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GST Annual Audit – A Complete Guide (Latest & Updated)

The Goods and Services Tax (GST) law mandates transparent reporting and verification of financial records to ensure the correctness of tax paid and compliance with statutory requirements. One of the most important compliance requirements under GST is the GST Annual Audit, which applies to businesses crossing a specified turnover threshold and ensures that GST returns match the books of accounts.

This article provides a complete, step-by-step, practical guide on GST Annual Audit, covering eligibility, statutory requirements, reconciliation, documentation, and key mistakes to avoid.

1. What is GST Annual Audit?

GST Annual Audit is the independent examination of a registered taxpayer’s GST records, returns, and books of account to verify:

  1. The correctness of turnover declared.
  2. Taxes paid and refunds claimed.
  3. Input tax credit (ITC) availed and utilized.
  4. Compliance with the provisions of the GST Act and Rules.

It ensures that the figures reported in monthly/quarterly returns (GSTR-1, GSTR-3B) match with the audited financial statements.

2. Who is Required to Get a GST Audit Done?

As per amendments in the Finance Act, GST Audit by a CA/CMA is no longer mandatory from FY 2020-21 onwards.

However, taxpayers must file:

  • GSTR-9 (Annual Return) – mandatory for businesses with turnover above Rs. 2 crore.
  • GSTR-9C (Reconciliation Statement) – self-certified by the taxpayer if turnover exceeds Rs. 5 crore.

No external auditor certification is required now, but a detailed reconciliation is still mandatory.

3. Forms Applicable for GST Annual Audit

Turnover (FY)Forms to FileAuditor Certification Required
Below 2 croreOptional GSTR-9No
2–5 croreGSTR-9 mandatoryNo
Above 5 croreGSTR-9 + GSTR-9CNo (self-certification)

4. Breakdown of GSTR-9 (Annual Return)

GSTR-9 consolidates the entire year’s details reported in various GST returns.

Sections in GSTR-9

  1. Basic Details
  2. Details of outward supplies
  3. Input tax credit details
  4. ITC reversals as per Rules 42 & 43
  5. Tax paid during the year
  6. Transactions of the previous year reported in the current year
  7. Other information: demands, refunds, HSN, late fees

5. Breakdown of GSTR-9C (Reconciliation Statement)

GSTR-9C reconciles:

  • Audited financial statements
  • With GST returns

Parts of GSTR-9C

  1. Basic details
  2. Reconciliation of turnover
  3. Reconciliation of tax paid
  4. Reconciliation of ITC
  5. Auditor’s recommendation (now self-certification)

6. Step-by-Step Process of GST Annual Audit

Step 1: Verify Turnover

  • Compare turnover as per books, GSTR-1, and GSTR-3B.
  • Identify differences in B2B, B2C, exports, exempt supplies, and advances.

Step 2: Check Output Tax Liability

  • Rate-wise verification.
  • Review credit and debit notes.
  • Ensure RCM liabilities are reported correctly.

Step 3: Input Tax Credit Verification

  • Match GSTR-2B with books and GSTR-3B.
  • Reconcile ineligible ITC (Rule 42/43).
  • Check ITC on capital goods, RCM, imports.

Step 4: Reconcile Books with GST Returns

  • Match revenue, purchases, expenses, ITC, and tax payments.

Step 5: Verify Refunds and Demands

  • Refund claims filed and sanctioned.
  • Pending tax demands, if any.

Step 6: Prepare Adjustments

Adjust for:

  1. Unreported invoices
  2. Tax rate mismatches
  3. Excess or short ITC
  4. RCM unpaid liabilities
  5. Previous year amendments

Step 7: Finalize GSTR-9 and GSTR-9C

  • Complete auto-populated details.
  • Fill missing fields (HSN, ITC, adjustments).
  • Self-certify and file using DSC/EVC.

7. Mandatory Documents for GST Annual Audit

  1. Audited financial statements
  2. Trial balance
  3. GSTR-1, GSTR-3B, GSTR-2B for all months
  4. Sales register and purchase register
  5. Expense ledger
  6. Output tax working
  7. ITC calculation sheet
  8. Reconciliation statements
  9. Credit notes and debit notes
  10. E-way bills summary
  11. RCM liability details
  12. Fixed asset register
  13. Refund orders/sanction letters

8. Common Mistakes in GST Annual Audit

  1. Mismatching turnover between books and GSTR-1.
  2. Not reconciling ITC with GSTR-2B.
  3. Incorrect classification of zero-rated/exempt supplies.
  4. Ignoring ineligible ITC.
  5. Non-reporting of RCM liabilities.
  6. Not reporting previous year transactions captured in current year.
  7. Wrong HSN summary.
  8. Missing ITC reversals as per Rule 42/43.

9. Due Dates for GST Annual Audit

  • The due date to file GSTR-9 and GSTR-9C is 31st December following the end of the financial year.
  • Extensions, if any, are announced through notifications.

10. Penalties for Non-Filing of GSTR-9 / 9C

For GSTR-9 Late Filing

  • Rs. 200 per day (100 CGST + 100 SGST)
  • Maximum: 0.5% of turnover

For GSTR-9C

  • No specific penalty, but general penalty of Rs. 25,000 may apply.

11. Practical Tips for Smooth GST Annual Audit

  1. Begin reconciliation early (from April onwards).
  2. Maintain month-wise ITC and outward supply matching file.
  3. Ensure vendor compliance to avoid ITC mismatches.
  4. Cross-verify e-invoices, e-way bills with books.
  5. Keep documentation organized year-round.

12. Conclusion

GST Annual Audit is essential to ensure accurate tax reporting and statutory compliance. Although CA/CMA certification is no longer mandatory, the complexity of GST makes reconciliation a crucial yearly requirement. Proper record-keeping, timely reconciliations, and understanding of GST rules help avoid penalties and ensure smooth compliance.

Businesses must treat GSTR-9 and GSTR-9C as the final opportunity to correct discrepancies and maintain transparency in their GST reporting.

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