GST Audit Limit Guide for Taxpayers with Turnover Above 2 Crores

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.

Conducting the GST Audit: Essential Documentation and Process

To conduct a comprehensive GST audit, an auditor reviews critical records, including:

  • Sales and stock registers
  • Purchase records and expense ledgers
  • Input tax credit (ITC) records
  • Output tax details
  • e-Way bills and e-Invoices, where applicable

The auditor also verifies communications with the GST department and reconciles the values in GSTR-9 with audited financials.

Annual Return and GSTR-9C Filing

For taxpayers above the specified turnover threshold, GSTR-9C must accompany the annual return (GSTR-9). Although GSTR-9C self-certification is permitted for turnovers above Rs. 5 crore post-2021, it still plays an important role in ensuring compliance.

Filing Requirements:

  • Regular taxpayers: GSTR-9 and GSTR-9C (if turnover exceeds Rs. 2 crore).
  • Composition scheme taxpayers: GSTR-9A.
  • E-commerce operators: GSTR-9B (pending implementation).

Timeline for Submission

The GSTR-9 and GSTR-9C forms are generally due by 31st December of the subsequent financial year. However, this deadline may be extended by CBIC notification as needed.

Navigating GST audit requirements, especially for businesses with turnovers exceeding Rs. 2 crore, requires understanding the latest regulations and staying compliant with statutory obligations. By familiarizing yourself with the GST audit process and compliance requirements, businesses can avoid penalties and ensure accuracy in their GST filings.

For more detailed guidance, consult Certicom Group’s expert team, experienced in helping businesses manage GST audits and related financial requirements efficiently

Related Post

image

GST Audit Limit Guide for Taxpayers with Turnover Above 2 Crores

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…
image

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees The Union Budget 2024 brought a notable shift for salaried employees with the introduction of Form 12BAA,…
image

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide Non-Resident Indians (NRIs) are defined under the Foreign Exchange Management Act (FEMA) as Indian citizens residing abroad for…

Book A One To One Consultation Now
For FREE

How can we help? *

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees

The Union Budget 2024 brought a notable shift for salaried employees with the introduction of Form 12BAA, a new tax form issued by the Central Board of Direct Taxes (CBDT). Form 12BAA is designed to enable employees to report details of taxes paid on non-salary income directly to their employers. This initiative is intended to simplify tax calculations and optimize cash flow for salaried individuals by ensuring that all Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) are accounted for accurately.

What is Form 12BAA?

Form 12BAA provides a structured way for employees to declare taxes paid on income sources outside of salary. Unlike previous forms, this new form specifically captures non-salary income details, allowing employees to offset TDS and TCS from other sources against TDS on their salary income.

Non-salary income sources covered in this form include:

  • Earnings from fixed deposits
  • Commissions from insurance policies
  • Dividends from equity investments
  • TCS collected on large expenditures, such as car purchases or foreign currency transactions.

By sharing this information with their employer, employees help ensure a more accurate TDS calculation on salary, potentially easing cash flow issues. This development is part of the government’s effort to streamline tax credit claims and minimize the need for refunds by enabling employers to consider all TDS and TCS payments when calculating tax on salary.

How Does Form 12BAA Benefit Employees?

Employers typically calculate TDS on salary based on employee-provided information regarding investments and deductible expenses. However, TDS and TCS from other income sources have not previously been factored into this calculation. With Form 12BAA, employees can now declare these other tax credits, which may reduce the total tax withheld from their salaries, resulting in improved cash flow and increased disposable income.

Introduced on October 1, 2024, this new reporting form allows employees to report non-salary TDS or TCS to their employer. It’s worth noting, however, that while the form must be submitted to the employer, there is currently no specific method prescribed for how employees should communicate these details.

Structure of Form 12BAA

Form 12BAA requires employees to provide detailed information about TDS and TCS payments, including:

  • TDS Details:

    • Section under which tax was deducted
    • Name and address of the deductor
    • TAN of the deductor
    • Amount of tax deducted
    • Amount received or credited
 
  • TCS Details:

    • Section under which tax was collected
    • Name and address of the collector
    • TAN of the collector
    • Amount of tax collected

This level of detail aims to ensure that employees can accurately reflect the TDS and TCS on non-salary income, which their employers can then incorporate when calculating salary-based TDS.

Form 12BA vs. Form 12BAA: What’s the Difference?

While Form 12BAA deals with non-salary income reporting, Form 12BA is the form used by employers to disclose perquisites and other benefits provided to employees earning above Rs 1,50,000 annually. These perquisites may include items like rent-free accommodation, contributions to superannuation funds, or travel expenses. Employees with a salary under Rs 1,50,000 need not worry about Form 12BA, as the details in ‘Part B’ of Form 16 cover the necessary information.

