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Technical guide on GST Audit

Posted on 06 June 2019,    
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Introduction to GST Audit

Reference to the Central Goods and Services Act, 2017 (CGST Act, 2017), wherever stated, must be understood to mean and include the respective State Goods and Services Tax Act, 2017/ Union Territory Goods and Services Tax Act, 2017 (SGST Act, 2017 / UTGST Act, 2017) and relevant provisions, where required, of Integrated Goods and Service Tax Act 2017(IGST Act, 2017). While every care has been taken to include the relevant Rules, certain portions may have to be read and understood along with Rules framed with respect to the respective State / UT / IGST legislations.


The introduction of the Goods and Services Tax regime is a revolutionary step in the domain of commodity and services tax, which has brought about a paradigm shift in the methodology of levy and collection of taxes. It is an internationally recognized multipoint tax system, providing for levy of tax on goods as well as services on the value addition occurring at every stage of business activity. Today, it can be said that the GST, being a self-assessment tax,requires the introduction of audit procedures for ensuring its proper compliance.

The audit of accounts in Corporate Sector has been made compulsory by legislation over decades. In addition to the above, the specific legislations governing different types of entities also mandates audit under the respective statutes. Realizing the importance of audit of businesses which are essentially not governed by the Companies Act or any other special statutes, the Income-tax Act introduced audit of businesses that have crossed the turnover limit provided in Section 44AB of the Income-tax Act. This has always helped the Government to ensure its statutory compliance under the provisions of the Income Tax Act.

Under the Central Excise Act, 1944 and Service Tax law (vide Finance Act, 1994), special audit was prescribed under Section 14A and 14AA of Central Excise Act, 1944 and Section 72A of Finance Act, 1994. Special Audit was required to be conducted by a Chartered Accountant or a Cost Accountant in cases where the Commissioner of Central Excise had reasons to believe that the credit of duty availed of and utilized under the rules are not within normal limits or that there is a case of under valuation. However, there was no general provision for audit by Chartered Accountants based on the turnover limit.

Goods and Services Tax was introduced to consolidate most of the indirect taxes and also to increase the tax base with emphasis on compliance. At the same time, thrust was given to self-assessment processes whereby the taxpayers are required to assess their tax liability and pay taxes. While doing so and considering the challenges which the government may face in  handling the volume of taxpayers and transactions, technology support has been taken right from the time of its introduction.

In the self-assessment regime, it becomes essential to have checks and balances to protect the revenues’ interests. The existing bureaucratic machinery would certainly be better placed if professionals are roped in. Because of this, the Government always looks for professional help. Invariably, they take the help of trained Chartered Accountants who are experts in accounting, statutory provisions, financial transactions, etc., and being a part of the Institute of Chartered Accountants of India set up by an Act of Parliament. This time, in addition to the Chartered Accountants the Government has also sought the help of Cost Accountants for the same.

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