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GST Audit Limit: What Business Owners Should Know

Updated: Jun 27


GST Audit Limit: What Business Owners Should Know

In India, numerous audits are carried out under the SGST and CGST statutes. To comply with GST, taxpayers must determine their GST tax liability, file the recommended returns, and make tax payments using the GST audit checklist. A thorough audit mechanism is outlined in the GST Act to guarantee proper and accurate filing as well as the tax liability of the taxpayer. The Finance Act of 2021 eliminated the need for a GST audit and the filing of a GSTR-9C that was certified by a CMA or CA. The 43rd meeting of the GST Council took place on May 28, 2021, and the Council recommended that taxpayers with a yearly aggregate turnover of at least Rs. 5 crore may continue to submit GSTR-9C as self-certified. We will explain the GST audit limit concept in detail in this guide.

 

Table of Contents

 

What is a GST Audit?

Examining records, returns, and other documents kept by a GST-registered individual constitutes an audit under the law. Additionally, it verifies that all turnover declarations, taxes paid, refunds requested, input tax credits obtained, and other compliances with the GST Act are accurate and should be examined by a qualified specialist. A taxpayer under the goods and services tax (GST) must determine his own tax burden, pay taxes, and file returns. GST is a trust-based tax system. Therefore, a strong audit process is essential to verify if the person has accurately self-assessed his tax burden. The government is taking several actions to ensure that the GST is implemented correctly, and auditing is one of them. The following are the types of GST audit:

  • Turnover-Based GST Audit: The assessee arranges for the CA, or cost accountant, to carry out the audit. If the assessee's turnover exceeds Rs. 5 cr. as defined by the CGST statute, he must have his accounts audited by the same individuals. 

  • Standard GST Audit: This is carried out by the CGST/SGST commissioner or any other officer the commissioner has given permission to. In these kinds of situations, the audit will be carried out after providing the commissioner with 15 days' notice.

  • Special GST Audit: The cost accountant or the certified public accountant appointed by the commissioner will conduct the audit under this. The professional must have both the commissioner's consent and the directive from the deputy or assistant commissioner to carry out the audit.


GST Audit Limit for Turnover-Based Audit

A registered taxpayer must have his accounts audited annually by a chartered accountant or cost accountant if his yearly turnover exceeds Rs. 2 crore in a fiscal year. The 12-month period that runs from April of one calendar year to March of the following year is known as a financial year. The government's news statement from July 3, 2019, provides clarification regarding the turnover limit for the Financial Year 2017–18. It will span from July 1st, 2017 to March 31st, 2018, excluding the first quarter of FY 2017–18. Businesses with yearly revenue under Rs 5 crore are exempt from submitting GSTR-9C for FY 2018–19. 

Value of all taxable (interstate and intrastate) supply plus exempt supplies plus export supplies of all commodities and services equals aggregate turnover. The PAN must be used to calculate the total turnover. This means that all business entities registered under that PAN's GST will be subject to a GST audit for the duration of the financial year if the turnover under that PAN exceeds Rs. 2 crore. 


Items included in Aggregate Turnover

  • All taxable (including intra- and interstate) supplies, excluding those for which a reverse charge is imposed. 

  • Products given to or obtained by the employee on a principal-to-principal relationship.

  • Provisions to many business verticals. 

  • The total export/zero-rated supply value. 

  • All materials excluded. For instance, farm-fresh produce delivered with branded, ready-to-eat meals. 

  • Agent/worker supplies made on the principal's behalf. 

  • All taxes excluding those that fall under the GST. For instance, the entertainment tax collected from ticket sales for films. 


Items Excluded from Aggregate Turnover

  • All levies and compensating cess levied under the goods and services tax, such as the CGST, SGST, or IGST. 

  • Supplies that are imported and for which reverse charge is applied. 

  • Goods that are given to or collected from an employee. 

  • Activities that are outside of the CGST Act's schedule III for the provision of goods or services.


