GST Audit

GST Audit in India is governed by the GST Act, 2017, and is designed to ensure compliance with tax regulations. It involves examination of financial records, returns, and other documents to verify the accuracy of declared turnover, taxes paid, and input tax credits availed.

Types of GST Audits

There are three main types of GST audits that businesses may encounter. Each type serves a specific purpose and follows different procedures to ensure compliance with GST regulations.

Categories of GST Audits

• Turnover-Based Audit: Conducted by a Chartered Accountant or Cost Accountant for businesses with annual turnover exceeding Rs. 5 crore
• Departmental Audit: Conducted by GST officers as part of regular tax compliance checks
• Special Audit: Ordered by the GST Commissioner when there are discrepancies or concerns about tax payments
• Self-Audit: Internal audit conducted by businesses to ensure ongoing compliance

GST Audit Threshold Limit

The Finance Act of 2021 eliminated the requirement for a GST audit by a CA/CMA. However, taxpayers with an annual aggregate turnover of Rs. 5 crore or more must submit a self-certified reconciliation statement in Form GSTR-9C along with their annual return.

Documents Required for GST Audit

• Books of Accounts and Financial Statements
• GST Returns (GSTR-1, GSTR-3B, etc.)
• Purchase and Sales Registers
• Input Tax Credit Registers
• E-way Bills and Invoices
• Stock Registers and Inventory Records
• Bank Statements and Payment Records
• Previous Audit Reports (if applicable)

GST Audit Process

The GST audit process involves these key steps:

Penalties for Non-Compliance

• General Penalty: Up to Rs. 25,000 for failure to comply with audit requirements
• Tax Evasion Penalty: Up to 100% of the tax amount evaded
• Interest Charges: 18% per annum on unpaid tax liabilities
• Incorrect Input Tax Credit: Penalty equal to the amount of wrongly claimed ITC
• Late Filing Penalty: Rs. 200 per day (Rs. 100 under CGST and Rs. 100 under SGST) up to a maximum of 0.5% of turnover
• Prosecution: In severe cases of tax evasion, imprisonment for up to 5 years

Conclusion

GST Audit is a critical compliance requirement that helps businesses maintain accurate financial records and ensure proper tax payments. By understanding the audit process and maintaining proper documentation, businesses can avoid penalties and ensure smooth operations. Regular internal audits and professional assistance can help businesses stay compliant with GST regulations and identify potential issues before they lead to penalties.