GST Audit Process and Its Impact on Your Business

Posted In | Finance | Accounting Software | India Accounting Tax

The Goods and Services Tax (GST) is a comprehensive tax system that has been implemented in India to replace the multiple taxes levied by the central and state governments. GST has made the indirect tax system more efficient and streamlined, leading to increased compliance and reduced tax evasion. As part of the GST regime, businesses are required to undergo a GST audit to ensure that they are complying with the provisions of the GST law. In this article, we will discuss the GST audit process and its impact on your business.

 

What is a GST Audit?

A GST audit is a systematic examination and verification of a taxpayer's records, returns, and other documents to ensure that they are complying with the GST laws and regulations. The objective of the audit is to assess the accuracy of the taxpayer's self-assessed tax liability and to identify any discrepancies or instances of non-compliance. The audit process also helps in detecting tax evasion and ensuring that the right amount of tax is being paid by businesses.

 

Who is required to undergo a GST Audit?

As per the provisions of the GST law, the following taxpayers are required to undergo a GST audit:
 

1. Businesses with an annual aggregate turnover exceeding INR 2 crores in a financial year are required to get their accounts audited by a Chartered Accountant or a Cost Accountant.
    

2. Taxpayers who have opted for the composition scheme under GST are also required to get their accounts audited if their turnover exceeds the specified limit.
    

3. Businesses that are subject to a special audit as ordered by the tax authorities.
    

GST Audit Process

The process of a GST audit typically involves the following steps:
 

1. Appointment of an auditor: The taxpayer needs to appoint a Chartered Accountant or a Cost Accountant to conduct the GST audit.
    

2. Verification of documents and records: The auditor will thoroughly examine and verify the taxpayer's records, including books of accounts, invoices, returns filed, etc.
    

3. Identification of discrepancies: If any discrepancies or instances of non-compliance are identified during the audit, the auditor will discuss them with the taxpayer and provide recommendations for rectification.
    

4. Filing of the audit report: Upon completion of the audit, the auditor will prepare and submit the GST audit report (Form GSTR-9C) along with the audited financial statements and other relevant documents to the tax authorities.
    

Impact of GST Audit on Your Business

The GST audit process can have several implications for your business, including the following:
 

• Compliance with GST laws: A GST audit ensures that your business is adhering to the provisions of the GST law, which can help you avoid penalties and interest for non-compliance.
   

• Improved accuracy of tax liability: The audit process helps in identifying any discrepancies in your tax liability, which can lead to the payment of the correct amount of tax and prevent potential disputes with the tax authorities.
   

• Detection of tax evasion: The GST audit can help in detecting tax evasion by identifying instances of under-reporting or over-reporting of tax liability.
   

• Better financial management: The audit process provides an opportunity for businesses to review their financial records and improve their accounting and record-keeping practices, which can contribute to better financial management.
   

The GST audit process is an essential aspect of the GST regime, ensuring that businesses comply with the law and pay the correct amount of tax. By understanding the audit process and its impact on your business, you can prepare effectively and ensure that your business maintains a high level of compliance with the GST law.