Departmental GST Audit Process – Key Highlights

What is GST Audit?

Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST.

  • Key Objective:

1.To ensure and promote the correctness of

  • turnover declared,
  • taxes paid,
  • refund claimed &
  • input tax credit availed, and

2.To assess the compliance of Registered Taxpayers (RTP) with the provisions of the GST Act and rules made thereunder.

  • Departmental GST Audit – Key Highlights
  1. Audit Officer (AO) will issue Prior Notice in Prescribed Form at least 15 days (or as may be prescribed) prior to the date of proposed visit seeking documents / information ranging from returns, books of accounts, agreements, invoices etc, and Details of tax payments and returns filed under other acts such as Income Tax, Professional Tax etc can also be demanded.
  2. Audit to be conducted at the place of business
  3. The registered personmust provide a self-certified copy of the documents asked for by AO to concerned AO / Authority. (it may vary from case to case).
  4. In case on returns are not filed / incorrect, then the audit officer will quantify the correct liability and enforce recovery and can use the powers delegated to him by Commissioner
  5. AO can also verify the stock of goods.
  6. AO cannot carry out search of the premises.
  • Points to be kept in mind:
  1. At least 15 days must be given for collection, compilation, preparation and arrangement of documents for audit from receipt of an audit notice
  2. Adjournment can be sought in case of unavoidable circumstances
  3. The registered person can submit his say throughout the audit proceedings in written form
  4. The opportunity of hearing must be provided
  5. Audit must be completed within prescribed time limit i.e. 3 months
  6. Findings of the Audit must be informed within 30 days of conclusion of audit in Form ADT-02
  7. In case any non-payment of tax is found out, such tax can be paid prior to issuance of Show Cause Notice along with interest. No penalty can be imposed in such cases.
  • Preparedness of GST Audit includes
  • Making of internal reconciliation statements, 
  • Ensuring that all relevant documents are present in proper form; and 
  • Most importantly, taking a review of legal positions taken under GST. A few instances in this regard are as under:
  • the transactions on which GST has not been discharged (for instance, GST on transactions covered under Schedule – I of the CGST Act (i.e. supplies made without consideration) may not have been discharged); 
  • cases where incorrect/wrong input tax credit has been availed (for instance, Input tax credit on goods/services covered under Section 17(5) of the CGST Act has been inadvertently availed)
  • whether input tax credit, wherever required has been reversed and if reversed, whether quantum of reversal is correct (for instance reversals of input tax credits to the extent of making exempted supplies under Rule 42 and 43 of the CGST Rules)
  • cases where incorrect benefits under GST have been availed (for instance, claiming refund of IGST paid on exports which are covered under the provisions of Rule 96(10) of the CGST Rules).
  • An authorized representative of the said registered person (who is aware of all facts and legal positions) must be identified so as to represent before the GST Department at the time of Audit.

GST Audit has to be carried out with utmost seriousness and devote time with complete knowledge of the facts and laws including relevant updates.

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Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.

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