What is GST auditing?

GST AUDIT REQUIREMENT:

Notification No. 29/2021 – Central Tax dated 30th July 2021

In section 35 of the CGST Act, sub-section (5) omitted w.e.f 1 st August 2021

• Compliance obligation of mandatory requirement of getting annual accounts audited and submitting reconciliation statement by specified professional removed to allow self-certification.
• Before removal of Section 35(5), every registered person whose turnover during a financial year exceeded the prescribed limit of Rs. 2 crores, was required to get his accounts audited by a chartered accountant or a cost accountant and submit a copy of the audited annual accounts, the reconciliation statement under section 44(2) and such other documents in such form and manner as prescribed in CGST Rules.

WHAT IS GST?

The Goods and Services Tax (GST) is a comprehensive value-added tax that was introduced in India in 2017. It is a indirect tax that is levied on the supply of goods and services in India. GST is applied at multiple stages of the production and distribution process, from the manufacturer to the consumer.

GST replaces several indirect taxes, such as the VAT, service tax, and excise duty, and creates a single, unified tax system for the country. GST is applicable to all goods and services, except those that are specifically exempted by the government.

GST is collected by the government at each stage of the supply chain and is paid by the final consumer. Businesses are allowed to claim input tax credits on their purchases, which means that they can offset the GST paid on their inputs against the GST collected on their sales. This helps to reduce the burden of tax on businesses.

GST is administered by the Central Board of Indirect Taxes and Customs (CBIC) and is implemented by the state governments. GST is collected by the central and state governments in equal proportions, and the revenues are shared between them.

Multi-stage taxation

A product goes through multiple stages before it is consumed by the end-user. These stages are similar to those of a supply chain.

For instance, the supply chain of a product involves the following stages:

• Purchase of raw materials
• Manufacturing of a product,
• Selling the product to a wholesaler and then to a retailer
• Sale to the end consumer

GST is levied on each stage mentioned above, which makes it a multi-stage tax.

Destination-based Tax

GST is levied at the point of consumption of goods or services. For instance, if a product is manufactured in West Bengal and is sold to an end consumer in Karnataka, then GST will be levied and collected by the Government of Karnataka and not West Bengal.