Understanding GST on Auditing Services

Service providers engaged in auditing, bookkeeping, and accounting advisory must be aware of the tax implications associated with their services. The Goods and Services Tax (GST) in India plays a significant role in determining whether and at what rate the service provider must charge taxes.

Eligibility for GST on Auditing Services

Whether GST is applicable to auditing services heavily depends on the service provider's registration status under GST. If a service provider is an entity registered under GST and provides services that include the monthly review of accounting data, advisory to correct errors, and ensuring error-free data, then the service falls under the major head of “Accounting, Auditing, Book-keeping Services.”

The Service Accounting Code (SAC) for such services is 998221. SAC codes are unique identifiers for different types of services for the government, acting similarly to employee IDs for organizations.

Provision of Services and GST Computation

When a registered service provider offers auditing services during the GST period, they are required to provide a GST bill. Clients can claim input tax credit (ITC) on the services availed. The service provider must upload GSTR1, mentioning the clients' GSTIN, which is reflected and verified in the GSTR2A form. Once verified, it will be shown in the credit ledger.

Credit Relief and GST Rates

For registered service providers, the provision of auditing services attracts a GST rate of 18 percent. However, if a service provider is not registered and has an annual turnover less than Rs. 20 lacs, GST is not applicable to the service.

Practical Example

Suppose a company provides accounting, auditing, and book-keeping services to its clients. If the company is registered under GST and provides services like monthly data review, advice on corrections, and ensuring error-free data from scratch, then GST is applicable to these services. The SAC code for such services is 998221, and the GST rate is 18%.

Conclusion

Understanding the applicability and computation of GST on auditing services is crucial for providing accurate and compliant services. Regular updates and adherence to the current GST regulations can ensure smooth operations and maximize client satisfaction.