All about GST Audit

CA Chinmay Gangwal , 25 February 2019  

Every Registered person whose aggregate turnover during a financial year exceeds the prescribed limit of Rs 2 crore is liable to get his account audited by Chartered Accountant or a Cost Accountant. The above prescribed limit is calculated by all India pan based turnover which includes intra state supplies, exports, interstate supplies, exempt supplies, stock transfers, etc. but exclusive of GST and compensation cess.

Eligibility for GST Audit

GST audit can be performing by a chartered accountant or a cost accountant. Only a member having a certificate of practice (COP) or a firm of chartered accountants can take up the GST Audit. Additionally, among other things a CA must keep in mind that member in part time practice (including an employee having a COP) is not entitled to perform attest function.

Audit Engagement

In case of a company, the appointment of GST Auditor should be made through a resolution of board of directors or by an officer of the company, if so authorised by the board on this behalf. In case of partnership firm or proprietary concern, the appointment can be made by a partner or the proprietor or a person authorised by the assessee. The acceptance of appointment should also be communicated in writing to the auditee.

Communication with the previous auditor-

Since the GST Audit is applicable for first time (For F.Y 2017-18), the requirement of communication with the previous auditor prior to accepting the engagement ( based on the provision of CA Act) does not arise. However, as a healthy practice, the GST Auditor may choose to communicate with the previous auditor (under the erstwhile provision of state level laws) so as to get a better insight into the auditee’s business practices. Such communication would, however, become mandatory in the subsequent years (where the retiring auditor is a chartered accountant).

Preparation for GST Audit

The GST Audit would be undertaken for the first time this year, and, therefore demands significant preparation from both the auditor and the auditee. While the statutory audit (under the Companies Act, 2013) and tax audit (under the Income Tax Act,1961) primarily rely on the financial records, the GST Audit coverage would be larger.

GST Audit Program 

Understanding the business of the Auditee:

The auditor is to be awareness about nature and complexity of the business / Operations of the auditee. When an auditee approaches a chartered accountant for the first time, he must exercise due caution in assessing how compliant the auditee is, from a GST standpoint. It may be advisable that he prepares a suitable standard questionnaire in order to become familiar with the business, modus operandi of operations, etc.

Special Attention to transactions not appearing in financial Accounts:

There are several transactions which may not appear in the financial accounts and records maintained by the registered person such as stock transfers, free samples, services received from outside India from related parties, other supplies made without consideration, etc. Due care must be exercised by the auditor to identify such transactions as there may be no direct reference to these transactions in the financial records.

 Use of Software:

It is important for auditors to be conversant with various related software. Different software tools are available for conducting an audit, and the one appropriate to the auditee must be chosen based on nature of the audit and size of the auditee. While selecting the software or software tool, the auditor must check on whether the same is updated with the latest amendments. Since the audit under the GST laws is being carried out for the first time, the auditor must be attentive to the possible errors that could arise while using the software.

Accounts and Other Records:

  1.  Every registered person shall maintain the details of input tax credit (ITC) availed, stock of goods – in Value and Quantity with description of inflow and outflow, production/manufacture of goods, inward and outward supplies of goods and / or services including imports and exports , supplies attracting tax on reverse charge, details of advances paid /received, output tax payable and paid etc. along with the relevant documents such as invoices/ bill of supply/ delivery challans/ credit notes/debit notes/receipt voucher/payment vouchers/refund vouchers.
  2. The Registered person shall also maintain the names and complete address of suppliers and recipients, and the complete address of the premises where goods are stored (including goods stored during transit). Goods found at a place, other than so declared, without a valid tax invoice could be treated as a taxable supply.
  3. The details contained in the records are expected to be true and correct. Entries therein shall not be erased/effaced/overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter the correct entry shall be recorded in the registers. In case of electronically maintained records, a log of every entry edited/ deleted shall be maintained.
  4. Such records are required to maintain at the principal place of business, and in case of additional places of business specified in the certificate, the records must be maintained in the respective places. The registered person is also permitted to maintain the records in an electronic form.
  5. Every owner or operator of warehouse/godown / other storage spaces, and every transporter, shall maintain records of the consigner, consignee and other relevant details of the goods, even if he is not a registered person.
  6. Every registered person manufacturing goods shall maintain monthly production accounts showing quantitative details of the goods so manufactured including the waste and by product thereof.
  7. A registered person supplying services shall maintain the accounts showing quantitative details of goods used in the provision of services, details of input services utilised and the services supplied.
  8. Where records are generated and maintained electronically, proper backup is to be maintained and preserved, and shall be authenticated using a digital signature. On demand by the officers, the registered person shall give the electronic record file with the password.

Submission of Audit Report:

Section 35(5) read with Section 44(2) of the CGST Act provides that the following documents shall be furnished electronically by the assessee upon conclusion of the audit:

  1. Annual Return
  2. Copy of the audited annual accounts
  3. Reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement in Form GSTR 9C, duly certified ;
  4. Such other particulars, as may be prescribed.


An Auditor is expected to exercise due and adequate care, prudence, diligence and adopt the best practices considering the complexity of each business and its surrounding circumstances.

Published by

CA Chinmay Gangwal
(Proprietor at Chinmay P Gangwal & Associates)
Category GST   Report

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