What is GST Audit?

Audit under GST is the process of examination of records, returns and other documents
maintained by a taxable person. The purpose is to verify the correctness of turnover declared,
taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the
provisions of GST.

As per the CGST Act, Section 35 (5), the registered taxpayers of India whose aggregate
turnover is over ₹ 2 crores in a financial year (FY) to get their accounts book audited by an
authorised Cost Accountant or a Chartered Accountant. The taxpayer registered under GST
must submit a copy of the GST audit report, financial statements, and reconciliation
statement through Form GSTR 9C. The concerned taxpayer must submit the reports to the tax
department once in a financial year.  

It shall be noted that the GST auditing is carried out state-wise. This is the reason why a
separate GST audit is done for each unique registrations under the same Permanent Account
Number (PAN).
OBJECTIVES OF GST AUDIT
1. Examination of records, return and other documents. These records, returns and
documents might have been maintained or furnished under GST law or any other law.
2. To verify the correctness of :-
a) Turnover declared
b) Taxes paid
c) Refund claimed
d) Input tax credit availed

3. To assess auditee’s compliance with the provisions of GST Act and Rules.

Types of GST Audit :

1. Mandatory GST Audit/ Turnover based Audit (Section 35(5) Audit by professionals: This
type of audit is performed by the Cost Accountant or the Chartered Accountant
appointed/hired by the taxpayer. According to the CGST Act, this audit is conducted
when the turnover exceeds the limit of ₹ 2 crores, and the taxpayer needs to get audits for
their records and accounts.
The formula to calculate the aggregate turnover of an enterprise is as follows:-

Aggregate Turnover = Value of the taxable supplies (intrastate and interstate) + Goods
and Services export supplies + Exempt supplies
2. Normal/General GST Audit (Section 65 Audit by Tax Authorities): This GST audit is
conducted by the CGST/SGST Commissioner or any other officer accredited by them. It
is conducted on Commissioner’s order with 15 days prior notice to the taxpayer.
3. Special GST Audit (Section 66 Audit by Tax Authorities): This audit is conducted by a
Cost Accountant or a Chartered Accountant accredited by the Commissioner. It is
conducted on the order of the Assistant or Deputy Commissioner with the prior approval
of the Commissioner. 

When can a special audit be initiated?

The Assistant Commissioner may initiate the special audit, considering the nature and
complexity of the case and interest of revenue.
If he is of the opinion during any stage of scrutiny/ inquiry/investigation that the value
has not been correctly declared or the wrong credit has been availed then a special
audit can be initiated.
A special audit can be conducted even if the taxpayer’s books have already been
audited before.

Who will order and conduct a special audit?

The Assistant Commissioner (with the prior approval of the Commissioner) can order
for special audit (in writing). The special audit will be carried out by a chartered
accountant or a cost accountant nominated by the Commissioner.

What is the time limit to initiate a special audit under GST?

The auditor will have to submit the report within 90 days. This may be further
extended by the tax officer for 90 days on an application made by the taxable person
or the auditor.

Who will bear the expenses of the special audit?

The expenses for examination and audit including the auditor’s remuneration will be
determined and paid by the Commissioner.

How are the findings of the special audit dealt with?

The taxable person will be given an opportunity of being heard in the findings of the
special audit. If the audit results in detection of unpaid/short paid tax or wrong refund
or input tax credit wrongly availed then demand and recovery actions will be initiated.

Document Requirements for the Taxpayers

There are a few documents that the taxpayer has to furnish in front of the auditee for the GST
audit. These documents are as follows:-

● PAN-based Financial Audited Statements. 

● GSTIN-based Form GSTR-9 led Annual Return.
 ● Reconciliation Statement Certificate through Form GSTR 9C. The certificate should
reconcile the supplies’ value and the tax and the declared sum in Form GSTR 9
compared to the financial audited in Part A and the audited reports in Part B. 

Accounts Reviewed by an Auditor

● Sales Register

● Stocks Register

● Purchase Register

● Expenses Register

● Tax Credit/ITC utilised, available, or accounted

● Paid or payable output tax 

● Audit under GST-period generated e-bills and their compliance with the rules.

