Sec 2(13): Audit

“audit” means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder 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 thereunder;

Statutory provisions for GST audit and annual return

Section 44(1)

Section 44(1) of the Act states that “Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

Section 35(5)

Section 35(5) of the Act states that “every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant 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.”

Rule 80 (3) of the CGST Rules

Rule 80 (3) of the CGST Rules provides “every registered person whose aggregate turnover during a financial year exceeds two crore 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 Centre notified by the Commissioner.

On reading the above provisions, the applicability of GST Annual Return and Audit can be summarized as under:

  • Annual Return– Every registered person, except an ISD, the person paying TDS/TCS, casual taxable person & non-resident taxable person.
  •  GST Audit     – Every registered person with an aggregate turnover of Rs.2 crores.

Turnover and aggregate turnover

It is to be noted that Section 35(5) uses the word “turnover” whereas in Rule 80 (3) the words used are “aggregate turnover”.  CGST Act contains a definition for ‘aggregate turnover’ which is computed on all India basis. There is no definition for ‘turnover’ in the CGST Act as it defines the only turnover in a State. As wordings in section and rule are not identical, an issue may arise as to whether GST audit is required for all the GST registrations once the aggregate turnover at all India level exceeds INR 2 Crores or the turnover threshold is to be seen at registration level. If there is a registration with turnover less than INR 2 Crores, whether such registration is required to comply with GST Audit requirement is an issue requiring clarification from the authorities.

Annual Return – Additional reporting requirements

Annual Return as per Section 44 of CGST Act is to be filed on or before 31st December 2018 for the FY 2017-18. CBIC has recently notified the form for annual returns – GSTR-9 applicable to normal taxpayers and GSTR-9A applicable to taxpayers operating under composition scheme.

These forms seek details of outward supplies, inward supplies, taxes paid and credits availed besides information on demands and refunds. HSN-wise summary of outward supplies for the FY 2017-18 has to be provided in a consolidated manner.

Though these forms essentially seek to consolidate the figures/information submitted through monthly returns filed by the assessee, yet there are certain additional reporting requirements for which the assessee will have to work overtime to compile the required information. Additional data/information required in annual return which is not captured in monthly returns are:

  • HSN wise summary of inward supplies (purchases)
  • Segregation of inward supplies received from different categories of taxpayers like composition taxpayers
  • Inputs / Capital Goods / Input Services – Segregation of inward supplies
  • Particulars of the transactions for the previous FY declared in returns of April to September of current FY.