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written by Khatabook | January 11, 2022

Know About GST Audit Checklist FY 2022-23

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Table of Content


The Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) acts have several audits to see that the Act's objectives are implemented. It includes checking if the GST taxes are being paid on time and also aids in verifying the declared turnover of a business, input tax credit availed or refund claimed.

GST audit turnover limit audits are implemented to ensure whether the self-assessment of tax liabilities declared by the GST taxpayers is accurate or not. The Goods and Services Act (GST) implies a trust-based taxation system and implies the taxpayer should assess their GST tax liability, file the recommended returns, and pay taxes as per the GST audit checklist. To verify the proper and accurate filing and self-assessment of the taxpayer’s tax liability, a comprehensive system of audits is specified in the GST Act.

Did you know? A Chartered Accountant or a Cost Accountant are the only individuals who can perform a GST Audit u/s 35.

What is the purpose of the GST audit?

GST audit is mandated for certain GST taxpayers. 

  • The GST audit reviews the organisation’s returns, records, and a host of other financial documents. 
  • It is meant to verify that the turnover declared is accurate and that all GST taxes are paid for FY 2022-2023. 
  • Under the GST Act, it also reviews the input tax credits claimed, refunds claimed, and other compliances (ex: filing within due date, audit if required, etc.). 
  • The audit is to be conducted, assessed and verified by an expert specified and authorised under the GST Act. For example, a Chartered or Cost Account, the Commissioner of SGST/CGST, or an officer appointed for this purpose.

GST Applicability:

The taxpayers with Goods and Services Tax Identification Number (GSTIN) have to undergo a GST Audit annually. The GST audit limit for FY 2022-22 occurs when the sale of services or goods turnover exceeds a value of ₹2 Crore in a financial year. Certain conditions that are also required to be followed are:

Businesses with a turnover not equal but lesser than ₹5 Crore must file the reconciliation statement GSTR-9C for 2022-2023 and 2021-2022. This condition has been waived. However, the FORM GSTR-9C or reconciliation statement for the financial year 2022- 2023 has to be filed by GST taxpayers with an aggregate annual turnover equal to and above ₹5 Crore.

For easy reference, the table below explains the GST applicability norms -

GST Turnover (annual)

Reconciliation Form GSTR-9C

Returns in GSTR-9

Less than ₹2 Crore

Not applicable

Optional

From ₹2 Crore and up to 5 Crore

Optional

Mandatory filing

Equal or greater than ₹5 Crore

Mandatory filing

Mandatory filing

What are the types of GST audits?

Audits based on the GST are of three types and are explained below:

Audit type

Undertaken by

Initiated by and whom

Audit based on Turnover

Cost Accountant or Chartered Account of taxpayer’s choice.

GST turnover limit for audit being equal to or more than ₹2 Crore

General/Normal Audit

SGST or CGST Commissioner or an officer deputed by them.

Initiated by SGST/CGST Commissioner after affording 15-day notice.

Special Audits

A Cost or Chartered Accountant nominated by SGST or CGST Commissioner.

Initiated by SGST/CGST Assistant/ Deputy Commissioner and with approval from the Commissioner.

Also Read: GST audit- When Are You Likely To Be Audited By Tax Officers?

Audit types:

  • Turnover-based Audits: 

The first type is the audit based on turnover. It is required when the GST turnover is equal to or exceeds the value of ₹2 Crore. The taxpayer is then required to get their records and accounts audited by a Cost Accountant or Chartered Accountant of their choice. 

  • Normal Audits: 

There is also the General Audit called the Normal Audit requirements. The Commissioner of SGST/CGST generally initiates such an audit. A 15-day notice period is mandated, and the audit is undertaken by either any officer deputed by the Commissioner of SGST/CGST.

  • Special Audits: 

Such audits are undertaken by the Assistant and Deputy Commissioner of SGST/CGST with the approval of the Commissioner of SGST/CGST. However, in such audits, a Cost Accountant or Chartered Accountant is nominated by the audit authorities, namely the Commissioner of SGST/ CGST. 

GST compliance checklist:

Another important aspect of GST returns filing is the auditor’s and taxpayer’s GST, which helps understand the statutory requirements in the GST audit checklist ICAI (Institute of Chartered Accountants of India) for auditors. The auditor must verify, check entries and ensure compliance with several items. These can be briefly summed up as below:

1. Reconciliation of GSTR 3B and GSTR 1: 

The Form GSTR 9 and Form GSTR-9C filing is to be done only after ensuring that the monthly Form GSTR-1, the quarterly returns Form GSTR-3B and the books of accounts are all synchronised.

2. Interest on GST late payments: 

The auditor is required to verify that the GST tax liability interest calculations are @ 18% p.a. and ensure that these late payments (if any) are duly deposited within the due date by the taxpayer. The auditor must also ensure that all notices issued by the GST authorities and department regarding the deposit of interest and such payments are appropriately dealt with. If any Input Tax Credit or ITC is claimed in excess, the excess tax amount is to be deposited along with an interest payment @ 24% pa. 

3. RCM or Reverse Charge Mechanism Taxes: 

The RCM GST payable taxes on supplies of services or goods under the ‘Reverse Charge Mechanism’ is to be paid in cash. Ensure the ITC for such reverse charges is availed in the month it is claimed for. The Auditor undertaking the audit has to ensure that the RCM taxes have been paid in cash and that they are availed in the month to which they are applicable.

4. E-Way Bill Requirements: 

An E-way bill issue is a statutory requirement under the GST Act. The auditor must verify that the E-Way Bills issued tally with the invoices issued. They must also check for any instance when an E-Way bill has not been issued, whether any goods are sent on an approval basis and where the approval period has crossed the 6-month limit, whether such goods have been appropriately taxed under the GST Act.

