GST audit preparation checklist

Types of GST audit

The audit can be at your place of business or at the tax office. Time limits and procedures are in the law and rules and can change; follow the notice. This is general information, not tax advice.

Documents to keep ready

• Registration certificate, with all additional places of business.
• Returns filed: GSTR-1, GSTR-3B, GSTR-9, GSTR-9C, with acknowledgements.
• Sales register and purchase register, month-wise.
• Tax invoices, bills of supply, credit and debit notes, delivery challans, e-way bills.
• Stock registers or stock summaries, with year-end physical count.
• Electronic cash and credit ledger statements; challans paid.
• Financial statements and the income-tax audit report, if any.
• Contracts, dealer scheme circulars, job work challans, LUT, export documents.

Reconciliations to run before the officer does

1. Turnover: sales in books vs GSTR-1 vs GSTR-3B vs financial statements, month by month.
2. Output tax: GSTR-1 vs GSTR-3B; explain every difference.
3. ITC: books vs GSTR-3B vs GSTR-2B; see reconciling GSTR-2B.
4. E-way bills: total value of e-way bills generated vs sales reported.
5. RCM: expenses that attract reverse charge (GTA freight, legal fees, rent from unregistered persons where applicable) vs RCM paid.
6. Reversals: blocked credit, exempt-supply share, 180-day unpaid bills, free samples.
7. Stock: opening + purchases − sales ≈ closing, in quantity, for main items.

A worked reconciliation

The aim is a short note explaining every adjustment, so the officer sees the same number arrived at from both ends. Unexplained gaps are what turn into demands.

Questions officers commonly ask

• Why is ITC higher than GSTR-2B in some months?
• Why did tax paid in cash fall while turnover rose?
• Was RCM paid on freight, legal fees and other notified services?
• Were credit notes issued within the time limit, and was the buyer's ITC reversed?
• Was ITC on exempt supplies reversed?
• Were inter-state branch transfers invoiced?

The two weeks before the audit date

1. Read the notice: period covered, documents listed, place and date.
2. Bring your CA in early and agree who will speak for the business.
3. Complete the reconciliations above for every month in the period, not only the year totals.
4. Pull a sample of invoices, e-way bills and credit notes for the largest customers and suppliers, and check they agree with the returns.
5. List known issues honestly, with the amount involved, and decide which ones to pay before the officer raises them.
6. Arrange a desk, a printer and organised files, physical or digital, so the officer is not kept waiting.

During and after the audit

• Name one person as the point of contact and keep a log of every document handed over.
• Answer in writing with reconciliations, not just verbally.
• If an observation is correct, you can pay the tax with interest voluntarily through DRC-03, which can limit penalties.
• If you disagree, reply to the observations with reasons and evidence within the time given.
• Correct the underlying cause so the same issue does not repeat.

The common notices that can follow are covered in common GST notices.

Getting audit-ready with Cashflow OS

Most audit preparation is pulling the right reports for the right period. Cashflow OS syncs your TallyPrime data and lets you run reports for any financial year or a custom range across years: day book, ledgers, stock summaries, Profit and Loss, Balance Sheet, and GSTR-1 and GSTR-3B views with bill-wise and HSN-wise detail. Reports export to Excel and PDF for your CA. It does not represent you before the department or give tax advice.