If your annual turnover exceeds ₹5 crore, your business comes under the GST audit requirement.
A GST audit verifies that your returns, books, and ITC claims align with actual transactions — ensuring accuracy and compliance.

In this guide, you’ll learn who needs an audit, the documentation required, what officers review, and how to prepare for one smoothly.

What is a GST Audit?

A GST audit is an examination of your records, returns, and statements to confirm the correctness of declared turnover, taxes paid, ITC claimed, and refunds.

There are two types of GST audits:
1️⃣ Self-Audit (GSTR-9 & 9C) – filed annually by eligible taxpayers.
2️⃣ Departmental Audit – initiated by tax authorities based on risk parameters.

Who Needs a GST Audit?

• Businesses with aggregate turnover > ₹5 crore in a financial year.

• Taxpayers selected by authorities for detailed verification.

• Businesses with high refund claims or ITC utilization.

Key Documents Required for GST Audit

✅ GST returns (GSTR-1, GSTR-3B, GSTR-9, GSTR-9C).
✅ Sales and purchase registers.
✅ Input Tax Credit (ITC) ledgers and reconciliations.
✅ E-way bills and stock registers.
✅ Bank statements and payment challans.
✅ Reconciliation of turnover as per books vs returns.

Steps in the GST Audit Process

Step 1: Officer issues audit notice (Form ADT-01).

Step 2: Business submits requested records within 15 days.

Step 3: Audit conducted — on-site or desk-based.

Step 4: Officer issues audit report (Form ADT-02) with observations or demands, if any.

Common Audit Observations

• ITC claimed on ineligible items.

• Mismatch between GSTR-1 and GSTR-3B.

• Non-reversal of ITC on personal or exempt use.

• Undeclared sales or advances.

Penalties for Audit Discrepancies

• Under-reporting tax: 10% of tax due or ₹10,000 (whichever higher).

• Fraudulent reporting: 100% of tax due + prosecution in severe cases.

How to Prepare for a GST Audit

✅ Reconcile returns monthly and annually.
✅ Maintain organized digital records.
✅ Verify vendor compliance — unmatched invoices often trigger audits.
✅ Address past notices or mismatches proactively.

Conclusion

GST audits aren’t meant to intimidate — they’re meant to ensure fairness and accuracy.
When your books, returns, and ITC claims are aligned, audits can be completed without stress or penalty.

Continue reading: