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- Key Highlights
- Abbreviations and the Full Forms used in this Content
- GST Audit Limit: A Guide for Taxpayers with Annual Turnover Above 2 Crores
- Understanding the GST Audit Limit and Its Importance
- GST Audit Limit under Section 35(5) of CGST Act for Turnover-based Audit
- Understanding GST Audit Limit: Composition of Aggregate Turnover
- GST Audit Limit: Conducting GST Audit & Issuing Audit Reports
- Submission of GST Audit Report & Annual Return
- Streamlining Compliance with GST Audit
- FAQS - FREQUENTLY ASKED QUESTIONS
Key Highlights
- An audit under GST involves scrutinising records, returns, and documents maintained by GST-registered individuals or entities to verify the accuracy of declared turnover, taxes paid, refunds claimed, and input tax credit utilised.
- Audits are crucial in a trust-based taxation system like GST, helping ensure taxpayers accurately assess their tax liabilities and comply with GST regulations.
- There are three main types of GST audits: turnover-based audits performed by Chartered Accountants or Cost Accountants if turnover exceeds ₹2 crore, general audits initiated by the commissioner, and special audits appointed under orders from a Deputy/Assistant Commissioner.
- A GST audit is mandatory if the annual turnover of a taxpayer exceeds ₹2 crore, requiring an audit by a Chartered Accountant or Cost Accountant.
- Includes all taxable, exempt supplies, exports, and interstate supplies under the same PAN, excluding GST taxes like CGST, SGST, IGST, and cess.
- Only Chartered or Cost Accountants are authorised to conduct GST audits, and internal auditors cannot perform GST audits.
Abbreviations and the Full Forms used in this Content
Here's a table displaying the full forms of the abbreviations related to the Goods and Services Tax (GST) and related terms used in this article:
| Abbreviation | Full Form |
| GST | Goods and Services Tax |
| CA | Chartered Accountant |
| CMA | Cost and Management Accountant |
| CBIC | Central Board of Indirect Taxes and Customs |
| CGST | Central Goods and Services Tax |
| IGST | Integrated Goods and Services Tax |
| SGST | State Goods and Services Tax |
| UTs | Union Territories |
| GSTIN | Goods and Services Tax Identification Number |
| GSTR | Goods and Services Tax Return |
GST Audit Limit: A Guide for Taxpayers with Annual Turnover Above 2 Crores
Following the Finance Act of 2021, the mandate for GST (Goods and Services Tax) audit and the submission of GSTR-9C certified by CA/CMA (Chartered Accountant/
Cost and Management Accountant) was abolished. During the 43rd GST Council meeting on 28th May 2021, it was advised that taxpayers with an annual aggregate turnover of ₹5 crore or more may still submit GSTR-9C, but as a self-certified document. The CBIC (Central Board of Indirect Taxes and Customs) officially communicated this update in Notification No. 29/2021 – Central Tax, dated 30th July 2021.
Understanding the GST Audit Limit and Its Importance
An audit under GST means scrutinising records, returns, and documents maintained by someone registered under GST. This process verifies the accuracy of declared turnover, taxes paid, refunds claimed, and input tax credit utilised and ensures compliance with the GST Act by an authorised expert.Since GST operates on a trust-based system, taxpayers must self-assess their tax obligations, remit taxes, and file returns accordingly. Therefore, an audit mechanism is crucial to verify that taxpayers have accurately assessed their tax liabilities. The government implements various measures, including audits, to ensure the effective enforcement of the GST framework.
