Technical Guide to Turnover-based GST Audits

by Gulshan Aggarwal Digital Marketer

Need for GST Audit and Meaning

Audits performed under the provisions and prescription of GST laws and norms are called GST Audits. These are conducted for examining and evaluating the records, returns and data prepared and maintained by a person who has registration under GST. Every taxpayer and company with a registration is required to have GST Audits by authorized person. They are important to be performed because of the following reasons-

· To verify and ensure the declared turnover by the person or the company.

· To check whether the taxes are paid accurately.

· To ensure the fairness and correctness of the amount of claimed refund.

· To verify the availed Input Tax Credits by the taxpayer.

· To properly assess the relevant compliances under the CGST Act, 2017.

GST Audits have been categorized into three types. These three types are-

· Turnover based Audit

· Normal audit/General Audit

· Special audit

Here in this article we will elaborate the audits that are based on the turnover of the company or the taxpayer.

Also Read: GST Audit Documentation Requirements

Turnover-based Audit under Section 35(5) of CGST Act:

As per Section 35(5) of the Central Goods and Services Act, 2017, when the annual turnover or threshold of a registered taxpayer or company exceeds the amount of Rupees Two Crores in a financial year, then they are liable to get their accounts and statements properly audited by a cost accountant or chartered account for that particular year. Such audits are called turnover-based GST Audits.

Items included in Turnover Calculationcal:

The following items are included while making the calculations of the turnover for the GST Audits-

· All the supplies either inter-state or intra-state that are taxable.

· Supplies that are not covered under the applicable reverse charge.

· Value of all the zero-rated supplies and exports.

· All the levied taxes other than the ones that are covered under the Goods and Services Tax. Thses include entertainment taxes etc.

· All the supplies that have been exempted under the law.

· Supplies regarding job workers and agents made on behalf of the principal.

· Goods that have been received or supplied on principal to the job worker to principl basis.

· Supplies made between the separate verticals of business.

Items excluded in Turnover Calculation:

The following items are excluded while making the calculations of the turnover for conducting the GST Audit Sevice-

Goods that have been received back from or supplied to the job worker.
Inward supplies for which taxes have been paid under the reverse charge mechanism.
Activities other than supply of goods or services and are prescribed as per the Schedule III of the CGST Act, 2017.
All the cess and taxes that have been levied under the Goods and Services Tax like CGST, SGST, UTGST or IGST and compensation cess.

Calculating the Aggregate turnover:

The formula for calculating the turnover for the Turnover-based GST Audit is as follows-

Aggregate Turnover = Value of all taxable (inter-state and intra-state) supplies + exempted supplies + export supplies of all goods and services