GSTR 9 and GSTR 9C

Every registered taxpayer is obliged by the GST Rules to file a GSTR 9 annual return; however, as of late, taxpayers with a turnover above Rs. 5 crore in a given financial year must also file a Form GSTR 9C (GST Audit). The taxpayer must complete the duly verified reconciliation statement in addition to the GSTR 9C Audit form. 

  • Every GST-registered taxpayer whose annual aggregate turnover in a specific financial year is over and above Rs. 5 Crore is required to have his accounts audited in accordance with Section 35 Sub-section (5) of the CSGT Act, 2017. 

  • Certified audited yearly accounts and reconciliation statements must be submitted by these taxpayers using the GST portal's FORM GSTR-9C.

It is mandatory for all regular taxpayers whose yearly total revenue is above Rs. 5 crore within a specific fiscal year to submit GSTR 9C. These taxpayers must additionally provide an audit certification and reconciliation statement. The following categories of taxpayers are not required to submit Form GSTR 9C audits.

  • Taxpayers with aggregate turnover of less than Rs. 5 crore

  • Casual taxpayers

  • Non-resident taxpayers

  • Taxpayers deducting tax at source (TDS)

  • E-commerce aggregators collecting tax at source (TCS)

  • Government departments

  • Input Service Distributor (ISD)

  • Composition Scheme dealers

  • OIDAR service providers


GST Audit Self-Declaration Limit

The Finance Act of 2021 advanced a proposal to do away with the CA's certification of GSTR-9C. This plan was applied from the Annual Return of FY 2020–21 and approved in the Union Budget 2021. In light of this modification, 

  • In the GSTR 9C Form, the reconciliation statement can now be "Self-certified" by taxpayers. 

  • The statement does not need to be certified by a cost accountant or a certified public accountant. The CGST Act of 2017's Sections 35 and 44 have been modified by this modification.

Update on the GSTR 9C threshold limit: 

  • The new eligibility to file a GSTR-9C return is defined under Rule 80(3) and PART-B of the CGST Rules.

  • The new rule requires taxpayers whose total yearly revenue exceeds Rs. 5 crore to submit GSTR-9C.


How is the GST Audit Conducted?

A GST audit comprises the following steps:


Appointment of GST Auditor

At the start of the fiscal year, the owner, a partner, or the board of directors of a company shall designate a GST auditor. A GST Audit under Section 35 may only be carried out by Chartered Accountants or Cost Accountants. It is not possible for an internal auditor to serve as a GST auditor in tandem. A GST practitioner is not permitted to conduct the audit under the GST Act. Only chartered accountants or cost accountants in active practice or those working for a firm of chartered accountants or cost accountants are authorised to conduct audits. Consequently, to issue the Audit Report, a chartered accountant is not required to be registered as a GST practitioner.


Accounts to be Reviewed

The following accounts or records are reviewed by the GST auditor as a part of the audit process:

  • Stock register

  • Sales register

  • Purchase register and expenses ledgers

  • Output tax payable and paid

  • Input tax credit availed and utilized

  • e-Way bills generated during the audit period under audit

  • e-Invoices and IRN generated 

  • Any documents recording communications with the GST department 


Forms for Annual GST Return and Audit

GSTR-9: Filed by regular taxpayers filing GSTR 1 and GSTR 3B

GSTR-9A: Filed by taxpayers under the composition scheme

GSTR-9B: Filed by e-commerce operators

GSTR-9C: Taxpayers whose turnover exceeds Rs. 2 crore

Through different CBIC announcements, entities with an annual revenue of less than Rs 5 crore are exempt from submitting GSTR-9C until FY 2019–20. As per the Finance Act, 2021, the applicability of GST audit by CA/CMA is to be withdrawn from the financial year starting from 1st April 2021 onwards. Following that, on July 30, 2021, the CBIC published Notification No. 29/2021 - Central Tax, which announced this modification.


