Before moving straight towards the procedure of the GST Audit Checklist, it is essential to grasp the essence of the GST audit process and the GST compliance checklist in the context of GST. Additionally, understanding the process of obtaining a Standard Operating Procedure (SOP) for the GST audit checklist is crucial.
This type of GST audit takes place when the aggregate turnover of the taxpayer exceeds the 2 Crore INR mark. The taxpayer needs to appoint a CA or CWA for a turnover-based audit.
General audit takes place when the order is passed by the GST Commissioner. However, the taxpayer gets a minimum of 15 days prior notice for such an audit. A general audit is done either by the CGST/SGST Commissioner or any other person authorized by the GST Commissioner.
This type of GST audit takes place when the order is passed by the deputy or assistant commissioner, however, such officers need to take prior approval of the GST Commissioner and prepare a GST internal audit checklist. To perform a special audit the GST commissioner can appoint a CA or CWA as may be required.
The GST audit process begins with a formal notification to the auditee at least 15 days before the GST audit procedure. The auditee submits the required documents within 15 days, and the GST audit process starts upon acceptance by the auditor or verification of business premises. During the audit, the authorized officer may access and verify necessary documents. After completion, the auditee receives preliminary findings, and within 30 days, the Final Audit Report (Form GST ADT-02) is issued. The auditee can make payments for any tax discrepancies with a waiver of show cause notice. The entire GST audit process aims for completion within three months, extendable by six months if necessary. The GST audit process prioritizes trade facilitation and a non-intrusive environment for taxpayers.
The GST audit checklist serves as a guide, encompassing every aspect of the audit program. The GST audit checklist functions as a manual for the audit team, significantly improving the efficiency of the GST audit process. Here is the checklist for GST audit which will help you with the GST audit process-
There are two important things that will be covered under how to do GST audit step by step and this point in the GST audit checklist ICAI for internal audit:
In some cases, it is found that the taxpayers try to manipulate the figures and take excess Input Tax Credit (ITC). So, the taxpayer needs to reconcile GSTR 3B with GSTR 2A to ensure that the taxpayer is not claiming excess Input Tax Credit (ITC). In case if the taxpayer has claimed any ITC in excess then he or she needs to pay interest and penalty as may be prescribed.
b) Amendment in GSTR:
In case if the GST auditor finds any mismatch between GSTR 3B and GSTR 2A then in such a case the auditor needs to direct the management to amend the invoices at summary levels in GSTR 1 by filing GSTR-1A.
The format of invoices plays a very crucial part in GST and that is why there are specific GST rules for the same too. In case the invoice format varies, the GST auditor can advise the management to amend the invoice structure or format as may be prescribed. There are many incidents where the taxpayer was using different invoice structures. So, keeping this in mind the Government has introduced e-invoicing where the invoice schema will remain the same throughout.
At the time of auditing, the taxpayer shall keep the following condition in mind to reverse ITC for non-payment:
The invoice date of supply and the payment date of supplies made could not be more than 180 days apart under the GST audit turnover legislation for FY 2023–2024. The Input Tax Credit (ITC) will be reversed if an invoice is not paid within 180 days.
As we already know under GST Regime, the taxpayer can move goods from one place to another only after generating an e-way bill. So by reconciling the e-Way Bills data with invoices, the auditor can determine if there is any bogus entry made in the records by the taxpayer. However, there are instances where the goods are transported in non-motorized vehicles. In such cases, the generation of the e-way bill is not required. Hence, the auditor needs to closely scrutinize all the invoice-level data too.
Reconciling intra-branch and inter-branch stock transfers across all branches is necessary if a business has many branches.
It is the responsibility of the taxpayer and the auditor to make sure that the returns submitted to the Income Tax and GST authorities about their turnover under the IT Acts and the GST Act are duly examined, documented, and validated.
This indicates that all supplies include goods made all over India and exempt services by validating and verifying the GSTIN turnover on a PAN-India basis. The same is verified in the declared GST turnover during a GST audit.
The auditor is required to verify that any interest on the GST tax liability is computed at 18% annually and that the taxpayer deposits any overdue payments by the deadline.
Cash payment is required for GST payable on supplies covered by the Reverse Charged Mechanism (RCM). In the same month, you can claim the corresponding ITC.
ITC needs to be reported and divided under the different purchase categories including goods, bank charges, employee costs, capital goods, etc.
When preparing for the GST audit, the following documentation is needed:
A GST audit is necessary for some GST taxpayers. The business's records, returns, and other financial documents are examined during the GST audit. Its goal is to guarantee that all GST taxes are paid for the fiscal year 2023–2024 and that the documented turnover is accurate. The GST Act designates and authorizes an expert to conduct, review, and verify the audit. It must also evaluate claims for input tax credits, refunds, and other compliances as mandated by the GST Act.
According to sub-section (5) of section 35 of the CGST Act, every registered person whose total turnover during a financial year exceeds Rs. 5 crore rupees must have an audit of his accounts. A reconciliation statement duly certified in Form GSTR-9C must be filed with GSTR-9C if the registered person's turnover exceeds INR 5 crore in a fiscal year. The turnover limit for required GSTR 9 filing is Rs.2 crore, while the turnover limit for GSTR 9C is Rs.5 crore. For GST-registered taxpayers with yearly aggregate revenue up to Rs. 2 crore, the Central Board of Indirect Taxes and Customs (CBIC) has provided an exemption from the need to file Form GSTR-9.
The GST Act states that the annual return and audit deadlines are December 31 of the following fiscal year, and it does not specify any penalties for non-compliance. It will therefore be subjected to the general penalty of Rs. 25000.
You do not require an audit if your business's sales and gross receipts for any given fiscal year amount less than ₹2 crores. However, it's necessary to comply with the GST audit if your yearly turnover is above ₹5 crores. It is essential to adhere to the GST audit checklist and the necessary audit types.
If you require assistance with the return process or compliance, use Masters India's GST Software to speed up the GST return process, making it more efficient and convenient for your team. You can use this to find any gaps in your GST Return filing and to assess the compliance status of your business. Reach out to Masters India if you have further queries.
