GST Audit: Top 5 Steps To Get Ready!

GST Audit Top 5 Steps To Get Ready!

While the Finance Minister extended the due date to file GSTR-9 and GSTR-9C for FY 2019-20 from 31st December 2020 to 28th February 2021, a hope for another extension is prevailing. The industry may plead or represent for a further extension, but the truth of the matter is that another extension shall only delay the process and would not in any manner provide any respite to the industry. Hence, it would be better just to get it over with!

In this blog, we have tried to enlist the top 5 to-do’s for any organisation to become ready for the fast-approaching due date.

Top 5 Steps To Be Ready

The GST Act stipulates three types of audits namely – turnover audits u/s 35 of the CGST Act, 2017, departmental audits, and special audits u/s 65 and 66 of CGST Act, 2017 respectively.

Turnover based audit is where a taxpayer needs to get his books audited by a Chartered Accountant/ Cost Accountant and submit the report in GSTR 9 and GSTR 9C.

Section 2(13) of the CGST Act, 2017 defines “Audit” as 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.

The current turnover limit for filing of GSTR 9 and 9C is INR 2 crore. Hence, any assesse whose annual turnover exceeds INR 2 crore is required to file GSTR 9 and GSTR 9C. Further, for FY 2019-20, if the turnover of a taxpayer is up to INR 5 crore, filing of GSTR 9C has been waived off. Furthermore, in terms of Section 35(5) of the CGST Act, 2017 read with Rule 80(3) of the CGST Rules, 2017, a taxpayer with prescribed turnover has to get his accounts audited and a reconciliation statement certified from a Chartered Accountant or Cost Accountant and furnish a copy of the same as required.

To stay abreast of the upcoming due date, the top 5 steps are:

Prepare a Summary

The first step in preparing for the GST audit exercise is to make summaries and statements in accordance with the format of GSTR-9 and GSTR-9C. Depending on the optional and mandatory fields, a summary for each section should be prepared. The summary should be double-checked to ensure its correctness and accuracy. Further, to prepare such a summary, the organisation needs to check if their ERPs are competent enough to give out the requested data in the required format.

Carry out the Reconciliations with Respect to Turnover, ITC & Procurements

Indisputably, the GST regime and its compliances revolve around reconciliations. As a part of the GST audit exercise, a reconciliation needs to be prepared between the GST returns filed and annual financial statements. The importance of reconciling the turnover, the ITC availed and procurements cannot be insisted upon enough. Any variations found should be deeply analysed and reasons thereof should be mentioned. This is the most gruesome and at the same time most important step of the entire GST audit exercise.

Re-assess all Tax Positions Adopted

GST audit should not be considered merely as a compliance measure. It gives an opportunity to the taxpayers to rectify any mistakes or slip-ups and gives a 360-degree view of the compliances undertaken throughout the year. Therefore, to best utilise this opportunity, the taxpayers should also re-assess the tax positions adopted by them throughout the year and validate the same with the help of the GST auditor.

Be wary of the Reporting Requirements

There are certain reporting requirements in GSTR-9 which are different from the reporting done while filing GSTR-3B and GSTR-1. Therefore, such data may not be readily available with the organisation. Hence, the tax team may have to spend some additional time and effort in collating such information. Some examples of this could be the break-up of input tax credit availed as inputs, input services, and capital goods, or HSN summary of inward supplies, etc.

Review & Discuss Comments by the GST Auditor

Once the audit exercise is complete, the GST auditor shall provide his/her comments on the correctness and accuracy of the figures stated in GSTR-9 and GSTR-9C. These comments should be addressed at the earliest; any tax dues discovered as a part of the process should be discharged with interest, any ITC not availed/ excess availed should be treated accordingly. Wherever possible, the auditor’s comments should be resolved.


The GST audit process is a time-consuming activity; especially the data collation and reconciliations. Hence, the earlier one starts, the better it becomes to close the audits within the stipulated timeline. A taxpayer must prepare and furnish GST audits for all registrations across before the due date. It should also be kept in mind that there are no provisions to revise the GST audit return as yet; this makes it all the more imperative to file accurate and correct returns to avoid any consequences. Another vital point is that the late fees for not filing GSTR 9 within the stipulated timeline are INR 100 per act, per day, i.e. 200 per day of default subject to the maximum of 0.25% of turnover.

Cygnet offers an Audit Tool that can be totally automated with your ERP Systems. It helps you with a 3-Way Reconciliation between the GL, Purchase & Sales Register, and your GSTN data. It provides insightful reports like turnover reconciliation, Missing Invoices, Unavailed and Incorrect ITC, Tax and ITC comparisons, and many more that will help you file GSTR 9C. To know more – click here.

It is often said The earlier you start, the earlier you succeed’, thus, the time to begin the GST audit exercise NOW!

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