● Any communication, documents, records, or more received by the concerned GST

department during the financial year.

Due Date for Submission GST Report

The last date for the GST Audit limit and submission is 31st December of the preceding
financial year. Through the CBIC notice, the due date can be extended for the registered
taxpayers.  

Penalty for not Submitting Audit Report

As of now, there is no specific provision for the GST Audit report. However, as a penalty, an
amount of ₹ 25,000 needs to be paid to the authority. However, the penalty does not apply to
the taxpayers whose annual turnover is less than the limit of ₹ 5 crores and whose GST return
filing has been waived off in the Form GSTR 9C in FY 2018-19.  

Forms for Annual Return and GST Audit

TYPE FORM

 Regular taxpayer of India who is filing GSTR 1 as well as GSTR 3B Form GSTR-9

A Taxpayer who comes under the Composition Scheme Form

GSTR-9A

Taxpayers whose turnover annually exceeds Rs. 2 crores in a Form

Financial Year GSTR-9C
GST refund

Usually when the GST paid is more than the GST liability a situation of claiming GST refund
arises. GST refund is a process in which, registered taxpayers can claim excess amount if
they paid more than the GST liability. GST refund applies to any taxpayer upon making extra
GST payment in the form of tax, interest, penalty, fees or any others.

The cash flow and working capital requirements of manufacturers and exporters could be
adversely affected if a refund is delayed. As a result, one of the intentions of the
implementation of GST is to ensure that the refund process is smoother so that manufacturers
and exporters do not face issues due to delays. By ensuring that the refund process is
facilitated quickly, tax administration becomes more effective.

Under GST the process of claiming a refund is standardized to avoid confusion. The process
is online and time limits have also been set for the same. For the refund process, the taxpayer
shall apply through FORM GST RFD-01, as prescribed. 

As per Sec 54(1), a person claiming refund of tax or interest or any other amount paid must
file an application for refund in Form GST RFD-1 before the expiry of 2 years from the
'relevant date’. The ‘relevant date’ in each scenario of refund is given below:

● Goods exported by sea or air – Date on which the ship or aircraft in which the goods
are loaded, leaves India
● Goods exported by land – Date on which the goods pass the frontier
● Goods exported by post – Date of dispatch of goods by the concerned post office
● Services exported, where the supply of service has been completed prior to the
receipt of payment – Date of receipt of payment
● Services exported, where the payment has been received in advance, prior to the
date of issue of invoice – Date of issue of invoice
● Unutilized input tax credit – End of the financial year in which the claim for tax
refund arises

Situations that can lead to Refund Claims

The following are the most common refund rules under GST:

● Tax paid on inward supply of goods and/or services which have been exported or
on inputs or input services used in goods and/or services exported. Please note,
that if the goods are subjected to export duty, the refund will not be allowed.
● Unutilized input tax credit due to output supplies being exports or zero rated
supplies
● Unutilized input tax credit due to inverted duty structure. This is when the rate of
tax on inputs is higher than the rate of tax on output supplies. Please note, that in this
case, the refund is not applicable when supplies are NIL rated or fully exempt.

As per Section 54 of the GST Act, any of the following situations may necessitate a GST
refund application to be filed by the taxpayer:

● Exports of commodities or services

● Deemed exports
● Refund of taxes when embassies make purchases
● Supplies to developers and units in special economic zones
● Refund of accrued input tax credit on account of inverted duty structure
● Refund of pre-deposit
● Refund arising from order, judgment, direction or decree of the Appellate Tribunal,
Appellate Authority or any court of law
● Finalisation of provisional assessment
● Excess payment because of an error
● Refund due to issuance of refund vouchers for taxes paid on advances against which
commodities or services haven't been supplied
● Refunds to overseas tourists of GST paid on commodities within the country and
carried to an international location when they depart India
● Refund of SGST and CGST paid by considering the supply in the course of inter-state
commerce or trade