5. Non-payment of Reversal of Input Tax Credit within 180 days: 

According to GST audit turnover limit for FY 2021-22 laws, the invoice date of supply and the payment date of supplies made can be a maximum of 180-days apart. The non-payment of an invoice within 180 days mandates that the Input Tax Credit (ITC) claimed will be reversed within this time. The auditor is also required to verify that this common error in filing has not occurred, and if it is present, the reversal of ITC takes place within 180 days. 

6. ITC-availed Bifurcation: 

The availed ITC under the various purchase heads needs to be properly bifurcated and reported. For example, bifurcation into expense-kinds like the Bank Charges, Freight, Capital Goods, Cost of Employees, etc., is to be made. These are easily identified in the P&L or Profit and Loss Statement of Accounts. The auditor must verify such ITC-availed and bifurcation expenses under the proper heads.

7. Income Tax Turnover matching with GST Audit Turnover: 

Disclosing the Goods and Service Tax Turnover under the GST Act and disclosing the Income Tax Turnover under the Income Tax Act 1961 can be very confusing as both of the turnovers are different. But, these two departments work closely with each other and exchange the turnover information to cross-check and reference the same with each other. Hence, the auditor and taxpayer should ensure that they correctly report, check and verify the returns made to the GST and Income Tax authorities regarding their turnover under the GST Act and the IT Acts.

8. Transfer of Stocks: 

If any organisation has multiple branches, the inter-branch and intra-branch stock transfers across all branches need to be reconciled. This means that the GST annual return and the stock held in the accounting books are identical. Do note that the transfer of stocks outside the state even to the organisation’s branch is considered a GST supply. The taxpayer and the auditor must verify compliance with the GST supply norms.

9. Audit on turnover basis of GSTIN:

GST Audits become applicable when the ‘Total Turnover’ of goods or services supplied across India equals or exceeds ₹5 Crore for the financial year 2018-2019. Such GST Audits are undertaken based on the GSTIN and a country-wide basis. The GSTIN Turnover is verified and checked on a PAN-India basis, indicating that all supplies made include the exempted goods and services supplies made throughout India (from multiple branches or one supply point). The same is verified in the GST turnover declared during a GST audit.

10. Other important audit points:

Some additional points to be noted by the taxpayer and auditor in GST audits are:

  • In the cases where there exists a data gap or non-reconciliation in the GST checklist, the auditor is bound to inform the GST taxpayer.
  • The final amount payable is the sum of the invoice value and the GST on it. If the bill has not suffered GST taxation, the shortfall in payment (where the amount declared is less than the GST amount added to the invoice value) requires an input tax credit reversal to the value of such short payments of GST. 
  • Also, check if any inward or outward supplies have exempted supplies in them. 
  • The taxpayer also needs to check that the outward and the inward supplies are appropriately charged for GST compliance.

Also Read: All About GST Audit For Taxpayers With Annual Turnover Above Rs. 2 Crores

Conclusion

You do not need an audit if the total turnover on gross sales and receipts from business is less than ₹2 crore in any financial year. However, if your annual turnover is more than ₹5 crore, you need to adhere to the GST audit. Abide by the GST audit checklist and according to the types of audits required. We hope through this article, we have cleared your doubts regarding the GST audit turnover limit for FY 2022-23.

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FAQs

Q: What is the Form GSTR 3B used for?

Ans:

Taxpayers file Form GSTR-3B which is a self-declaration form filed monthly and along with the GSTR 2 and GSTR 1 return forms. The new simplified GST return is used to declare the summary of sales and compute the GST liabilities for the given month or tax period. Even if the turnover is zero, a form GSTR-3B must be filed and is called the nil return.

Q: What does B2B mean in GST?

Ans:

A B2B transaction is a transaction of one business to another business. Such B2B transactions involve other businesses who are also GST registered taxpayers and hence eligible to claim inward tax credits or ITC. The invoice wise B2B supply details of both inter-state and intra-state supplies are to be reflected in the monthly filing using the GSTR-1 Return.

Q: What is meant by GST outward supply?

Ans:

GST taxpayers have to declare their sales and outward supplies in Form GSTR-1. In this context, the “outward supply” means all services and goods under the GST Act that are sold, bartered, transferred, licensed, exchanged, leased, rented, or disposed of using any other mode. Such a supply of goods is declared for turnover calculation purposes, as the supply agreed to be made or actual supply made by the taxpayer during their business.

Q: What is Form GSTR-1?

Ans:

Form GSTR-1 is also called the sales-return form and is mandatory to be filed by every registered GST taxpayer. In this form, the GST taxpayers have to enter relevant details of their outward supplies and sales.

Q: What are the Form GSTR-9C limits?

Ans:

The Form GSTR-9C is required to be filed by taxpayers having a turnover equal to or exceeding ₹5 crores in the previous fiscal year. The GSTR-9C is made based on self-certification. The changed limits are applicable from the financial year 2020-2021.

Q: How many forms does the GSTR contain?

Ans:

GSTR or GST returns are forms filled by the GST taxpayer registered under the GST (Goods and Services Tax) Act. The GST laws mandate that returns are filed for every GSTIN registration the taxpayer may possess. 11 GST return forms are actively used, 8 in viewable form only and 3 GSTR forms are suspended.

Q: What is the turnover for GST audit?

Ans:

The GST audit is mandatory if the turnover limit exceeds ₹2 crores. As per the 2017 CGST Rules, Rule 80(3), every registered GST taxpayer whose total turnover aggregated during a financial year exceeds the limit of ₹2 crores has to have the accounts audited by a Cost or Chartered Accountant of their choice U/S 35(5) of the 2017 CGST Act.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.