and amendment related to it cannot be done in next return.
Basics for Goods and Service Tax (GST) Audit
- Checking particulars of invoice.
- The details in the invoices should be subject to specific rules. If the format of the invoice varies, management should be advised to make amendment in the invoice and include the requirements as per the GST rules.
- If you have claimed extra ITC, you will have to pay interest at 24% on the excess tax amount, the auditor would need to reconcile that businessman does not claim excess ITC.
- Check for any data gap and if there is any, auditor should inform to taxpayer.
- ITC should be reversed for non-payment within 180 days and this should be checked by the auditor.
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- Date of invoice and payment should be checked that the difference does not exceed 180 days.
- The payment amount to supplier should be equal to the invoice amount including GST. If there is short payment then ITC will reverse to the extent of short payment.
- In case of multiple branches, stock transfers amongst branches must also be reconciled. The stock held as per books of accounts and the GST annual return must be same.
- Check whether both the inward supplies and outward supplies are charged with applicable rate or not.
- Turnover will be based on PAN basis that means all supplies made inclusive of exempted supplies made throughout the country either from one place or multiple branches will be considered, while checking turnover for GST audit.
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- Was there any Good which sent on approval basis and it’s exceeding the time limit of 6 months and not offered to tax? If yes, then add that amount in turnover and increase the tax liability.
- Pay the tax liability through the form DRC-03.
- Total of B2B and B2C shall match with the total taxable supplies.
Above, are the few points which should be kept in mind by both the auditors and taxpayer while doing GST audit.
For any offence committed such as wrong information given in audit by a company or any person, both the person in charge (such as director, manager, secretary, or any person) and auditors might have to face many problems.
Outcomes of Improper Documentation.
If due to any reasons following mistakes are made:
- Wrong or fake Invoices are issued by the tax payer.
- False information while registering under GST or financial records/documents or has filed fake returns to evade tax and has hidden information or has given false information during proceedings.
- Has collected GST but didn’t submit it to the government within 3 months.
Nil Rated, Zero Rated, Non-Taxable and Exempted Supply
- Taken or utilized input tax credit without actual receipt of goods and services.
- Deliberately suppressed sales to evade tax.
And many other mistakes then following can be the outcomes.
Amount Of Penalty
| a) For any reason, other than the reason of fraud or any willful misstatement or suppression of facts to evade tax. | Shall be liable to a penalty for an amount equal to-
1) Rs10,000 or 2) 10% of the tax due from such person. Whichever is higher. |
| b) For reason of fraud or any willful misstatement or suppression of facts to evade tax. | Shall be liable to a penalty for an amount equal to-
1) Rs10,000 or 2) Tax due from such person. Whichever is higher. |
The amount of penalty may extend to Rs 25,000.
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The author of above article is Sneha Bhalotia.
