How Does an Audit Work Under the GST Regime?



A GST Audit is performed to ensure the correctness of a professional’s reported turnover, taxes paid, and input tax credit claimed. Previously, all enterprises with a yearly revenue of more than 2 crores were required to produce financial audit reports. However, Finance Bill 2021 eliminated this provision, and a mandatory audit is no longer required.

What Exactly Is a GST Audit?

According to Section 2(13) of the CGST Act, 2017, an audit is an inspection of records and other documents maintained or submitted by a person or business registered under this act or any other applicable law. These include any regulations that aid in verifying the accuracy of turnover declared, taxes paid, refunds claimed, and input tax credits claimed. As a result, such audits aid in determining the registered individual’s compliance with the terms of this act or the rules promulgated thereunder. While mandated auditing is no longer necessary, alternative sorts of audits are permitted under GST.

Can Tax Authorities Conduct GST Audits?

The GST scheme places the obligation and accountability for ensuring tax compliance through self-assessment on business owners. However, different audit systems are in place to guarantee that businesses remain compliant. In some circumstances, the assistant commissioner may request an audit by a chartered or cost accountant.

In most circumstances, tax authorities request such an audit when they suspect a company has failed to submit its profits or credits on time. Such special audits enable tax authorities to use the expertise of tax specialists to determine a company’s responsibility.

Section 65 of the CGST Act of 2017 states that the commissioner or any official authorised by him by an order may audit any registered person. The authorities’ general or particular order determines the period and manner of the audit. These orders provide officers the authority to conduct audits at a registered person’s place of business or employment.

Individuals will be informed about such audits at least fifteen days before the start of the proceedings. During this audit, business owners must offer the authorities with all required facilities, including access to books of accounts and other records. Such examinations often take three months to complete. If necessary, the Commissioner may extend it to six months by providing written justification.

The registered individual must allow approved officials access to their place of business in order for their financial paperwork to be verified. Furthermore, enterprises must prepare all financial statements and books of accounts for scrutiny. During the audit, the officer will go over these financial documents and records to ensure they are in accordance with the rules.

They will also check the accuracy of the income, exemptions, refunds, and deductions claimed, as well as the ITC obtained and obligations paid. If they discover any irregularities, the officers will notify the registered individual and file the audit report within 30 days of its completion. If the registered person fails to take corrective measures as specified in the notice, the authorities will commence procedures in accordance with Sections 73 and 74. 


What You Should Know About GST Audits?

  • In most situations, the audit must be completed within three months after the audit’s start date. If the commissioner is convinced that an audit cannot be completed within three months, he or she may, for reasons to be noted in writing, extend the term by up to six months.
  • The beginning of an audit refers to the date on which the registered individual makes accessible the requisite records and other papers, or the actual initiation of audit at the place of business, whichever is later.
  • The authorised officer may request that the registered person give the necessary facility to check the book of accounts or other documents during the audit. Furthermore, they may require individuals to provide information and help in order for the audit to be completed on time.

Following the audit, the officer must notify the individual of the following details within 30 days:

  • Individual rights and obligations.
  • If the audit results in a deduction for tax that was not paid, was underpaid, was incorrectly returned, or was incorrectly claimed as an input tax credit.
  • According to Section 73 of the CGST Act 2017, it will be established whether the default was used for any cause other than fraud, deliberate deception, or suppression of facts.


Audits are critical in guaranteeing compliance and protecting the integrity of the tax system under the GST regime. Tax authorities perform GST audits to ensure the accuracy and completeness of financial statements, records, and GST returns filed by firms. The audit process entails a thorough study of the company’s records, invoices, ledgers, and other pertinent documents.

The auditor evaluates GST law compliance, discovers discrepancies or noncompliance, and may seek additional information or explanation. Based on the audit findings, the tax authorities may initiate penalties, recover overdue taxes, or conduct additional investigations. GST audits are a crucial tool for promoting transparency, accountability, and compliance with GST legislation.