What is GST Departmental Audit? And How to be Prepared for it?

GST Audit is the process of looking at a taxable person’s records, tax returns, and other papers. The goal is to make sure that all GST rules are followed, sales are reported, taxes are paid, claims for refunds and input tax credits are valid, and taxes are paid.

The GST law calls for three different kinds of audits: the Statutory GST Departmental Audit, the Special Audit, and the Independent Audit. Everything you need to know about them is in Audit under GST.

This article will talk about the GST departmental audit and what you can do to do a better job with it.

What is GST Departmental Audit?

Section 65 and Rule 101(3) of the GST Audit Rules say that the commissioner or an officer he has authorised can do a GST audit with the help of a team of officers and officials to check the details of a registered person’s “records” and “books of account.”

When the GST audit is over, the authorised officer has 30 days to send FORM GST ADT-02 to the registered person with the results, the person’s rights and obligations, and the reasons for the results. If the authorised officer finds that the registered taxpayer did something wrong, like taking or using ITC in the wrong way, they can follow the steps in section 73 or section 74 of the GST Audit Rules.

6 Key Points to Keep in Mind for a GST Departmental Audit

  1. Prior Notice: The Audit Officer (AO) needs to send a Prior Notice in Recommended Form at least 15 days (or as soon as possible) before the proposed visit, asking for documents and information like returns, books of accounts, agreements, invoices, and details of tax payments and returns filed under other acts like Income Tax, Professional Tax, and others.
  2. Location of Audit: The audit will always have to happen at the location of the company.
  3. Documents: The person who is registered must give the Audit Officer a copy of the documents that they have signed themselves. This could be different in each case.
  4. Liability: If returns aren’t filed or are wrong, the audit officer will figure out how much is owed and use the powers the Commissioner has given him to get it back.
  5. Stock Verification: The Audit Officer can also check the stock of goods.
  6. Premise Search: The audit officer is not allowed to search the building.

How to Prepare for a GST Departmental Audit in 3 simple steps?

If you are getting ready for a GST departmental audit, there are many things you need to do. Here are some important things to remember.

  1. Keeping Track: Track the progress of audits across GSTINs, Divisions, and legal entities (in a group) by capturing all relevant details up until it goes to court. Also, give a general status of whether the audit is done, done and a SCN has been issued, or the audit is still going on. At the time of audit, it’s easy to find out what happened to all the documents that were turned in.
  2. Internal Reconciliation: In the system, there is a pre-defined checklist that helps find out which reconciliations need to be done at the time of audit. Users can upload the files and then use them during the audit.
  3. Review of All Legal Positions: Keep a record of all the tax positions and give people a way to keep track of the legal opinion or judicial precedent that led to that tax position. With the help of LMS’s automatic updates on tax positions, you can make sure that your tax positions are still valid at regular intervals.
  4. For example:
    • The sales and purchases on which GST has not been paid (GST on transactions covered under Schedule – I of the CGST Act i.e. supplies made without consideration).
    • Instances in which the wrong input tax credit was used.
    • Situations where wrongly claimed GST benefits have been used, such as asking for a refund of IGST paid on exports that are covered by Rule 96(10) of the CGST Rules.
  5. GST Know-How: The company’s entire portfolio is recorded and kept in one place. This includes information about the company’s products, applicable taxes, tax rates, exemption notifications, capital goods, whether reverse charge applies, how tax credits are taken, etc. It helps the company’s representative or registered person learn about the company’s overall GST position and get ready to talk to the GST Officer.

Because the GST Rules have changed a lot over the years, businesses need to be ready for departmental audits and court cases that fall under the GST umbrella. They also need to know every little detail that is needed. It’s also important to keep and track the information, data, and documents related to audits, since they could have a big effect on the organization’s management, operations, and even its ability to stay in business.

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