GST Audit Limit: Types of GST Audits
| Types of GST Audit | Performed By | When Initiated |
| Turnover-based Audit | Chartered Accountant or Cost Accountant appointed by the taxpayer | As per the CGST (Central Goods and Services Tax) Act, if the Turnover exceeds 2 crore, the taxpayer has to get his accounts & records audited |
| Normal audit/General Audit | Commissioner of CGST/SGST(State Goods and Services Tax) or any officer authorised by him | On the order of the commissioner by giving 15 days prior notice |
| Special audit | A Chartered Accountant or Cost Accountant nominated by the commissioner | On the order of the Deputy/Assistant Commissioner, with prior approval of the commissioner |
GST Audit Limit under Section 35(5) of CGST Act for Turnover-based Audit
If the annual turnover of a registered taxpayer exceeds ₹2 crore in a financial year, he/she must have his/her accounts audited annually by a Chartered Accountant (CA) or Cost Accountant. A financial year extends from April of one calendar year to March of the next. Special Note: For determining the turnover limit for the Financial Year 2017-18, a government press release dated 3rd July 2019 stated that the period will cover from 1st July 2017 to 31st March 2018, not including the first quarter of FY 2017-18. For businesses with an annual turnover under ₹5 crore, the requirement to file GSTR-9C for FY 2018-19 has been waived. Calculation of Aggregate Turnover Aggregate turnover includes the value of all taxable (both inter-state and intra-state) supplies, exempt supplies, and exports of goods and services.The calculation of total turnover is based on the PAN Card. This implies that if the turnover under a PAN exceeds ₹2 crore, all business entities registered under that GST for the PAN must undergo a GST audit for the financial year. Aggregate Turnover = Value of all taxable supplies (inter-state and intra-state) + value of exempt supplies + value of exports of goods and services + value of inter-state supplies of persons having the same PAN details Note: The formula excludes central tax, state tax, union territory tax, integrated tax, and cess.
Understanding GST Audit Limit: Composition of Aggregate Turnover
Items Included in Aggregate Turnover Calculation:
- All taxable supplies (inter-state and intra-state), excluding those on which reverse charge applies.
- Supplies made between distinct business verticals.
- Goods supplied to or received from a job worker on a principal-to-principal basis.
- Value of all exports or zero-rated supplies.
- Supplies made by agents or job workers on behalf of a principal.
- All exempt supplies, such as agricultural produce and branded ready-to-eat food.
- All taxes, excluding those under GST, like entertainment tax on movie tickets.
Items Excluded from Aggregate Turnover:
- Inward supplies where tax is paid under reverse charge.
- All taxes and cess under GST, including CGST, SGST, IGST(Integrated Goods and Services Tax) , and compensation cess.
- Goods supplied to or received back from a job worker.
- Transactions are classified as neither goods nor services under Schedule III of the CGST Act.
GST Audit Limit: Qualifications and Eligibility of GST Auditors Eligibility Criteria for GST Auditors: Only a Chartered or a Cost Accountant is authorised to conduct a GST Audit under Section 35. Important Points to Consider:
- An internal auditor cannot simultaneously serve as a GST Auditor.
- The GST Act restricts GST practitioners from conducting audits. Only Chartered or Cost Accountants practising independently or employed by a firm are empowered to perform GST audits. As such, a Chartered Accountant involved in the audit must not be registered as a GST practitioner when issuing the Audit Report.
- For entities with multiple branches registered under GST across various states or UTs(Union Territories), the combined aggregate turnover of all branches is considered when determining the ₹2 crores threshold for GST audit applicability. If the total turnover across all branches exceeds ₹2 crores, a GST audit must be conducted for each branch, regardless of individual branch turnover below this limit. Entities may choose to appoint one auditor for all branches or individual
GST Audit Limit: Conducting GST Audit & Issuing Audit Reports
Appointment of GST Auditor A proprietor, partner or Board of Directors in case of a Company should appoint a GST Auditor at the beginning of the financial year. Accounts to be Reviewed by GST Auditor The following are crucial accounts or records for review:
- Sales Register
- Stock Register
- Purchase Register and Expenses ledgers
- Input tax credit availed and utilised
- Output tax payable and paid
- E-way bills generated during the period under Audit if in compliance with rules.
- Any documents that record communications from the GST department relating to the year.
