In this article, We are going to talk about How to do “GST Audit” and “GST Audit Checklist” related documentation.
GENERAL PROVISIONS UNDER THE GST LAW WITH RESPECT TO ANNUAL RETURN UNDER GST (FORM GSTR 9) AND GST AUDIT (FORM GSTR 9C)
The provisions relating to maintenance of books and records under GST have been itinerated in Section 35(1) of the Central Goods and Services Tax Act, 2017 read with Rules 56 to 58 of the Central Goods and Services Tax Rules, 2017.
Every person registered under the GST Laws shall keep and maintain books and records in physical or electronic form, at his principal place of business.
List of documents required to be maintained include –
- Inward and outward supply of goods or services or both
- Stock of goods
- Input tax credit availed
- Output tax payable and paid
- Goods and Services imported and exported
- Supplies attracting payment of tax on reverse charge mechanism along with along relevant documents such as invoices, credit notes, debit notes, refund vouchers, bill of supply etc.
- Advances received, paid and adjustments thereof.
The above is not an exhaustive list and the registered person may have to maintain additional records and registers in support of its GST Returns, GST Payments and Input Tax Credits.
While statutory audit under Companies Act, 2013 or tax audit under Income Tax Act, 1961 primarily relies on financial records, GST-Audit would require a deep diving into transaction level information and thus would require a comparatively larger cluster of records to be verified. Moreover, each GSTIN of the registered person would need to be audited separately.
RELEVANCE AND SIGNIFICANCE OF DOCUMENTATION FOR ANNUAL RETURN UNDER GST AND GST AUDIT
Annual Return under GST and GST-Audit, requires significant amount of preparation by both, the registered tax person and the auditor.
The accuracy, completeness and correctness of the annual return under GST cannot be achieved without comprehensive documentation and information supporting the same.
When a Report is issued by a Chartered Accountant/Cost Accountant, he would obtain fair level of assurance about the correctness of the information furnished in Form 9C. GST-Audit requires deep understanding of the GST Laws, IT Infrastructure, applicability of various notification, circulars, clarifications, classification and nature of supplies, manner of availment/utilization of credit, maintenance of various records and documents specified etc.
The Assessing Officer or any other authority who is authorised to issue summons to the registered person and call for evidence or documents, can call the GST auditor who has audited the accounts to give evidence or produce documents (other than his working papers) on which he has relied upon before certifying.
If the actual work relating to the examination of books and records is done by a qualified assistant of a firm of chartered accountants and the partner of the firm signing the audit report has relied upon his work, action, if any, action for professional negligence can be initiated against the member who has signed the report and in such an event, it would be open for the member concerned to prove that he has taken due care and diligence in the performance of his duties and is not aware of any reason to believe that he should not have so relied.
If the qualified assistant (whether or not holding the certificate of practice) is found to be grossly negligent in the performance of his duties, CA Institute can take disciplinary action against the qualified assistant also.
In view of these provisions and otherwise considering the responsibility casted by the law, a strong set of documentation would serve as an evidence that the audit was planned, performed in accordance with the professional and ethical standards. Also, it would serve as evidence in case of any enquiry or scrutiny by the GST Officials or any other regulatory authority.
Thus, it is very important to maintain detailed documentation for both, the registered person preparing the annual return under GST as well as the auditor, in order to maintain the quality of the return and the audit and for complying with statutory compliance and fulfilment of various provisions of the GST Laws, as mentioned above.
To start with, the following (among others) are the various steps an auditor can take in connection with the GST audit:
- Inform the concerned taxpayer about the applicability of the GST audit especially due to change in the monetary limits
- Confirm the eligibility to be the GST auditor under the related legislation and the guidelines issued by the ICAI;
- Understand the nature of business, the products or services, require- ments of records to be maintained, and advise the auditee to maintain accounts and records so required, beforehand;
- Prepare a questionnaire to understand the operations/activities of the auditee, and specifically develop questions on those issues on which the GST law would have a bearing;
- Preparation of the detailed audit program and list of records to be verified;
Every client’s documents should be bifurcated into a permanent file and a working papers file. Generally, the following documents should be included in the permanent file:
- Name, address and contact number of the client;
- Brief profile of the client, its promoters, directors, partners etc., details of his businesses and locations of his branches, GST Registration Numbers, along with the details of the concerned persons in charge;
- A list of products/services being dealt with, the various notifications and clarifications applicable, copies of important judgments, advance ruling copies and clarification with reference to the client and products in general;
- Copies of the registration certificates issued under the GST Laws and/or other allied laws;
- Previous years signed audit reports under GST, if any
- Copies of signed financials, statutory audit report, internal audit or special audit reports etc.;
- Copies of the constitution of the organization, like Memorandum and Article of Association, Partnership Deed, Addendum to the Deeds etc.;
- Copies of the Application made for Composition Scheme or incentives or subsidies, if any;
- Details of software used, and methodology of systems and controls set up in the software
- A list of visits by various department officials, letters and notices received and replies thereof, pending litigations before various authorities and other important unresolved issues, if any.
