India’s 2021 federal budget (Finance Bill 2021) has proposed changes to the audit regime for goods and services taxes (GST) to ease the burden on businesses. The amendment calls for removing the mandatory requirement to audit GST accounts annually and submitting reconciliation statements prepared by chartered accountants and cost and management accountants.
The GST audit process involves examination of records, returns, and other documents maintained by a GST-registered person. It ensures accuracy of the turnover declared, taxes paid, refund claimed, input tax credit availed. It also involves assessment of other such compliances under the GST Act by an authorized expert.
The Finance Bill 2021 seeks to make changes to the Central Goods and Services Tax (CGST) Act 2017 to streamline audit obligations.
The proposed amendment relates to the turnover-based audit as specified in Section 35(5) of the CGST Act, 2017.
The other types of audits namely General Audit specified U/S 65 and Special Audit U/S 66 of the said Act will not be affected.
It has been reported that the decision to this effect was already taken by the GST Council in March 2020. It was, however, stalled due to the outbreak of COVID-19 and the subsequent lockdowns.
According to officials quoted in various news outlets, this proposed amendment will help over 10 million firms save audit fees amounting to approximately INR 300 billion (US$4.09 billion) annually. They also note that it could reduce the compliance burden and, consequently, help expand the GST base.
The 2021 Finance Bill, which is intended to give effect to the financial proposals of the federal government’s budget for FY 2021-22 is still listed for introduction, consideration, and passing. These provisions will come into force only after the bill is passed.