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Technical Guide on GST Audit by ICAI

Technical Guide on GST Audit by ICAI

The introduction of the Goods and Services Tax regime is a revolutionary step in  the domain of commodity and services tax, which has brought about a paradigm shift in the methodology of levy and collection of taxes. It is an internationally recognized multipoint tax system, providing for levy of tax on goods as well as services on the value addition occurring at every stage of business activity. Today, it can be said that the GST, being a self-assessment tax, requires the introduction of audit procedures for ensuring its proper compliance.

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The audit of accounts in Corporate Sector has been made compulsory by legislation over decades. In addition to the above, the specific legislations governing different types of entities also mandates audit under the respective statutes. Realizing the importance of audit of businesses which are essentially not governed by the Companies Act or any other special statutes, the Income-tax Act introduced audit of businesses that have crossed the  turnover  limit provided in Section 44AB of the Income-tax Act. This has always helped the Government to ensure its statutory compliance under the provisions of the Income Tax Act.

Under the Central Excise Act, 1944 and Service Tax law (vide Finance Act, 1994), special audit was prescribed under Section 14A and 14AA of Central Excise Act, 1944 and Section 72A of Finance Act, 1994. Special Audit was required to be conducted by a Chartered Accountant or a Cost Accountant in cases where the Commissioner of Central Excise had reasons to believe that the credit of duty availed of and utilized under the rules are not within normal limits or that there is a case of under valuation. However, there was no general provision for audit by Chartered Accountants based on the turnover limit.

Goods and Services Tax was introduced to consolidate most of the indirect taxes and also to increase the tax base with emphasis on compliance. At the same time, thrust was given to self-assessment processes whereby the taxpayers are required to assess their tax liability and pay taxes. While doing so and considering the challenges which the government may face in 

handling the volume of taxpayers and transactions, technology support has been taken right from the time of its introduction.

In the self-assessment regime, it becomes essential to have checks and balances to protect the revenues’ interests. The existing bureaucratic machinery would certainly be better placed if professionals are roped in. Because of this, the Government always looks for professional help. Invariably, they take the help of trained Chartered Accountants who are experts in accounting, statutory provisions, financial transactions, etc., and being a part of the Institute of Chartered Accountants of India set up by an Act of Parliament. This time, in addition to the Chartered Accountants the Government has also sought the help of Cost Accountants for the same.

Meaning of Audit in General

Audit is a subject with which members of the accountancy fraternity are familiar. Auditing is a systematic and independent examination of the books and records of an entity to ascertain  and report on the facts regarding its financial operations and results thereof. The systematic and independent examination of the books and records may be limited to transactions and performances of an entity for a stated purpose, say audit under GST. Such an audit may be conducted to ascertain whether they present a true and fair view of the financial transactions vis-a-vis returns filed with the authorities. This compulsory audit is intended to ensure proper maintenance of books of account and other records, in order to reflect the true turnover and purchase of a dealer and also to reflect the correctness of input tax claimed and output tax paid, to facilitate the administration of tax laws for his further assessment.


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