GST Refund Process

● Visit the GSTN portal and fill in the application form meant for claiming refund.
● You will receive an email or SMS which contains an acknowledgment number after
the filing of application is done electronically.
● The cash and return ledger will be adjusted and the "carry-forward input tax credit"
will be reduced automatically.
 ● The application for refund along with the documents you have submitted will be
scrutinised by the authorities with a 30-day period after you have filed the refund
application.
● "Unjust enrichment" is a concept that will be thoroughly scrutinised by the
authorities. In case the application qualifies, the refund will be transferred to a
Consumer Welfare Fund (CWF).
● In case the refund claimed by the individual in excess of the predetermined amount of
refund, a pre-audit process will be conducted before the refund is sanctioned.
● The credit of the refund will be done electronically to the applicant's account through
NEFT, RTGS or ECS.
● Individuals are allowed to make their applications for refund at the end of each
quarter.
● In case the amount of refund is below Rs.1000, no refund will be provided to the
individual.

GST laws have standardised procedure for processing a GST refund claim across India. The
taxpayer must file all GST refund applications online in a standardised form on the GST
Common Portal. The person shall also file returns on a monthly basis for claiming refund
amount in the credit balance. On filing a refund application, an acknowledgement for refund
application would be provided within 14 days of the refund application is acceptable.

On receiving the refund request, the concerned Officer would have to convey the status of the
application within 14 days. If there are any deficiencies in the application, the GST refund
request would be sent back to the applicant along with the list of deficiencies and the
applicant can refile the application. If there are no errors or deficiencies, the GST refund
claims, if in the order must be sanctioned within a period of 60 days from the date of receipt
of the claim. Officers are also not allowed to issue deficiencies memo after the 14 day period
during when there are required to process the GST refund application.
Interest Payable on Delayed refunds

As per Sec54(5), If the amount is not refunded to the applicant within 60 days from receipt of
application, the applicant is entitled to receive the interest @ 6% along with the refund
amount from the date immediately after the expiry of 60 days till the date of payment of GST
refund. If the claim of refund arises from an order passed by an adjudicating authority or
Appellate Authority or court, the applicant is entitled to receive the interest @ 9% along with
the refund amount from the date immediately after the expiry of 60 days till the date of
payment of GST refund.

Procedure for Filing Refund Request

Any taxpayer can claim a refund of any tax, interest, penalty, fees or any other amount paid
by him by filing an application electronically in FORM GST RFD-01 through the GST
Common Portal or through a GST Facilitation Centre. However, if a refund relates to balance
in the electronic cash ledger, the taxpayer can claim the GST refund upon furnishing the
returns for the relevant tax period in FORM GSTR-3, FORM GSTR-4 or FORM GSTR-7.

Documents Required
Statement of Relevant Invoices
For claiming GST refund, the applicant must maintain and file proper documentation. Along
with all GST refund request, a statement of relevant invoices pertaining to the claim must be
filed. As per the GST rules, the taxpayer shall maintain the invoice filed by the taxpayer for a
minimum period of 7 years.

For Export of Services

In favour of refunding export of services, the taxpayer should produce the relevant bank
realisation certificates evidencing the receipt of payment in foreign currency.

For Supplies Made to SEZ Units

If the supplier makes the claim for the GST refund to an SEZ unit, the concerned individual
shall produce an endorsement from the Proper Officer evidencing receipt of such
goods/services associated the SEZ. The process also requires a declaration from the SEZ unit
stating that input tax credit of the tax paid by the supplier remains unclaimed. However, if the
concerned individual applies only to claim a refund for the accumulated input tax credit, the
application shall include a statement containing the invoice.

Refund on Account of Judgement

In case of a claim of GST refund on account of any order or judgment of appellate authority
or court, the reference number of the order giving rise to refund should be submitted along
with the GST refund request.

Claiming Refund for Unjust Enrichment

For crossing the bar of unjust enrichment and upon claiming a refund for less than Rs.2
Lakhs, the taxpayer must submit a self-declaration stating the effect that the incidence of tax
remains unpassed passed to any other person.