Forms for Annual Return and GST Audit Limit
| Type of taxpayer | Form to be filed |
| Whether or not applicable to GST Audit | |
| A Regular taxpayer filing GSTR 1 and GSTR 3B | GSTR-9 |
| A Taxpayer under the Composition Scheme | GSTR-9A |
| E-commerce operator | GSTR-9B |
| Applicable for GST Audit | |
| Taxpayers whose turnover exceeds ₹2 crores in FY | GSTR-9C |
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 the GST audit. Taxpayers can settle taxes as recommended by the auditor in Form DRC-03.
Submission of GST Audit Report & Annual Return
The finalised GSTR-9C can be certified by the same CA that conducted the GST audit, or it can also be certified by any other CA that did not conduct the GST Audit for that particular GSTIN (Goods and Services Tax Identification Number). The auditor or certifier must:
- Confirm whether all requisite accounts or records are maintained.
- Verify whether financial statements are prepared according to the books of accounts maintained at the taxpayer's principal or additional place of business.
- Certify the accuracy of the information in GSTR-9C.
- List the audit observations, reservations or comments, if any.
Documents to be Furnished by the Taxpayer
- Audited financial statements (which are 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 GSTR-9 and GSTR-9C are due on or before 31st December of the subsequent fiscal year. The due date can be extended through a CBIC notification.
Streamlining Compliance with GST Audit
Understanding thresholds, requirements, and compliance strategies is crucial for navigating the complex landscape of GST audits. These audits, critical for verifying financial honesty and accuracy in tax declarations, play a significant role in maintaining the tax system's integrity. Businesses can use a GST calculator to estimate liabilities accurately and stay prepared for audits. By adhering to updated regulations and preparing meticulously, businesses can ensure they meet all legal obligations effectively.
FAQS - FREQUENTLY ASKED QUESTIONS
What is the purpose of a GST audit?
The GST audit aims to verify the correctness of turnover declared, taxes paid, refund claimed, and input tax credit availed by taxpayers. It ensures compliance with the GST laws and helps in maintaining accurate tax records.
Who is required to file a GST annual return?
All taxpayers filing returns under GSTR-1 and GSTR-3B must file an annual return using GSTR-9. However, taxpayers under the Composition Scheme should file GSTR-9A, and e-commerce operators must file GSTR-9B when it comes into effect. Typically, these documents should be submitted by December 31st of the following fiscal year.
What is true about the turnover limit for mandatory GST audits?
The turnover limit for a mandatory GST audit is ₹2 crore. If a taxpayer's annual turnover exceeds this amount, they must have their accounts audited by a qualified Chartered or Cost Accountant.
Who is liable for GST audits?
Taxpayers whose annual turnover exceeds ₹2 crore are liable for GST audits. This includes ensuring that a Chartered or Cost Accountant audits all their financial records.
Can I use the same e-mail address, mobile number, and PAN combination for multiple registrations on the GST Portal?
You can register multiple times on the GST Portal using the same e-mail address, mobile number, and PAN combination.
What documents must I furnish for a GST audit?
You must provide audited financial statements and an annual return using Form GSTR-9 for each GSTIN(Goods and Services Tax Identification Number),. Additionally, submit a certified reconciliation statement in Form GSTR-9C that reflects reconciled values of supplies and tax amounts. Typically, these documents should be submitted by December 31st of the following fiscal year, although this deadline may be extended based on notifications from the Central Board of Indirect Taxes and Customs (CBIC).
Who should appoint a GST auditor?
If you are a proprietor, partner, or a member of the Board of Directors in a company, you are responsible for appointing a GST auditor at the beginning of the financial year.
What should be included in the GST audit report?
The GST audit report should include whether all necessary accounts and records are maintained, if financial statements are prepared as per the books of accounts, and a certification of the accuracy of the information in GSTR-9C.
By when do I need to submit my GST audit report and annual return?
Your GST audit report and annual return are due on or before 31st December of the subsequent fiscal year.
Can the same Chartered Accountant who conducted the GST audit certify the GSTR-9C?
Yes, the GSTR-9C can be certified by the same Chartered Accountant who conducted the GST audit or another Chartered Accountant who did not conduct the audit for that particular GSTIN.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
