Unit 4 GST
Unit 4 GST
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.
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.
TYPE FORM
Regular taxpayer of India who is filing GSTR 1 as well as GSTR 3B Form GSTR-9
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:
• 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.
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.
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.
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:
o 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
o 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
o Any other examination notified by the Government, on the recommendation of
the Council, for this purpose; or
o 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:
o pass an exam conducted by the GST Authority and
o complete it within one year from the implementation of GST.