Review of comments by GST Auditor

Any tax liability that the taxpayer has not yet paid, as determined by the reconciliation process and the auditor’s observations during the GST audit, must be reported. The auditor's suggested tax settlement can be done by taxpayers via Form DRC-03.


Submission of GST Annual Return and Audit Report 

The finished GSTR-9C may be certified by any other CA who did not perform the GST Audit for that specific GSTIN, or it may be certified by the same CA who performed the GST audit. The GST auditor or certifier must report and certify the following: 

  • Whether or not the necessary records or accounts are kept up to date. 

  • If the financial statements are prepared in accordance with the books of accounts kept at the taxpayer's major place of business or extra place of business. 

  • Verify that the data in GSTR-9C is accurate. 

  • To enumerate any reservations, remarks, or audit observations that may exist.


Due dates for Submitting GST Audit Report

The deadline for filing GSTR-9 and GSTR-9C is December 31 of the next financial year, at the latest. A CBIC notice may be used to extend the deadline.


Documents to be Provided by the Taxpayer

  • Financial statements that have been audited; PAN-based

  • An annual GSTIN return on form GSTR-9

  • A certified reconciliation statement in Form GSTR-9C that includes the audit report in Part-B and reconciles the tax amounts and supply values disclosed in GSTR-9 with the audited financials in Part-A.


Conclusion

You do not require an audit if your firm sales and gross receipts for any given fiscal year total less than ₹2 crores. However, you have to comply with the GST audit if your yearly turnover is above ₹5 crores. It is imperative to adhere to the GST audit checklist and the necessary audit types. The best way to stay ahead of these guidelines and requirements is by consulting an expert who can handle your queries and complete the process for you.


FAQ

Q1. Is GSTR-9 applicable for all the categories of taxpayers?

No, the yearly return for normal taxpayers only is GSTR-9. For taxpayers in composition, GSTR-9A served as a yearly return. However, GSTR-9A has been deactivated with the launch of GSTR-4. Moreover, the e-commerce operators' yearly return is GSTR-9B.


Q2. How is GST annual return different from GSTR-9C?

For normal taxpayers, GSTR-9 is the annual return; GSTR-9C is a reconciliation statement. All that is included in the GST annual return is a combined summary of the turnover, input tax credit (ITC), taxes paid, late fees paid, and adjustments made after the fiscal year has ended. The GSTR-9C statement serves as a reconciliation for the ITC, turnover, tax paid, and other items, along with any applicable justifications for any discrepancies.


Q3. What is the due date to file the GST annual return and GSTR-9C?

The GST annual return and reconciliation statement must be filed by taxpayers within nine months of the end of the fiscal year. Thus, for the fiscal year that concluded on March 31, 2022, the deadline for filing the GST annual return and the reconciliation statement in GSTR-9C is set for December 31, 2022, at the latest.


Q4. What is the GST audit turnover limit for the financial year 2023-24?

A GSTR-9 form must be filed by every registered person whose annual revenue exceeds INR 2 crore. In case the registered person's turnover surpasses INR 5 crore within a Financial Year, they must submit GSTR-9C along with GSTR-9. 


Q5. Is the GST audit mandatory?

A registered taxpayer must have his accounts audited annually by a chartered accountant or cost accountant if his yearly turnover exceeds Rs. 2 crore in a fiscal year.


Q6. What is aggregate turnover in GST?

The CGST/SGST Act's Section 2(6) defines "aggregate turnover" as "interstate supplies of persons under the same PAN." Therefore, the turnover of the branch providing goods or services will include a stock transfer from one branch in one state to another branch in another state.


Q7. Who can do a GST audit?

A GST practitioner cannot conduct the audit under the GST Act. Only chartered accountants or cost accountants in active practice or those working for a firm of chartered accountants or cost accountants are authorised to conduct audits. Consequently, to issue the Audit Report, a chartered accountant is not required to be registered as a GST practitioner.



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