GST Annual Audit Under Section 35(5): Who Must Get It Done & What It Covers
- shubhamtulsian05
- 1 day ago
- 3 min read
GST audit has undergone significant changes since the regime was introduced in 2017. Initially, all registered persons with turnover above ₹2 crore were required to get their accounts audited by a CA and submit Form GSTR-9C with a CA's certificate. This requirement was subsequently modified — and understanding the current position is essential for businesses planning their year-end compliance.
Current Legal Position on GST Audit
Section 35(5) amendment: Section 35(5), which required a mandatory GST audit by a CA for taxpayers with annual turnover above ₹2 crore, was omitted by the Finance Act 2021 with effect from 1st August 2021. This means the mandatory CA audit for GST is no longer required under Section 35(5).
GSTR-9C — now self-certified: GSTR-9C (the reconciliation statement) is still required for taxpayers with aggregate annual turnover above ₹5 crore, but it is now self-certified by the taxpayer themselves — not certified by a CA. This is a significant reduction in mandatory compliance cost for many businesses.
What remains mandatory: Filing GSTR-9 (annual return) by 31st December for all registered taxpayers with turnover above ₹2 crore; and filing GSTR-9C (self-certified reconciliation) for those with turnover above ₹5 crore.
When Does a CA-Certified GST Audit Still Happen?
Departmental GST audit (Section 65): The GST department itself can conduct an audit of any registered person through its officers — this is separate from the statutory audit and can happen regardless of turnover.
Special audit under Section 66: If the GST officer, during scrutiny or departmental audit, finds complexity in accounts or suspects undervaluation or ITC manipulation, they can direct the taxpayer to get their accounts audited by a CA nominated by the Commissioner.
Voluntary CA engagement: Many businesses continue to engage CAs for GST reconciliation and GSTR-9/9C preparation even though self-certification is now permitted — the complexity of the reconciliation and the risk of errors that can trigger departmental scrutiny make professional assistance valuable even when not mandatory.
What GSTR-9C Reconciliation Covers
Turnover reconciliation: Financial statement turnover vs GST turnover as declared in GSTR-1 — adjustments for advances, credit notes, exempted supplies, and non-GST supplies.
Tax rate-wise analysis: Breakup of taxable turnover at different rates (5%, 12%, 18%, 28%) reconciled with GSTR-1 declarations.
ITC reconciliation: ITC as per books of accounts vs ITC claimed in GSTR-3B vs ITC available in GSTR-2B — any differences must be explained and ITC reversal adjustments documented.
Tax payable vs tax paid: Final reconciliation confirming no tax is outstanding based on the audited figures.
Common GST Audit Findings That Lead to Demands
Revenue recognised in books but not declared in GSTR-1: Due to timing differences, invoices raised in the last month of the financial year sometimes appear in the next year's GSTR-1 — acceptable if within the amendment window, but must be disclosed in GSTR-9.
ITC in books exceeding GSTR-2B: A recurring issue where purchase book entries don't match GSTR-2B due to supplier non-filing or incorrect invoice details.
RCM liability not accounted in books: Services received from unregistered vendors, import of services, or residential rent payments subject to RCM often missing from books.
Exempt or non-taxable supplies incorrectly classified: Creating an incorrect proportion for Rule 42/43 ITC reversal calculations.
How PGT & Associates Can Help
PGT & Associates provides complete GSTR-9 and GSTR-9C preparation services — including full-year GST reconciliation, ITC health checks, turnover matching with financial statements, and self-certified GSTR-9C filing. We also represent clients during departmental audits under Section 65 and special audits under Section 66. Contact us at +91-87994-99189.
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