AUDIT UNDER GST

[Dr. Sanjiv Agarwal]

Audit under GST involves examination of records, returns and other documents maintained by a GST registered person. It also ensures correctness of turnover declared, taxes paid, refund claimed, input tax credit availed and assess other such compliances under GST Act to be checked by an authorized expert, i.e., the Chartered Accountant in practice or cost accountant in practice who is authorized under GST Act to carry out GST audit stipulated under Section 35(5) of CGST Act, 2017.

GST is a trust-based taxation regime with self assessment wherein a taxpayer is required to self-assess his tax liability, pay taxes and file returns. Thus, to ensure whether the taxpayer has correctly self -assessed his tax liability, a robust audit mechanism is a must. Various measures are taken by the government for proper implementation of GST and audit is one amongst them. GST Audit is one of them which is basically a reconciliation statement of information as per financial statements and GST returns.

Turnover based audit under GST (Section 35(5) of CGST Act, 2017)

If the annual turnover of a registered taxpayer is more than ₹ 2 crores in a financial year, he is required to get his accounts audited by a Chartered Accountant or Cost Accountant every year.

It may be noted that GSTR-9 filing for businesses with turnover up to ₹ 2 crores has been made optional for FY 2017-18 and FY 2018-19.

A financial year covers the 12-month period beginning from 1^st April of a calendar year to 31^st March of the following calendar year (e.g., 1^st April, 2019 to 31^st March, 2020)

For businesses with an annual turnover of less than ₹ 5 crore, filing of GSTR-9C for FY 2018-19 has been waived off. The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than ₹ 2 crores, all business entities registered under GST for that PAN will be liable for GST audit for a financial year.

Forms for Annual return and GST Audit:

Type of taxpayer	Form to be filed
Regular taxpayer filing GSTR 1 and GSTR 3B	GSTR-9
Taxpayer under Composition Scheme	GSTR-9A
E-commerce operator	GSTR-9B
Taxpayers whose turnover exceeds ₹ 2 crores in FY	GSTR-9C

Analysis of GSTR-9

GSTR-9 is the relevant form prescribed in terms of Section 44 of the CGST Act. It consists of six parts and nineteen tables as listed below:

Part	Items
I	Basic Details
II	Details of Outward and inward supplies made during the financial year
III	Details of ITC for the financial year
IV	Details of tax paid as declared in returns filed during the financial year
V	Particulars of the transactions for the previous FY declared in returns of April to September of current FY or up to date of filing of annual return of previous FY, whichever is earlier.
VI	Other Information

Review of comments by GST Auditor:

The Auditor must report any tax liability pending for payment by the taxpayer, identified through the reconciliation exercise and observations made on GST audit. Taxpayers can settle taxes as recommended by the auditor in Form DRC-03.

Submission of GST Audit report and Annual return:

The following must be reported and certified by the GST Auditor while certifying Form -9 / 9C

• Whether or not all the requisite accounts or records are maintained.
• Whether or not the Financial Statements are prepared as per the books of accounts maintained at the principal place of business or additional place of business of the taxpayer.
• Certify the accuracy of information in GSTR-9C.
• To list down the audit observations or reservations or comments, if any.

Documents to be furnished by the taxpayer:

• Audited financial statements (which is PAN-based)
• Annual return in form GSTR-9 (for every GSTIN)
• Certified reconciliation statement in Form GSTR-9C, reflecting reconciled values of supplies and tax amounts declared in GSTR-9 compared to audited financials in Part-A, along with the Audit report in Part-B.

Due dates for submission of GST Audit report:

In GST, the due dates for GST audit returns have been delayed or extended for various administrative and technical reasons.

For the financial year 2018-19, the due date was 31^st December, which has since been extended to 30^th September, 2020 due to Covid 19 pandemic as of now.

It has been prescribed that all returns under GST law are required to be filed online on common portal (GSTN). As such, Form 9 and 9C are to be submitted and filed online only which can be done directly or through facilitation centre.

Consequences of failure to submit the annual return

(a) Notice to defaulters - Section 46 of the CGST Act provides where a registered person fails to furnish a return under section 39 or section 44 or section 45, a notice shall be issued requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.

(b) Late Fee for delayed filing - Section 47(2) of the CGST Act provides for levy of a late fee of ₹ 100/- per day for delay in furnishing annual return in Form GSTR-9, subject to a maximum amount of quarter percent (0.25%) of the turnover in the State or Union Territory. Similar provisions for levy of late fee exist under the State / Union Territory GST Act, 2017. On a combined reading of Section 47(2) and Section 44 (1) of the CGST Act, 2017 and State / Union Territory GST Act, 2017, a late fee of ₹ 200/- per day (₹ 100 under CGST law + ₹ 100/- under State / Union Territory GST law) could be levied which would be capped to a maximum amount of half percent (0.25% under the CGST Law + 0.25% under the SGST / UTGST Law) of turnover in the State or Union Territory.

(c) General Penalty for Contravention of Provisions - As per section 125, any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees. An equal amount of penalty under the SGST/UTGST/IGST Act would also be applicable. To sum up, a penalty of up to ₹ 50,000/- could be levied.

It is important to note that to impose a penalty under section 125 up to ₹ 25,000, the ingredients such as willful default, etc., must be established by a process of adjudication allowing a reasonable opportunity to the taxable person and not imposed as a matter of routine.

Epilogue

The experience suggest that GSTN portal is generally overloaded during the last few days and it would therefore, be advisable to get the GST Audit done to avoid last minute hassles. Moreover, the present audit for the financial year 2018-19, the audit for 2019-20 will follow later.