Budget 2024: Enhancements in TCS and TDS Provisions

During the 2024 Budget presentation, Finance Minister Nirmala Sitharaman highlighted the necessity of including TCS credits when calculating salary TDS. This amendment aims to reduce the compliance burden on employees by allowing a more comprehensive calculation of tax obligations, minimizing refund claims and easing the tax filing process.

Form 12BAA, combined with the updated provisions in Budget 2024, provides employees with an efficient way to disclose all TDS and TCS paid, improving their overall tax compliance experience and ensuring they receive the full benefits of their eligible tax credits.

As we move forward, Form 12BAA will play a crucial role in simplifying tax deductions for employees, empowering them to optimize their finances with greater transparency and ease.

Related Post

image

GST Audit Limit Guide for Taxpayers with Turnover Above 2 Crores

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…
image

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees The Union Budget 2024 brought a notable shift for salaried employees with the introduction of Form 12BAA,…
image

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide Non-Resident Indians (NRIs) are defined under the Foreign Exchange Management Act (FEMA) as Indian citizens residing abroad for…

Book A One To One Consultation Now
For FREE

How can we help? *

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide

Non-Resident Indians (NRIs) are defined under the Foreign Exchange Management Act (FEMA) as Indian citizens residing abroad for employment, business, or other reasons, with the intention of an indefinite stay. For tax purposes under the Income Tax Act, 1961, an individual’s residential status is determined based on physical presence in India, resulting in three classifications: Resident, Not Ordinarily Resident (NOR), and Non-Resident (NR). Each classification carries unique tax implications for income earned in India and abroad.

1. Determining Residential Status Under the Income Tax Act

  • Resident: Individuals who stay in India for 182 days or more in a financial year qualify as Residents and are taxed on their global income.
  • Not Ordinarily Resident (NOR): Individuals who have been non-resident for 9 of the last 10 years or have stayed in India for less than 730 days in the preceding 7 years. NOR status incurs tax on Indian income and partly on foreign income if connected to a business in India.
  • Non-Resident (NR): Those who do not meet Resident criteria and are taxed only on income accrued or received in India.

2. Taxable Income Based on Residential Status

  • Global Income: Resident individuals are taxed on worldwide earnings.
  • Indian Income: NORs and NRs are taxed on income that accrues or is received in India, including gains from business activities controlled from India

3. Deemed Residency for High Earners

Indian citizens earning over INR 15 lakh (excluding foreign income) are deemed residents if not taxed elsewhere. This applies since FY 2021-22 and includes Indian residents in tax-exempt jurisdictions.

4. Categories of Taxable Income for NRIs

 

  • Salary Income: Salary for services rendered in India is fully taxable, regardless of where it is received.
  • Income from House Property: Taxable if property is located in India, with allowable deductions for property maintenance and loan interest.
  • Rental Income: NRIs renting out Indian property face a 30% TDS, and tenants must submit Form 15CA and, in some cases, Form 15CB.
  • Business Income: Income from an India-based business or profession is taxable.
  • Capital Gains: Gains from selling Indian assets, such as real estate or shares, are subject to capital gains tax, with potential deductions for reinvestment under Sections 54 and 54EC.

5. Exempt Income for NRIs

 

  • NRE Account Interest: Interest on Non-Resident External (NRE) accounts is tax-free.
  • Specified Bonds and Deposits: Certain bonds and foreign currency deposits with scheduled banks enjoy tax exemptions.
  • Offshore Banking Unit Interest: Interest from deposits in Offshore Banking Units is also tax-exempt.

6. Deductions and Exemptions Available to NRIs

  • Section 80C Deductions: NRIs can claim deductions for life insurance, principal repayments on home loans, children’s tuition, ULIPs, and ELSS investments.
  • Section 80D for Health Insurance: Deductions for health insurance premiums, including policies covering family and dependents.
  • Section 80E for Education Loans: NRIs can claim interest deductions on loans for higher education for themselves or dependents.

7. Special Provisions and Considerations for NRIs

  • TDS on Property Sales: TDS applies at 20% for long-term gains from property sales, with possible exemptions for reinvestment.
  • Eligible Bond Investments: Certain government bonds allow capital gains exemptions under Section 54EC.
  • Restrictions on Investments: NRIs cannot invest in Public Provident Fund (PPF) or National Savings Certificates (NSC).

Related Post

image

GST Audit Limit Guide for Taxpayers with Turnover Above 2 Crores

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…
image

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees

New Form 12BAA Issued by CBDT to Report Non-Salary Taxes Paid by Employees The Union Budget 2024 brought a notable shift for salaried employees with the introduction of Form 12BAA,…
image

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide

Tax Compliance for NRIs Under the Income Tax Act, 1961: A Guide Non-Resident Indians (NRIs) are defined under the Foreign Exchange Management Act (FEMA) as Indian citizens residing abroad for…

Book A One To One Consultation Now
For FREE

How can we help? *