Bearing the aforementioned general audit practices, and to ensure the completeness and accuracy of the Annual Return under GST and GST Audit, we have listed below certain important documents required for Annual Return under GST and GST Audit Checklist.
|Sr. No.||General Documentation/GST Audit Checklist|
|1||Letter of Appointment and Letter of Acceptance of GST Audit Engagement|
|2||Signed Copy of Financial Statements, along with notes, schedules, groupings, segment reports etc.|
|3||Consolidated and GSTIN wise trial balance and financial statements of registrations (if any)|
|4||List of all accounts and records maintained by the registered person|
|5||Certificate of Incorporation, Registration certificates under GST, geo- graphical presence along with Person in Charge (Principal + additional place of business)|
|6||Statutory Audit Report, Income Tax Audit Report, Cost Audit Report, Branch Auditors Report etc.|
|7||E way bill reports etc.|
|Sr. No.||Specific Documentation/GST Audit Checklist|
|1||List of products and services along with HSN Classification and rates|
|2||Filed returns and base workings GST Returns (GSTR-1, GSTR-3B, GSTR 7, GSTR 7A, GSTR 8, TRAN-1, TRAN-2, ISD, ITC-04, ITC-02, etc.)|
|3||Details of Input Tax Credit availed and reversed, TDS / TCS |
– Nature of purchases:-Bifurcation of inputs, input services and capital goods along with HSN
– Sample Documents
– Blocked Credits
– Electronic Cash and Credit Ledger
– Transitional Credit details
– Deduction of GST TDS/TCS
|4||Host of relevant reconciliations:-|
– Invoices v/s Books of Account
– Books of account v/s 3B
– Books of account v/s GSTR-1
– GSTR 3B v/s GSTR -1
– Payment vouchers v/s Invoices – Unregistered
– Purchase register v/s 2A
– E-way Bills v/s Books of account
– Turnover as in GST Returns v/s Books of account
– Turnover and ITC of period 17-18 shown in 18-19
– Turnover and ITC of period 18-19 shown in 19-20
|5||Details of advances given, received, adjustment thereof|
|6||Transaction level details and Ledgers – Outward Supply, Inward Supply, Tax etc.|
|7||Details of tax, interest penalty paid along with payment challans|
|8||Details of exemptions claimed, if any (Product level, location level, Nature of Supply level, etc. if any)|
|9||Export, deemed Export, Import and SEZ details|
|10||Transactions pertaining to the current financial year disclosed in the sub- sequent admissible period|
|11||Sample copies of the following documents maintained by the Company under GST Law: – |
– Tax invoices (including self-invoices for inward supplies liable to reverse charge);
– Credit notes;
– Debit notes;
– Delivery challans;
– Receipt Vouchers;
– Payment Vouchers;
– E-way Bills with respect to transactions for which invoice/delivery challan shared;
– Bill of supply
– Commercial invoice (if any)
– Commercial debit note/Credit note (i.e. credit note/debit note on which no GST impact is given)
– ISD and Job work Documentation
– Details of Tax Deduction/collection at Source
|12||Sample copies of the following documents maintained by the Company in respect of import/export/deemed export of goods: |
– Bill of Entry along with invoice raised by supplier of goods;
– Bill of Lading;
– Shipping Bill/Airway Bill;
– Letter of Undertaking or Bond in case of export without payment of GST
|13||Reports generated by ASP/GSP’s/GSTN Portal and Draft Annual Return under GST (along with workings)|
|14||Refunds claimed, sanctioned and rejected along with workings|
|15||Pending litigations, notices, replies to notices etc.|
|16||Notifications, clarifications, legal opinions, relevant AR’s|
|17||Opening, closing balances and details of Unbilled revenue|
|18||Steps and measures taken to comply with Anti-Profiteering provisions under GST law, along with back-up working, if any|
|19||Copies of Advance Ruling and AAAR in auditee’s own case|
|20||Details of Related parties|
|21||Notes on the details of Software’s, accounting applications used and internal controls|
|22||Audit Checklist – Area wise|
|23||Management Representation Letter|
|24||GST User ID and passwords|
While the above is a suggestive list of documentation/checklist to be prepared, maintained and verified for the purpose of Annual Return under GST and GST Audit, there may be certain additional documentation and checks which may have to be performed in the course of undertaking the aforementioned activity.
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GST Audits are going to be phenomenally different from the Traditional VAT/Excise/ Service Tax or other similar Audits. The GST Auditors should upgrade their skill set to use the relevant IT tools for conducting the Audit. There would be multi fold challenges in GST Audit beginning from difference in classification of data between books of account and GST Reporting, Voluminous Data, multiple sources of data, multiple formats of data, correct application of GST provisions, and frequent changes to GST Law by way of Notification etc. Maintenance of appropriate documentation and checklist in such an environment shall be the most critical skill-set required by a GST Auditor.