GST Audit & Health Check India: Who Needs It and Who Does Not
Whether GST Audit & Health Check India applies to a given business is the first thing worth settling, and it is where most of the early questions land. The questions below are the ones raised most often in practice; the full scope of the service is on the GST Audit & Health Check India page.
Is GST audit still mandatory in India — I thought the CA certification requirement was removed?
The mandatory CA-certified GST audit under the erstwhile Section 35(5) of the CGST Act was removed by the Finance Act 2021, effective for FY 2020-21 onwards. So in that specific statutory sense, mandatory CA-certified GST audit no longer exists. However, the department retains its own audit powers under Sections 65 (General Audit) and 66 (Special Audit) of the CGST Act, which can be exercised at any time regardless of the self-certification change. "GST Audit & Health Check" as we offer it is a voluntary, advisory service — not a statutory filing requirement — designed to give you the same independent verification that the old mandatory audit used to provide.
In practice: Business owners sometimes assume that because CA certification of GSTR-9C is no longer mandatory, independent review is no longer necessary either. That is a costly misunderstanding — the self-certification requirement did not reduce risk, it simply moved responsibility for accuracy entirely onto the taxpayer.
What is Rule 42 and Rule 43 ITC reversal, and does the health check cover it?
Rule 42 governs the reversal of common input tax credit where a business makes both taxable and exempt supplies (or has some non-business use) — the credit attributable to exempt supplies must be reversed using a prescribed formula, reconciled and finally adjusted at year-end. Rule 43 applies a similar principle specifically to capital goods used partly for exempt supplies, spread over a 5-year useful life. Both rules can be missed by businesses that are not primarily exempt-supply entities but make some incidental exempt supplies (for example, renting a residential dwelling for use as a residence). Interest on deposits, loans and advances, although exempt, is excluded from the value of exempt supplies for Rules 42 and 43 except for banking companies and financial institutions including NBFCs, so ordinary interest income does not by itself trigger a reversal. Our health check specifically tests whether Rule 42/43 reversal applies to your fact pattern and, if so, whether it has been correctly computed.
In practice: Interest on fixed deposits and loans is a common point of confusion: it is an exempt supply, but for businesses other than banks, financial institutions and NBFCs it is excluded from the exempt-supply value used in Rules 42 and 43, so reversing credit on account of it overstates the reversal. Genuine exempt supplies, by contrast, do require the Rule 42/43 computation and are easy to overlook.
Does a GST health check also cover e-invoicing and e-way bill compliance?
Yes. For businesses above the notified e-invoicing turnover threshold, we verify that e-invoices carry valid IRNs and QR codes, and that the e-invoice data matches the corresponding GSTR-1 entries — a mismatch here is now flagged automatically by the GST system in many cases. For goods movement, we check e-way bill generation, validity period compliance relative to distance and vehicle type, and completion of Part B (vehicle details), since incomplete e-way bills are a common ground for detention and penalty during transit, independent of any underlying tax issue.
In practice: E-way bill Part B completion is a small, mechanical requirement that generates a disproportionate number of penalty notices in practice — usually from drivers or dispatch teams who are not aware of the requirement rather than any deliberate non-compliance.
Can PNPC help if we have already received a GST demand order and disagree with it?
Yes. Where a demand has already been raised — whether from a Section 61 scrutiny escalation, a Section 65 audit, or a direct show-cause notice — PNPC reviews the order, the underlying facts, and the legal basis for the demand, and advises on whether to pay, seek rectification, or file an appeal before the Appellate Authority under Section 107 of the CGST Act. Appeals must be filed within three months of the order (extendable by a further month for sufficient cause), along with a mandatory pre-deposit — 10% of the disputed tax amount for a first appeal in most cases. We coordinate with litigation counsel where the matter requires representation beyond the CA's scope.
In practice: The appeal limitation period is strict and the pre-deposit requirement is non-negotiable in most circumstances — clients who wait too long to engage after receiving an order frequently find the appeal window has narrowed or closed, which is why we recommend engaging immediately on receipt of any adverse order, not after deciding internally whether to contest it.
Does PNPC's health check cover TDS/TCS obligations under GST (Sections 51 and 52)?
Yes, where applicable. Section 51 TDS under GST applies to specified categories of deductors — primarily government departments, local authorities, and certain notified persons — deducting tax at 2% on payments to suppliers above the prescribed threshold. Section 52 TCS applies to e-commerce operators collecting tax at a prescribed rate on the net value of taxable supplies made through their platform by other suppliers. Where a business falls into either category as a deductor/collector, or is a supplier subject to TCS by an e-commerce operator, our health check verifies correct deduction/collection, timely deposit, and correct return filing (GSTR-7 or GSTR-8 as applicable) alongside the core reconciliation work.
In practice: This applies to a smaller group of businesses but carries significant penalty exposure for non-compliance — deductors and e-commerce operators specifically should raise this during scoping so we build the relevant checks into the engagement from the outset.
Where this sits in the wider engagement
GST Audit & Health Check India rarely arrives on its own. The statutory basis and the current requirements are set out on the GST Audit & Health Check India service page, and the related services are grouped under Audit Assurance.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On GST Audit & Health Check India we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.