Audit in gst

Audit has been defined in the CGST Act.2017 as under:
Section 2(13):“audit” means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made there under or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made there under;

GST Audit shall be conducted as per the above definitions and in accordance with provisions of GST Act and rules made there under.

This is Compulsory Audit as defined under the following provisions of the GST Laws:

Section 35(5): Every registered person whose turnover during a financial year exceeds the prescribed limit (2 Crores at present) shall get his accounts audited by a chartered accountant (CA) or a cost accountant (CMA) and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.
 

Section 44 (2) Says: Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.

The prescribed limit as per section 35 (5) is mentioned in Rule 80 (3) which says: Every registered person whose aggregate turnover during a financial year exceeds two crores rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Center notified by the Commissioner.

The annual return format i.e. GSTR 9, reconciliation statement GSTR -9C andaudit report format has already been notified.

Scope of GST audit shall be to verify: 

All taxable supplies has been included in the return.

Transaction value has been determined in accordance with valuation rules in certain specific cases as well as between related person.
Taxes has been correctly applied as per provisions of the CGST Act.
Classification of Finished goods as per applicable HSN.
Goods & services received under Reverse charge.
Whether there are purchases from composition dealers, in such case ITC is not available.
Documents on which ITC has been claimed are in compliance with rules made under GST Law.
Works contract services received by the company.
ITC reversals has been done in following cases:-
        (a) Supplier is not paid with in 180 days
        (b) input used for free supplies or gifts
        (c) input lost/stolen/destroyed/written off
        (d) Ineligible ITC as per Section 17(5)
Verification of Reconciliation statement of out ward supplies as per GSTR returns with statutory accounts.
Verification that all records as prescribed under the GST Law has been maintained

Records which are required to be maintained: 

1. Records of all input raw material/components/consumables/services/traded goods on which input tax credit has been availed.Records include invoice, debit note, credit note, receipt voucher, refund voucher , stock register etc

2. Records of Production of goods manufactured if applicable
3. Records of outward supplies- invoices, credit note, debit note , receipt voucher, refund voucher
4. Records of job work - delivery challans for sending & receiving the goods, records of scraps/rejections at job workers end, its disposal as per applicable provisions
5. Records of capital goods, dies, moulds ,jigs & fixtures provided to job worker
6. Records determining tax on outwards supplies and its discharge through input tax credit and/or by debit to cash register
7. Records of stock in respect of goods received and supplied , and such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof.


CMA Md Rehan
M. Com, ACMA
Cost Accountants
Partner at CKC LLP