Demystifying GST Audit for High-Turnover Taxpayers

Demystifying GST Audit for High-Turnover Taxpayers

Understanding GST Audit for Taxpayers with Annual Turnover above 2 Crores

Since the financial year 2020-21, the mandatory GST audit requirement by a CA/CMA for taxpayers with a turnover exceeding Rs.2 crores has been abolished. Instead, taxpayers with a turnover of over Rs.5 crores are required to self-certify and submit Form GSTR-9C from FY 2020-21 onwards. The Finance Act, 2021, eliminated the requirement for GST audit and submission of GSTR-9C certified by a CA/CMA.

The Need for GST Audit and its Significance

GST audit involves the examination of records, returns, and other documents maintained by a GST registered person to ensure the correctness of turnover, taxes paid, refund claimed, input tax credit availed, and compliance with other GST Act regulations. Given that GST operates on a trust-based system, robust audit mechanisms are essential to verify taxpayer compliance.

Types of GST Audit

1. Turnover-based Audit: Conducted by a Chartered Accountant or Cost Accountant appointed by the taxpayer if the turnover exceeds Rs.2 crores.
2. Normal/General Audit: Conducted by the Commissioner of CGST/SGST or any authorized officer upon prior notice.
3. Special Audit: Carried out by a Chartered Accountant or Cost Accountant nominated by the Commissioner, with approval from Deputy/Assistant Commissioner.

Turnover-based Audit under Section 35(5) of CGST Act

If a registered taxpayer’s annual turnover exceeds Rs.2 crores in a financial year, they must get their accounts audited by a Chartered Accountant or Cost Accountant annually. This audit applies to the 12-month period from April of one calendar year to March of the next.

Qualification of GST Auditor & Eligibility

Only Chartered Accountants or Cost Accountants can conduct GST audits under Section 35. Additionally:

• Internal auditors cannot simultaneously serve as GST auditors.
• GST practitioners are not authorized to conduct audits.

Conducting GST Audit & Issuance of GST Audit Report

• A GST auditor must review crucial accounts like sales, stock, purchases, expenses, and tax credits.
• Different forms of annual returns are applicable based on the taxpayer type.
• The finalized GSTR-9C can be certified by the auditor who conducted the audit or by another CA.
• Due dates for submission of GST audit reports are typically December 31st of the subsequent fiscal year.

Penalties for Non-submission of GST Audit Report

While there’s no specific provision for non-submission penalties, general penalties may apply, subject to a maximum of Rs.25,000.

Conclusion

Understanding the nuances of GST audit requirements is essential for taxpayers with annual turnovers above Rs.2 crores. Compliance with audit procedures and timely submission of reports ensure adherence to GST regulations and mitigate the risk of penalties