An Overview
Goods and Services Tax (GST) is an indirect tax regime that has been implemented in India since July 1, 2017. It is a comprehensive tax that subsumes various indirect taxes such as excise duty, service tax, VAT, and others, levied by both the central and state governments. The GST system is based on a self-assessment mechanism, where taxpayers are required to file their returns and pay their taxes. However, to ensure compliance and prevent tax evasion, the government has implemented a system of GST Audit.
A GST Audit is a process of verifying the accuracy and completeness of the information provided by the taxpayers in their GST returns. It is conducted by a qualified auditor, who examines the books of accounts, records, and other documents maintained by the taxpayer to ensure that they have correctly calculated and paid the GST liabilities. The GST Audit is an essential tool for the government to ensure that taxpayers comply with the GST law and pay the correct amount of tax.
Types of GST Audit
There are three types of GST audit in India, which are as follows:
- Annual GST Audit:
This type of GST audit is mandatory for all registered taxpayers whose aggregate turnover exceeds Rs. 5 crores in a financial year. The objective of the annual GST audit is to ensure that the taxpayer has maintained accurate records, filed timely returns, and paid the correct amount of GST. The annual GST audit is conducted by a qualified chartered accountant or cost accountant, who issues an audit report in Form GSTR-9C.
- Special GST Audit:
The tax authorities can order a special GST audit of any registered taxpayer if they suspect tax evasion or non-compliance. The objective of a special GST audit is to verify the accuracy and completeness of the taxpayer's records, accounts, and returns. The special GST audit is conducted by a qualified chartered accountant or cost accountant appointed by the tax authorities, who issues an audit report in Form GST ADT-04.
- GST Audit by the Commissioner:
The Commissioner of GST can conduct an audit of any registered taxpayer at any time to verify their compliance with the GST law. The objective of a GST audit by the Commissioner is to ensure that the taxpayer has maintained accurate records, filed timely returns, and paid the correct amount of GST. The GST audit by the Commissioner is conducted by a GST officer appointed by the Commissioner, who issues an audit report in Form GST ADT-01.
In conclusion, the three types of GST audits in India serve the objective of ensuring compliance with the GST law and prevent tax evasion. The selection of the audit type depends on the taxpayer's turnover, suspicion of non-compliance or tax evasion, and the discretion of the Commissioner of GST.
Procedure of GST Audit
The procedure for conducting GST audit in India involves the following steps:
- Notice of Audit
The first step in the GST audit process is the issuance of a notice to the taxpayer by the tax authorities. The notice specifies the date, time, and place of the audit and requests the taxpayer to provide all necessary records and documents.
- Preparation of Records and Documents
The taxpayer is required to prepare all records and documents required for the audit. These documents may include books of accounts, tax returns, invoices, credit notes, debit notes, and other supporting documents.
- Verification of Records
The auditor verifies the records and documents provided by the taxpayer to ensure that they are complete, accurate, and comply with the GST law. The auditor may also verify the physical stock of goods and visit the taxpayer's premises to verify the records.
- Communication of Findings
The auditor communicates their findings to the taxpayer and explains any discrepancies or non-compliance identified during the audit.
- Preparation of Audit Report:
The auditor prepares an audit report, which includes their findings, observations, and recommendations. The audit report is submitted to the taxpayer and the tax authorities.
- Response to Audit Report:
The taxpayer has the right to respond to the audit report and provide additional information or clarifications. The taxpayer must respond to the audit report within 30 days of its receipt.
- Action by Tax Authorities:
Based on the findings of the audit report and the response of the taxpayer, the tax authorities may take necessary action to recover any outstanding tax liabilities, impose penalties or initiate legal proceedings.
In conclusion, the GST audit process is a crucial tool to ensure compliance with the GST law and prevent tax evasion. The procedure for conducting a GST audit involves thorough verification of records and documents, communication of findings, and preparation of an audit report. It is important for taxpayers to maintain accurate records and comply with the GST law to avoid penalties and legal action.
Role Of Taxpayers In GST Audit
The role of the taxpayer in GST audit is crucial and involves the following responsibilities:
- Providing Access to Records and Documents:
The taxpayer is responsible for providing access to all records and documents required for the GST audit. The taxpayer must ensure that all records are complete, accurate, and comply with the GST law.
- Cooperating with the Auditor:
The taxpayer must cooperate with the auditor during the GST audit process. This includes providing necessary information and clarifications, allowing the auditor to verify physical stock, and providing access to the premises if required.
- Responding to Audit Findings:
The taxpayer has the right to respond to the audit findings and provide additional information or clarifications. The taxpayer must respond to the audit report within 30 days of its receipt.
- Rectifying Non-Compliance:
If any non-compliance or discrepancies are identified during the audit, the taxpayer must rectify them as soon as possible. This includes paying any outstanding tax liabilities, filing corrected returns, and complying with any other requirements of the GST law.
- Ensuring Compliance with GST Law:
The taxpayer is responsible for ensuring compliance with the GST law. This includes maintaining accurate records, filing timely returns, paying the correct amount of tax, and complying with all other provisions of the GST law.
In conclusion, the role of the taxpayer in GST audit is critical for ensuring compliance with the GST law and preventing tax evasion. The taxpayer must provide access to records and documents cooperate with the auditor, respond to audit findings, rectify non-compliance, and ensure compliance with the GST law. Failure to comply with the GST law may result in penalties, legal action, and damage to the reputation of the taxpayer.
Consequences For Non Compliance Under GST Audit
Non-compliance under GST audit in India can have severe consequences for taxpayers. Some of the consequences for non-compliance under GST audit are as follows:
- Penalty:
If non-compliance is identified during the GST audit, the taxpayer may be liable to pay a penalty under the GST law. The penalty may be imposed for various violations, such as non-maintenance of records, incorrect filing of returns, non-payment or short payment of tax, and non-compliance with other provisions of the GST law.
- Interest:
If the taxpayer has not paid the correct amount of tax or has paid tax after the due date, they may be liable to pay interest on the outstanding tax amount.
- Prosecution:
If the non-compliance is severe, the tax authorities may initiate prosecution proceedings against the taxpayer. This may result in imprisonment and/or fine.
- Loss of Reputation:
Non-compliance can damage the reputation of the taxpayer and affect their business relationships with suppliers, customers, and other stakeholders.
- Disqualification from Composition Scheme:
If the taxpayer is registered under the composition scheme, they may be disqualified from the scheme if they do not comply with its provisions.
In conclusion, non-compliance under GST audit can have serious consequences for taxpayers. It is important for taxpayers to maintain accurate records, file timely returns, pay the correct amount of tax, and comply with all provisions of the GST law to avoid penalties, interest, prosecution, and loss of reputation.
Frequently Asked Questions
What is the due date for filing GST audit report?
The due date for filing GST audit report is December 31st of the following financial year.
Who can conduct GST audit?
GST audit can be conducted by a Chartered Accountant or a Cost Accountant who is in practice and is authorized by the taxpayer.
Can the taxpayer object to the audit findings?
Yes, the taxpayer can object to the audit findings and provide additional information or clarifications within 30 days of receiving the audit report.
What is the duration of GST audit?
The duration of GST audit depends on the size and complexity of the taxpayer's business. It may range from a few days to a few weeks.
Can the taxpayer request an extension for filing GST audit report?
Yes, the taxpayer can request an extension for filing GST audit report by submitting an application to the tax authorities.
What are the documents required for GST audit?
The documents required for GST audit include invoices, purchase orders, bank statements, ledger accounts, GST returns, and other relevant records and documents.