Chartered Accountant Certificate

For refund claims exceeding Rs.2 Lakhs, a certificate from a Chartered Accountant or Cost
Accountant will have to be given. However, a CA or Cost Accountant certificate need not be
given if the GST claim is on account of zero-rated supplies or claim of accumulated input tax
credit or payment of wrong tax (integrated tax instead of central tax and state tax and vice
versa) or a claim where supply is not done or a refund voucher has been issued.

OFFENCES AND PENALTIES

Offences under GST and respective applicable penalties are enlisted under the CGST Act.
The provisions of offences and penalties are dealt with from Section 122 to Section 128 of
the CGST Act.
The word offence has not been defined under the Central Goods and Service Tax Act, 2017 or
under any other GST laws. As per the dictionary meaning, the word offence may mean a
crime or an illegal action, something that outrages the moral or physical senses. An offence is
a breach of a law or rule, i.e., an illegal act. Similarly, an offence under GST is a breach of
the provisions of CGST Act and the rules made thereunder.

Offences Under GST

Types of Breaches Under GST

There are two types of breaches prescribed under the GST law: minor breaches and major
breaches:
● Minor Breaches: These are the breaches in which the tax amount involved is less
than ₹5,000. These breaches include minor mistakes in filing returns such as
documentation errors and omissions. In most cases, no penalty shall be imposed for
such breaches.
● Major Breaches: These breaches involve a tax amount of ₹5,000 or above. In case
of such breaches, a penalty shall be imposed on the taxpayer - either monetary or
corporal punishment (jail term), depending upon the amount of tax involved.
There are 21 offences under GST. For easy understanding, these have been grouped
into heads as given below:
1. Wrong Invoicing
● Supply of goods/services by a taxable individual without an invoice or with a false
invoice.
● Issuance of the invoice without the supply of the goods/services.
● Using the invoice identification number of someone else.
2. Fraud
● Submission of wrong information at the time of GST registration.
● Submission of wrong financial records with an intent to evade the applicable tax.
● Not providing the required information or giving wrong information during the
proceedings.
3. Tax Evasion
● Collecting GST but not submitting the same to the government within a period of
3 months.
● Not collecting the GST in line with the provisions laid down by the law and not
submitting the same to the government.
● Obtaining CGST/SGST refund by committing fraud.
● Utilising input tax credit without actually receiving the goods/services.
● Deliberate suppression of sales with an intent to evade the tax.
4. Transport/Supply of Goods
 ● Transport of goods without proper documentation.
● Transport of goods that can be seized.
● Destroying/tampering with goods which have been seized.
5. Others
● Not registering under GST despite being required by the law.
● Not deducting TDS or deducting less TDS whenever required.
● Not deducting TCS or deducting less TCS whenever required.
● Taking or distributing the input tax credit in violation of the law.
● Obstructing the authorised GST officer when they are performing their duty.
● Not maintaining all the required books as mandated by the law.
● Destroying any evidence.

Offences under GST by Companies, LLPs, HUFs and others

For any offence committed by a company, both the officer in charge (such as director,
manager, secretary) as well as the company will be held liable. For LLPs, HUFs, trust,
the partner/Karta/managing trustee will be held liable.

Penalties under GST

What does penalty mean?
The word “penalty” is not specifically defined in GST and so it takes the meaning
from various judicial pronouncements and principles of jurisprudence. A penalty is a
punishment imposed by law for committing an offence or failing to do something that
was the duty of a party to do. A penalty can be both corporal or pecuniary, civil or
criminal. Both corporal (jail) and pecuniary (monetary) penalties are applicable under
GST.

Type of offence Amount of penalty

Penalty for delay in filing GSTR The late fee is Rs. 100 per day per Act. So
it is 100 under CGST & 100 under SGST.
Total will be Rs. 200/day. The maximum is
Rs. 5,000. There is no late fee on IGST.

