GST Audit Limit Guide for Taxpayers with Turnover Above 2 Crores

The due date for filing GSTR-9 and GSTR-9C forms is December 31.

The Finance Act, 2021 brought significant changes to GST audit requirements, particularly impacting businesses with higher turnovers. While previously, taxpayers with an annual turnover of Rs. 2 crores or more had to submit GSTR-9C certified by a Chartered Accountant (CA) or Cost Accountant (CMA), this mandate was lifted, shifting to self-certification for turnovers above Rs. 5 crore, as confirmed by the 43rd GST Council meeting in May 2021. These updates were later notified by CBIC in Notification No. 29/2021 – Central Tax, dated 30th July 2021. Let’s explore the GST audit process and its various types, providing clarity for businesses navigating these regulations.

Understanding GST Audit and Its Importance

A GST audit entails a thorough examination of financial records, returns, and other documentation maintained by a GST-registered taxpayer. The purpose is to verify the accuracy of reported turnover, tax payments, refunds claimed, and input tax credit availed, ensuring compliance with the GST Act. As GST is a self-assessed tax system, a well-structured audit mechanism serves as a crucial check to verify the taxpayer’s self-assessed tax liability.

Types of GST Audit

GST audits fall into three main categories:

  1. Turnover-Based Audit:

    • Conducted by a Chartered Accountant or Cost Accountant appointed by the taxpayer.
    • Required for businesses with an annual turnover exceeding Rs. 2 crore as per Section 35(5) of the CGST Act.
    • Although the audit requirement was relaxed for turnovers above Rs. 5 crore in the Finance Act, 2021, the original threshold of Rs. 2 crore remains applicable for certain audits.

  2. General Audit:

    • Conducted by the Commissioner of CGST/SGST or an officer authorized by them.
    • Initiated by an official order, typically issued with a 15-day prior notice to the taxpayer.

  3. Special Audit:

    • Ordered by the Deputy/Assistant Commissioner with prior approval from the Commissioner.
    • Performed by a Chartered Accountant or Cost Accountant nominated by the Commissioner when a detailed, specialized examination is warranted






Turnover-Based Audit Details

Under Section 35(5) of the CGST Act, businesses with an annual turnover exceeding Rs. 2 crore must have their accounts audited by a Chartered Accountant or Cost Accountant. This turnover is calculated on a PAN basis, covering the aggregate value of all taxable, exempt, and export supplies, excluding certain elements like reverse charge supplies. For businesses with multiple GST registrations across states, the cumulative turnover across all branches under a single PAN is considered.

Key Elements in Aggregate Turnover Calculation:

  • Includes all taxable supplies, exempt supplies, and exports.
  • Excludes reverse charge inward supplies, GST-related taxes (CGST, SGST, IGST), and certain non-taxable activities under Schedule III of the CGST Act.

GST Audit Eligibility and Auditor Qualifications

Only Chartered Accountants or Cost Accountants are authorized to perform GST audits. Notably, an internal auditor of a company cannot serve as its GST auditor, and GST practitioners are not permitted to conduct GST audits. If an organization operates multiple branches across states, the aggregate turnover across these branches determines GST audit applicability, regardless of individual branch turnover. 

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