Select Your Location
Audit in general terms means inquiry, verification of the documents, events, and processes for verifying the facts and also to conclude the accuracy of recording of the facts and also the efficiency of the system. In present times, the concept of audit broadly covers a risk-based audit. The GST law mainly functions under the principles of self-assessment wherein the taxpayers determine the tax liability themselves and discharge the liability, which brings various challenges. These multiple challenges in the new GST law make taxpayers tend to mistakes or errors. The mistakes or errors will lead to unnecessary departmental interventions or can cause litigations or revenue leakages to exchequer. This article describes the Checklist of Different Types of Reviews / Audit in GST.
Table of Contents
According to Section 2(13) of CGST Act,2017, the term Audit means the examination of the records, returns and any other documents maintained or provided by the registered person as per this act or the rules made thereunder or according to any other law for the time being in force to authenticate the accuracy of:
There are mainly three kinds of audit specified in GST law. All
of them are not mutually exclusive, and a registered person may be subjected to
one or more of them periodically.The type of audits in GST are enumerated
statutory audit is performed as per Section 35(5) of the CGST Act and CGST Rule
type of audit every registered person having an aggregate turnover exceeding
Rs. 2 crores during a financial year shall get his accounts audited by a
Chartered Accountant (CA) or a cost accountant and shall submit:
Some of the essential aspects which must be
considered by a GST auditor while doing an audit in GST are as follows:
Departmental audit or audit by tax
authorities is performed as per Section 65 of the GST Act and Rule 101 of GST
It is necessary
for the tax department to conduct the audit of the records maintained by the
taxpayers, just to ensure that the registered person is calculated correctly
and has discharged its tax liability. Section 65 authorises the conduct of
audit by the commissioner or any other officer authorized by him by way of a
general or special order of the registered persons. The time period of this
audit shall be financial year or part thereof or multiples thereof.
The audit shall
be conducted in the registered business place or office of the registered
person with an intimation of audit at least 15 days in advance in Form GST
ADT-01. The audit must be completed within three months from the date of
commencement of the audit, which can be extended by the commissioner, whenever
required, by a further period not exceeding six months.
According to Rule 101(3), the proper officer who is authorised to conduct an audit of the ‘records’ and the ‘books of account’ of the registered person shall verify the details with the help of the team of officers and officials accompanying him.
During the close
of audit, the proper officer shall, within a span of thirty days, inform the
registered person, whose records are audited, regarding the findings, his
rights and obligations, and also the reasons for such results in Form
In cases where
the pending tax liability is identified during the audit or the input tax
credit is wrongly availed or utilised by the auditee, the procedure laid down
under Section 73 or section 74 must be followed.
Also, Read: Power of Tax Authorities to conduct Special Audit under GST Act.
The special audit is conducted as per section 66 of
the GST Act and Rule 102 of CGST Rules.
To avail, the services of experts is an old practice
in the due process of law. As per Section 66 of the CGST Act, the audit officer
at any stage of investigation, inquiry, scrutiny, or any other proceedings
under the act, where the officer must not be below the rank of assistant
commissioner. He must duly approve to avail the services of a CA or a CMA by
considering the nature and difficulty of the business and in the interest of
revenue believes that:
The internal audits and reviews that businesses can start from the standpoint of GST can be as under:
The GST health check reviews can be conducted on a
monthly basis covering all the functions having GST impact. This could include
procurements, sales, procurements, inventory, etc. This type of reviews is also
helpful for GST mandatory statutory audit, and mostly it provides management
with the comfort on the level of compliance in the organisation. Broadly, this
type of reviews would cover the
The managements conduct the area-specific reviews as
per the requirement and need of the organization. The areas to be reviewed on a
specific basis for GST are sales, IT/ERP systems, ITC Credits etc. Areas
specific covers more in-depth review and help the management in streamlining
and strengthening the business process being reviewed.
With the advent of ‘distinct persons,’ the transactions which would have gone untaxed are not only brought to tax but are required to be reported as inward-outward supply, respectively. In the consolidated financials, the transactions cancel each other. As such, identifying the inter-branch transactions, reviewing the accounting entries, and also reporting them for GST purposes during each tax period needs close attention. After the introduction of IT systems, trade has almost forgotten the branch-departmental account, which GST is checking. In the case of banks, the option in section 17(4) increases the importance of this review.
Non-monetary transactions are also liable to GST.
The deal not having an accounting entry needs to be reported for GST purposes
and reconciled in Annual Returns. For Instance, the exchange of goods will not
involve any accounting entries, as there is no monetary consideration. This
type of review values the invisible transactions which do not have any
While restructuring the business, the tax due
diligence of the buyer is required. This may be done voluntarily by the buyer,
or the seller will make a specific direction related to it. The primary purpose
of this review is to highlight the tax exposure, which may carry on to the new
organisation. This becomes more crucial in cases where the entity is exposed to
various indirect tax laws. The review recognises areas of non-compliance in the
long term, potential risks and even threats, changes required if any in terms
of the contract, and also suggest alternative structuring strategy to optimise
Indirect tax systems affect all the financial transactions of a business. The complex business structure, along with system automation, needs a sound tax system inbuilt as a sturdy system in all the processes of the company. Therefore, this type of review helps the management in identifying the risks and the gaps at different levels of GST compliance and also the possible threat if the same remains unaddressed. This review assists the management in fixing various preventive controls at multiple levels of a business process. It also helps in streamlining and strengthening the entire process of the business cycle from its incorporation to the end, which eventually lowers the chances of mistakes or errors and frauds, thereby improving the overall compliance system.
GST is dependent on IT. The GSTN is the crucial
point of compliance. Many taxpayers have automated this process and event the
filing of GST Returns is done electronically with the services provided by the
GSTN as well as some independent vendors. The key objective is to keep the data
confidential. Any error made in the initial configuration or set up, data
entry, or transfer can have a substantial effect on the business. Therefore the
companies must get an audit of the IT/ERP systems and validation of software.
There is an evolving GST law with Government working actively on it and regularly seeking to amend the law for fitment of rates, Act, and Rules to make GST law simple and easy. The compliance followed in this period is therefore challenging, and its applicability would depend on the date of amendment. Some of the issues are not very clear for which one needs an in-depth understanding. Hence, the Chartered Accountants having this knowledge and audit skills need to get tech knowledge, and then they will be well placed to fulfill their services as employees and provide the review services as practitioners.
Read, Also: Provisions Relating to Aggregate Turnover Under GST.
Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Are you human?: 2 + 9 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Auto rickshaw rides booked through app aggregators such as Ola and Uber India are set to become more expensive begi...
18 Dec, 2021
This article throws light over the concept of casual taxable person registration under GST. A casual taxable person...
23 Jan, 2021
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!