Penalty for not filing GSTR Penalty 10% of the tax due or Rs. 10,000 –
whichever is higher

Penalty for committing a fraud Penalty 100% of the tax due or Rs. 10,000
– whichever is higher (High-value fraud
cases also have jail term)

Penalty for helping a person to Penalty extending up to Rs. 25,000

commit fraud

Penalty for opting for composition Demand & recovery provisions of sections

scheme even though he is not eligible 73 & 74 will apply.
 (i) Fraud case- Penalty 100% of the tax
due or Rs. 10,000 – whichever is higher
(ii) Non-fraud casePenalty 10% of the tax
due or Rs. 10,000 – whichever is higher

Penalty for wrongfully charging GST Penalty 100% of the tax due or Rs.
rate— charging a higher rate 10,000    -whichever is higher (if the
additional GST collected is not submitted
with the govt)

Penalty for not issuing an invoice Penalty 100% of the tax due or Rs. 10,000
– whichever is higher

Penalty for not registering under GST Penalty 100% of the tax due or Rs. 10,000
– whichever is higher

Penalty for incorrect invoicing A penalty of Rs. 25,000

Situations where there is no penalty (but interest may apply)

Penalty for incorrect type of GST No penalty. Pay the correct GST and get
charged (IGST instead of CGST/SGST) a refund of the wrong type of GST paid
earlier

Penalty for incorrect filing of GST return No penalty. But interest @18% on
shortfall amount

Penalty for delay in payment of invoice.  ITC will be reversed if not paid within 6
months. No penalty as such

Penalty for wrongfully charging GST Interest @18% applicable on the

rate— charging a lower rate shortfall

Penalty for short payment/tax evasion

An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e. 100%
penalty, subject to a minimum of Rs. 10,000.

Penalty for Fraud

If a person is found guilty of having committed fraud under the GST Act, they have to
pay a penalty of 100% of the tax amount, subject to a minimum penalty of ₹10,000.

Jail punishments
 GST also has corporal punishments (jail) for high-value fraud cases. In case of fraud
exceeding ₹100 Lakhs, the offender might also have to serve a jail term apart from the
applicable fine.

Penalty for Helping a Person Commit Fraud

In case a person is found guilty of helping a GST-registered business owner commit
fraud, they will have to pay a penalty of up to ₹25,000 depending upon the type of
fraud and their involvement in the same.

Minor Breaches under GST

1. Minor breaches (where tax amount is less than Rs.5000) or errors are easily
rectifiable and clearly made without any motive of fraud.
2. There will not be substantial penalties for minor breaches
3. The tax authority may issue a warning in such cases.

This will be beneficial to businesses, especially SMEs, who may make genuine
mistakes especially in the first few months of GST implementation. Being penalized
for genuine errors will be a hard blow to the SMEs who do not have as many
resources as the larger organizations to adapt to GST.

ACTIVITIES OR TRANSACTIONS TREATED NEITHER AS THE SALE OF

GOODS NOR SALE OF SERVICES
(A) ACTIVITIES OR TRANSACTIONS SPECIFIED IN SCHEDULE III
1. Services by an employee to the employer in the course of or in relation to his
employment.
2. Services by any court or Tribunal established under any law for the time being in force.
3. (a) the functions performed by the Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities and Members of other
local authorities;
(b) the duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity; or
c) the duties performed by any person as a Chairperson or a Member or a Director in a
body established by the Central Government or a State Government or local authority and
who is not deemed as an employee before the commencement of this clause.
 4. Services of funeral, burial, crematorium or mortuary including transportation of the
deceased.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and gambling.
7. Supply of goods from a place in the non-taxable territory to another place in the
non-taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption;
(b) Supply of goods by the consignee to any other person, by endorsement of documents
of title to the goods, after the goods have been dispatched from the port of origin located
outside India but before clearance for home consumption.

(B) SUCH ACTIVITIES OR TRANSACTIONS UNDERTAKEN BY THE

CENTRAL GOVERNMENT, A STATE GOVERNMENT OR ANY LOCAL
AUTHORITY IN WHICH THEY ARE ENGAGED AS PUBLIC
AUTHORITIES, AS MAY BE NOTIFIED BY THE GOVERNMENT ON THE
RECOMMENDATIONS OF THE COUNCIL, SHALL BE TREATED
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES.

