The Goods and Services Tax (GST) is integral to India’s tax system because it ensures all states’ taxes are identical. Following the rules, you could avoid fines, interest charges, and legal attention. Businesses of all kinds need to meet goals and keep clear records. The GST for franchises has changed the way taxes are handled in India in a big way. For businesses of all kinds, though, following its complicated rules and laws can take time and effort.
Why Do You Need a GST Audit, and What Does It Mean?
Records, reports, and other papers a GST-listed person keeps are reviewed as part of a GST audit. It also ensures that the amount of sales reported, refunds claimed, taxes paid, input tax credits claimed, and other things that must be checked for compliance with the GST Act are right. A qualified expert should do this.
GST for franchise businesses is a trust-based tax system. It means that each user has to figure out their tax bill, pay it, and make a report. The user needs a strong audit system to estimate his tax burden correctly. The government implements several steps to ensure appropriate GST implementation, with auditing being one of them.
What Kinds of GST Audits Are There?
Within a poll done in June 2022, 37% of companies said they spent a lot less time on goods and services tax (GST) regulations than before GST. The GST Act of 2017 mandates that audits can target Indian individuals who are appropriately registered and earn over five crores in a financial year. These people must have a professional inspector, such as a Chartered Accountant or a CMA, check their accounts. Under GST, there are two types of audits, which are:
Professionals Must Do a Mandatory GST Audit
As per Section 35(5) of the GST Audit rules, any registered user with an annual income of Rs. 5 crores or more must have a specialised chartered accountant audit their books of accounts and tax reports. After that, as instructed by the commissioner, a verified copy of these reviewed accounts and a balance statement must be sent through the assistance centers in form GSTR 9C.
Special Audit by Tax Authorities
Under Section 66 and Rule 102 of the GST Audit Rules, an authorised officer can get help from a CA or CMA during the auditing process. The type of business and its complexity determine this. The authorised person may ask for a more in-depth check-in Form GST ADT-03 if they think the credit amount exceeds the usual limits. As soon as the order is passed, a professional CA or CMA will examine the books of accounts and other records of a licensed supplier for ninety days.
Elements of GST Compliance
Businesses in India must carefully follow GST for franchise business rules because not doing so can lead to serious legal effects like fines and penalties. There are a few essential parts of GST compliance that all Indian businesses must follow:
GST Registration Compliance
Businesses earning above a specific threshold each year must register for GST for franchise as mandated by law. When businesses register, they receive a unique GSTIN (Goods and Services Tax Identification Number). Use this number when making tax returns as required by law. Businesses registered for GST can charge customers taxes and pay taxes on the goods their customers buy. GST also lets companies claim ITC, which lowers their tax bills.
Compliance with GST Tax Invoices
Companies must now issue GST-compliant receipts for all their sales and purchases to comply with the GST tax invoice requirements. For all deals to be transparent, all bills must carry important information like GSTIN, HSN codes, the GST rates, and the total amount involved. If a business needs to claim the Input Tax Credit, which will reduce its tax on the goods or services it buys, its invoices have to be accurate.
Make Sure You File Your GST Return
GST reports, such as GSTR-1 (for sales), GSTR-3B (for tax bills), and GSTR-9 (annual return), must be filed regularly by businesses. Filing returns correctly and on time is the only way to ensure you follow GST returns rules. Also, it avoids fines or legal problems. Companies can keep track of their tax responsibilities. They can ensure they are making payments on time.
The Process of GST Audit
The objective of an audit is to confirm that the taxpayer’s self-assessed tax debt is correct and to detect errors or instances of noncompliance. Auditors also help identify non-taxpayers and ensure that businesses pay the right amount. In a GST audit for franchise business, the process usually follows the following steps:
- Choice of auditor: The client should choose either a Chartered Accountant or a Cost Accountant to perform the GST audit.
- Papers and record checking: The auditor will go through and check all the taxpayer records, such as his books of accounts, his bills, tax returns prepared by him, and others.
- Errors: The auditor will then communicate to the customer any errors or noncompliance issues they may find in the audit process and will recommend action to rectify the mistakes.
- The audit report shall be submitted: Once the audit process is completed, the auditor shall prepare Form GSTR-9C, which, together with reviewed books of account, will be submitted to tax authorities and other related papers.
Penalties for Not Following the Rules in a GST Audit
A GST audit identifies mistakes before they escalate into more significant issues. A GST audit helps you spot errors in your financial records. Businesses can lose a lot of money if they don’t follow the rules for GST for franchise audits. If you follow the rules, good things can happen. You could get in trouble for the following:
- Fine: A fine of ₹10,000 could be levied in case of failure to follow the GST rules.
- Under-Reporting Tax: A company that reports less tax than it should will have to pay extra fines, which can be very high.
- Wrong Input Tax Credits Claim: You may end up paying more fines in this because the tax authorities will scrutinise your accounts.
- Interest charges: The businesses that owe money will be charged interest and the fees they should pay.
These fines can hurt a company’s funds and image. Businesses need to know and follow the GST audit rules. If they do, they can escape these fines and keep a good name in the market.
Also Read: How to Get Hindustan Petrol Pump Franchise – Here Are All the Details
Conclusion
Businesses in India need to know about the different checks allowed by GST rules. These GST franchise audits are crucial for ensuring that the GST system is followed and everyone is held responsible. The taxpayers will ensure their records of all business transactions are correct.
Failure to comply with the provisions of the GST law may result in extremely severe penalties such as fines, imprisonment, or other punishments. Stay on top of GST compliances with CaptainBiz.
FAQs
What is a GST Audit?
If a registered taxpayer’s sales are more than Rs. 2 crore in a financial year, his books must be checked by a chartered or cost accountant every year. A financial year runs from April of one year to March of the following year.
What do you need to do to follow GST?
GST compliance means following the rules and laws in the Goods and Services Tax (GST) law. This includes registering on time, sending out correct bills, making timely returns, and keeping notes correctly.
What are the new GST rules for 2025?
Once April 1, 2025, people with an AATO of 10 crore or more will have to post their e-invoices to the Invoice Registration Portal (IRP). That is within 30 days of the invoice being issued.
What’s new in GST apps these days?
The newest trends in GST for franchise business accounting software include AI solutions. These solutions run in the cloud and have tools that work in real-time. They also have features that make it easier to follow the rules. These new ideas make it easier for businesses to follow GST rules and make them more efficient.
What is the future of GST?
The government is always trying to streamline the GST tax system. They do so by reducing the number of tax bands and making the tax rates more reasonable. This will make it easier for people to follow the rules and improve the tax system.
