Finalisation of Accounts with GST: The Audit Approach

Finalisation of Accounts explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

The financial statements are signed in September. The GST annual return is filed in December. Everything found in December belongs in the accounts signed in September — and by then it is too late.

"With effect from 1st August 2021, Section 35(5) of the CGST Act, 2017 was omitted by the Finance Act, 2021, thereby abolishing the mandatory requirement of GST audit by a Chartered Accountant or a Cost Accountant. However, the requirement to file the reconciliation statement in FORM GSTR-9C was retained, albeit in a modified form… reconstituted as a self-certified reconciliation statement." And: "To avoid such mistakes creeping into the audited Financial Statements, it is imperative that the auditor carries out the GST reconciliation simultaneously with the audit of the Financial Statements."

The timing problem, stated plainly

"The statutory due date for filing of FORM GSTR-9 and FORM GSTR-9C is 31st December, following the end of the financial year. The due dates prescribed for submission of audited accounts under various other statutes, such as the Companies Act, 2013, the Income Tax Act, 1961 and the Income Tax Act, 2025, are earlier than the due date prescribed under the GST Act."

"Consequently, business entities and their auditors generally finalise the Financial Statements and file the same with the Registrar of Companies… and the Income Tax authorities, before commencing the process of preparing the Annual Return and self-certified reconciliation statement under the GST Act. This approach may not be entirely appropriate, as errors of omission and commission identified during the preparation and filing of GST Annual Returns may result in material misstatements in the Financial Statements, thereby affecting the 'True and Fair' view presented therein."

And the specific failure modes: "This may result in understatement of liability or overstatement of assets due to various reasons such as liability not discharged under RCM, ineligible ITC not reversed, etc. There may also be instances where the revenue and expenses may be under or overstated."

What removing the audit did not remove

Section 35(5) is gone. Section 44 is not. "This change was effected by incorporating the requirement of GSTR-9C within Section 44 of the CGST Act, 2017, which governs the filing of Annual Returns. Accordingly, every registered taxpayer whose aggregate turnover exceeds Rs. 5 crores in a financial year is now required to file GSTR-9C as a self-certified reconciliation statement along with the Annual Return in FORM GSTR-9."

And Rule 80 still carries the machinery — sub-rule (1) requiring the annual return from every registered person "other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person", and sub-rule (3) requiring the reconciliation statement above ₹5 crore.

The proviso to section 44(1) excludes "any Department of the Central Government or a State Government or a local authority, whose books of accounts are subject to audit by the C&AG of India or by an auditor appointed for auditing the accounts of local authorities."

So the certification moved from the auditor to the taxpayer, and the reconciliation stayed exactly where it was. GSTR-9C applicability →

The twenty-one item checklist

The Handbook sets out an "illustrative list of reconciliations" — and it is worth reading as a work programme rather than a list:

Ledger balances

• Electronic credit ledger against ITC in books;
• Electronic cash ledger against GST paid in cash per books;
• GST paid in cash in the March return against payables per books;
• Refund claimed on the portal against ITC refund receivable in books;
• Refund rejected on the portal against rates and taxes in books.

Returns against books

• Turnover and output liability; ITC claimed; ITC reversed; ineligible ITC;
• Adjustments of the previous year made in subsequent GST returns.

Cross-document

• Gross turnover in books against GSTR-1; against e-way bills;
• GSTR-3B against GSTR-1; GSTR-2A/2B against GSTR-3B; GSTR-2A/2B against books;
• Reconciliation of supplier and vendor accounts.

Exposure and control

• SCN / ASMT-10 / demand orders against contingent liabilities;
• Observations of internal auditors on GST;
• Ratio analysis across branches — GP/NP rates on a quarterly basis;
• RCM, TDS and TCS compliances;
• Issuance of credit and debit notes and their treatment in books and returns;
• Whether cross-charge of certain incomes and expenditures has been made.

Three of these are not reconciliations at all. Ratio analysis across branches, internal audit observations, and the demand-order review are risk-identification steps — they tell the auditor where to look before the reconciliation is even attempted.

The structure the Handbook uses

"The approach is to review the various line items in the asset and liabilities in the balance sheet and the likely impact that GST law has on them. Similarly the revenue and expense line items in the profit and loss account is to be reviewed for compliances such as, correct rate of tax charged on outward supply, discharge of tax on advance received for services to be rendered and for receipt of certain services or goods under RCM, reversal of ineligible credits, reversal of even eligible credits due to non-fulfilment of conditions stipulated, etc."

That is the organising idea: GST is examined through the financial statement line items, not through the GST law's own sequence. Fixed assets raise section 17(5) and section 18(6); inventories raise job work and goods-in-transit; trade payables raise the 180-day rule; revenue raises time of supply and valuation.

And if the simultaneous reconciliation is impossible, the Handbook's fallback is not "skip it": "the auditor must ensure compliance with GST Act and Rules have been adhered to and chances of misstatements in the Financial Statements are not likely to be material."

Key takeaways

• Section 35(5) was omitted w.e.f. 1 August 2021 by the Finance Act, 2021 — GST audit by a CA or CMA is abolished.
• GSTR-9C survived inside section 44, as a self-certified reconciliation statement above ₹5 crore aggregate turnover.
• Rule 80(1) and 80(3) carry the annual return and reconciliation statement requirements; ISD, section 51/52 deductors, casual and non-resident taxable persons are outside the annual return.
• The GST due date of 31 December falls after the Companies Act and Income-tax filing dates — so GST findings arrive after the accounts are signed.
• The consequences are understated liability (RCM not discharged) and overstated assets (ineligible ITC not reversed).
• The Handbook's 21-item reconciliation list spans ledgers, returns, cross-documents and exposure.
• Three items are risk-identification, not reconciliation — branch ratio analysis, internal audit observations and demand-order review.
• The review is organised by financial statement line item, not by GST provision.

Read next

• Review of Fixed Assets under GST During Finalisation
• Reconciling Book Turnover with GST Returns
• GSTR-9C: Applicability, the ₹5 Crore Line, and Self-Certification

Disclaimer: Positions stated as on 5 September 2026, based on sections 35, 44 and 46 of the CGST Act, 2017, rule 80 of the CGST Rules, 2017 and the Finance Act, 2021, as reproduced in the ICAI Handbook on Finalisation of Accounts with GST Perspective (Second Edition, June 2026, updated to 31.05.2026).