GST Audit Checklist

The GST Audit Checklist is an essential tool for businesses to ensure compliance with the requirements of the Goods and Services Tax (GST) regime in India. This comprehensive guide will provide you with all the necessary information and steps to follow while conducting a GST audit, helping you avoid any potential issues or penalties. We will cover various types of audits, key aspects to consider, and the importance of maintaining accurate records, among other essential topics.

Types of GST Audits

There are three primary types of GST audits that businesses need to be aware of:

1. Turnover-based Audit

A turnover-based audit is applicable when a GST registered business has an annual turnover exceeding Rs. 2 crores from the sale of goods or services in a financial year. In such cases, the taxpayer must appoint a Chartered Accountant or Cost Accountant to conduct the audit.

2. General Audit

A general audit is initiated by the Commissioner of CGST/SGST or an authorized officer on their behalf. This type of audit is conducted when there is an order from the Commissioner, and the taxpayer is given a minimum of 15 days prior notice.

3. Special Audit

A special audit is initiated by the Deputy or Assistant Commissioner with prior approval from the GST Commissioner. In this case, a Chartered Accountant or Cost Accountant is appointed by the Commissioner to perform the audit.

GST Audit Checklist: Key Aspects to Consider

To ensure a smooth and efficient GST audit, businesses should follow this comprehensive GST Audit Checklist:

1. Reconciliation with GSTR-1, GSTR-3B, and GSTR-2A

It is crucial to cross-verify the monthly or quarterly returns filed in GSTR-1, GSTR-3B, and GSTR-2A with the books of accounts. This step helps ensure that the financial statements are consistent with the GST returns and that the Input Tax Credit (ITC) claimed is accurate.

a. Accurate ITC

Reconciling GSTR-3B with GSTR-2A helps ensure that the taxpayer is not claiming excess ITC. If any excess ITC is identified, the taxpayer must pay interest and penalties as prescribed.

b. Amendment in GSTR

In case of any discrepancies between GSTR-3B and GSTR-2A, the auditor must direct the management to amend the invoices at summary levels in GSTR-1 by filing GSTR-1A.

2. Taxes on Reverse Charge Mechanism (RCM)

Ensure that GST payable on supplies covered under the Reverse Charge Mechanism (RCM) is paid in cash. ITC for these transactions can be availed in the same month. The auditor must verify whether taxes on RCM have been paid correctly.

3. Interest on Late Payment of GST

Calculate the interest on late payment of GST at 18% p.a. The auditor must ensure that the interest has been deposited timely by the taxpayer. If excess ITC is claimed, the interest payment at 24% on the excess tax amount is required.

4. Reversal of Input Tax Credit for Non-payment within 180 Days

Verify that the difference between the date of the invoice of supply and the date of payment does not exceed 180 days. ITC must be reversed for non-payment of the invoice within 180 days, and the auditor should check this aspect carefully.

5. Requirement of E-Way Bill

Ensure that an E-way bill was issued when required and that it tallies with the invoices issued. Verify if any goods were sent on approval basis, exceeding the time limit of 6 months, and not offered to tax.

6. Matching GST Audit Turnover with Income Tax Turnover

Ensure that the turnover reported under GST and Income Tax is consistent, as both departments will exchange information. Proper reporting of turnover under both tax regimes is crucial to avoid discrepancies and potential penalties.

7. GSTIN-wise Audit

GST Audit is applicable when the total turnover on a PAN India basis exceeds Rs. 5 crores in a financial year. However, the GST Audit is conducted GSTIN-wise. This includes all supplies made, either from one location or multiple branches, while checking the turnover for GST audit purposes.

8. Stock Transfer

For businesses with multiple branches, stock transfers among branches must be reconciled. The stock held as per books of accounts and the GST annual return must be the same. Stock transfers outside the state are considered as supplies under GST.

9. Bifurcation of ITC Availed

The ITC must be bifurcated into purchases and different types of expenses like Freight, Employee’s cost, Bank charges, Capital Goods, etc. From the Profit and Loss Account, expenses can be identified easily and should be classified under proper heads.

10. Other Points to Consider

• Verify that the payment amount is equal to the invoice amount, including GST. In case of short payment, ITC must be reversed to the extent of the shortfall.
• Check whether the applicable rates have been charged on both inward and outward supplies.
• Identify any supplies, either inward or outward, that contain exempted supplies.
• If there is any data gap, the auditor should inform the taxpayer.

Importance of Accurate Record-Keeping

Maintaining accurate records is crucial for businesses to ensure a smooth GST audit process. Proper record-keeping helps avoid discrepancies and potential penalties, as well as assists in identifying any areas of non-compliance. Businesses should ensure that all relevant documents, such as invoices, e-way bills, and tax returns, are readily available for the auditor to review.

Conclusion

The GST Audit Checklist is an invaluable tool for businesses to ensure compliance with the requirements of the GST regime. By following the steps outlined in this guide and maintaining accurate records, businesses can avoid potential issues and penalties, ensuring a smooth auditing process. With proper planning and attention to detail, navigating the complexities of the GST audit process becomes a manageable task for businesses of all sizes.