ICAI seeking a withdrawal of the Budget proposal to remove mandatory annual audit under GST
The Institute of Chartered Accountants of India (ICAI) is a statutory body established by an Act of Parliament, viz. The Chartered Accountants Act, 1949 for regulating the profession of Chartered Accountancy in the country. The Institute, functions under the administrative control of the Ministry of Corporate Affairs, Government of India.The CA Institute has now approached the Prime Minister and the Finance Minister seeking a withdrawal of the Budget proposal to trash the mandatory annual audit and reconciliation statement certification by aChartered Accountant (CA)in respect of Goods and Services Tax (GST).
What do you mean by audit under GST?
Audit under GST means inspection of returns, records and other documents furnished by the taxpayer. GST Audit is carried out to check whether the turnover, taxes paid, ITC refund claimed and ITC availed mentioned in his annual report are true and fair or not. Moreover, a GST audit also helps in evaluating whether the taxpayer is compliant with the GST provisions.
The Types of Audit under GST are as follows:
- Turnover based audit – It is carried out when the aggregate turnover of the taxpayer exceeds the prescribed limit by a CA (Chartered Accountant)or CWA (Cost and Work Accountant)appointed by the taxpayer
- General Audit – It is carried out after the order is passed by the commissioner by a CGST or SGST commissioner or any other person authorized by them.However, it is important to give 15 days prior notice.
- Special Audit – It is carried out after the order is passed by the deputy or assistant commissioner after the prior approval of GST commissioner by a CA or CWA appointed by the commissioner
What form is required to be submitted for audit under GST?
Every registered person whose aggregate turnover exceeds Rs 5 crore shall get his accounts audited as specified under section 35(5) and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C for the said financial year, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.
Who can be appointed as a GST Auditor?
- Only a Chartered Accountant or a Cost Accountant can perform a GST Audit u/s 35.
- An internal auditor cannot parallelly be appointed as a GST Auditor.
- The GST Act does not allow a GST practitioner to perform the audit. The power to audit is granted only to a Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants.
- Therefore, a Chartered Accountant must not be registered as a GST practitioner for the purpose of issuing the Audit Report.
What amendment is proposed by Budget 2021 w.r.t annual audit under GST?
- In an apparent business-friendly move,GST audit requirement by specific professionals such as CAs and CMAs has been removed from the GST law.
- Section 35 and 44 were amended for this.
- It has also empowered the commissioner to exempt a class of taxpayers from filing of annual returns.
- As per the amendment, only GSTR-9-annual returns on a self-certification basis needs to be filed on the GST portal by taxpayers, completely removing the requirement for GSTR-9C -reconciliation statement.
- However, the financial year and date of applicability of this removal are yet to be clarified by the government.
What is the contention of ICAI?
- This Budget proposal has left the Chartered Accountants fraternity in a state of shock, prompting the ICAI to demand a rollback of the move.
- As per source-based information, CA Institute has sought a rollback of this proposal and a formal representation was made to PMO and Finance Ministry about 4-5 days ago.
- According to ICAI, removal of GST audit should not be seen as one perspective of ease of doing business.
- Doing away with GST audit will be a retrograde step as it would create greater problems for society in days to come if there is no concept of maker checker.
- The audit fraternity has through various audits been instrumental in arranging over Rs 20,000 crore of additional taxes flow to the exchequer.
- GST audit helps in prevention and early detection of disease. When CA’s do reconciliation audit, they look at 20 different things from compliances point of view.
- That will not be done if Budget proposal goes through. Maker checker concept will not exist.
- It was unfortunate that Finance Bill 2021 sought to do away with GST audit irrespective of the size and turnover of the entity.
- To comment that the audit continues to the compliance cost might be true, however for withdrawing GST audit for the case of all the entities might not be answerable he said.
It is now open to see whether the government reconsiders the decision to withdraw the GST audit or not.