Role of GST Practitioner

Goods and Services Tax (GST) has overhauled India's indirect tax regime and made doing
business easy in India. With the implementation of GST, over one crore registered enterprises
were registered under GST as a taxable person and complied with various GST compliance
requirements. To make compliance easy for businesses, the Government had introduced
various initiatives like GST Practitioners and GST Facilitation Centres.
Section 48 of the CGST Act provides for authorization of an eligible person to act as
approved GST practitioners. The manner of approval of goods and services tax practitioners,
their eligibility conditions, duties and obligations, manner of removal and other conditions
relevant for their functioning have been prescribed in rule 24 and 25 of the Return Rules.
A goods and services tax practitioner enrolled in any other State or Union Territory shall be
treated as enrolled in the State/ Union territory
Forms required by a GST Practitioner
Standardised formats from GST PCT- 1 to GST PCT-5 have been prescribed for making
application for enrolment as GST practitioner, certificate of enrolment, show cause notice for
disqualification, order of rejection of application of enrolment, list of approved GST
practitioners, authorisation letter and withdrawal of authorisation.
Role:
A registered person may authorise an approved GST practitioner to furnish information, on
his behalf, to the government. To help taxpayers with their GST compliance, Goods and
Services Tax Practitioners can undertake any or all of the following activities on behalf of a
GST taxpayer
● File GST return GSTR-1 and GSTR-2 with details of outward and inward supplies;
● File monthly, quarterly, annual or final GST return;
● Make GST payment on behalf of the taxpayer for credit into the electronic cash
ledger;
● File a claim for GST refund;
● File an application for amendment or cancellation of GST registration.
After authorization of a GST Practitioner on the GST Common Portal, the Practitioner can
complete various services. However, if an application for GST refund or an application for
amendment or cancellation of GST registration is submitted, a confirmation must be provided
by the registered person. Hence, for major changes, the registered person’s consent must be
filed along with the application on the GST common portal. Routine return filing will not
require this special confirmation.
GST Practitioner – Requirements
The following are the requirements for registering as a GST Practitioner on the GST
Portal:
 ● The applicant should possess a valid PAN card.
● The applicant should possess a valid mobile number.
● Applicant should possess a valid Email ID.
● The applicant should possess a Professional address.
● The applicant should possess all the required documents and information.
Eligibility Criteria for becoming GST practitioner:

Rule 24 of the Return rules, provides the eligibility conditions to get enrolled as GST
Practitioner for any person who
(i) Is a citizen of India;
(ii) Is a person of sound mind;
(iii)Is not adjudged as insolvent;
(iv)Has not been convicted by a competent court for an offence with imprisonment not less
than two years.

In addition, the person should also satisfy any of the following conditions: -

● A retired officer of the Commercial Tax Department of any State Government or of

the Central Board of Excise and Customs, Department of Revenue, Government of
India, who, during his service under the Government, had worked in a post not lower
in rank than that of a Group-B gazetted officer for a period of not less than two years;
or
● Has been enrolled as a sales tax practitioner or tax return preparer under the existing
law for a period of not less than five years;
● Has the following degree or qualification:
○ A graduate or postgraduate degree or its equivalent examination having a
degree in Commerce, Law, Banking including Higher Auditing, or Business
Administration or Business Management from any Indian University
established by any law for the time being in force; or
○ A degree examination of any Foreign University recognized by any Indian
University as equivalent to the degree examination having a degree in
Commerce, Law, Banking including Higher Auditing, or Business
Administration or Business Management; or
○ Any other examination notified by the Government, on the recommendation of
the Council, for this purpose; or
○ Has passed any of the following examinations, namely:
■ Final examination of the Institute of Chartered Accountants of India;
■ The Institute of Cost Accountants of India;
■ Final examination of the Institute of Company Secretaries of India.

Validity of License
● The license for GST practitioner would valid until its cancelled by the relevant
authority.
● A person holding the license shall pass the examination which the GST authority
holds and the commissioner shall notify it time to time.
● Thereafter, people who want to become GST practitioner through the sales tax
practitioner or tax return preparer route are required to:
○ pass an exam conducted by the GST Authority and
○ complete it within one year from the implementation of GST.