GST audit is a reconciliation statement of audited financial statements with the annual return furnished. Further, a GST audit also assists in assessing whether the taxpayer is obedient to the provisions of GST.

For whom GST Audit is compulsory?

Section 35(5) of CGST Act,2017 provides that every registered person whose turnover in a financial year exceeds the amount of Rs. 2 crores, is required to get his accounts audited by a CA or CMA. He shall submit the following with the GST Annual Return filed by him:

1) Copy of audited financial statement;

2) Reconciliation statement (Form GSTR-9C); and

3) Other prescribed documents

The term ‘turnover’ is not defined under the GST Act. However, aggregate turnover is defined under section 2(6) of the CGST Act. Accordingly, aggregate turnover refers to the value of all outward supplies (taxable + exempt + exports + inter-state) of a person with the same PAN. 

What is the checklist for GST Audit?

An auditor should cover the following points while performing an audit assignment under GST:

1 Registration Certificate

Whether new registration has taken or migrated from the old regime

Details of business verticals, Factory, Warehouse, ISD etc

Whether the additional place of business is included in the registration certificate

Whether any amendments required

2 Invoicing and related Documentations

Whether Tax Invoice or Bill of Supply issued as per the provisions contained in GST law

Whether receipt vouchers issued in case of receipt of advance

Whether proper credit note/debit note issued as per GST provisions

Check correctness of Invoicing.

Whether delivery challan/e-waybills issued and maintained properly

Whether transport documents properly maintained and verified

Whether a unique series of invoicing is given as per the requirements of the law

3 Supply

Whether supply is correctly classified under Taxable, exempt, export, non-GST, zero-rated, nil-rated, supplies to SEZ, deemed exports, etc.

Whether transaction falls under the scope of supply or not

Identification of supply as Inter-state or Intra-state

Whether supply is a composite supply or a mixed supply

Proper classification of supply, i.e. supply of goods or supply of services

Transactions related to goods sent for job work

Whether supply falls under negative list

4 Time of Supply

Whether TOS of goods determined as per sec 12 of CGST Act

Whether TOS of services determined as per sec 13 of CGST Act

Whether TOS in case of reverse charge is properly dealt

Whether any changes in the rate of GST is dealt with sec 14 of CGST Act

TOS treatment in case of continuous supply of goods or services

5 Input Tax Credit

Check ITC availed with invoices

Check inward supply records and reconcile with invoices of vendors

Reconciliation of inward supplies records with monthly returns

Check restricted credits like blocked ITC and ITC for non-business purposes, ITC against exempt outward supplies etc.

Check the adjustment of taxes, i.e. set-off with the ITC or payment in cash

Check ITC on capital goods correctly claimed

Check whether reversals of ITC done whenever required

Any reversals in case of goods sent for job work

Whether the recipient of supply has made the payment within 180 days of the invoice

Check whether the documents based on which ITC claimed have the required particulars as per law

Check proper treatment of ITC in case of Credit Notes/debit notes

Check whether appropriate bifurcation of ITC made as per the rules under GST

Check reconciliation of ITC claimed in GSTR-3B with auto-populated data in GSTR-2A

Check transitional credits properly

Any reversals of ITC from the change of schemes and other circumstances

6 Classifications

Whether the classification of goods or services as per schedules or notifications

Whether HSN/SAC taken as per law

Check whether any specific advance ruling applicable

Check whether any change in tax by way of any notification or exemption notification

7 Input Service Distributor

Whether registration take as per law separately

Whether the distribution of ITC done as per the law

Whether turnover for determining the amount of ITC is calculated correctly as per law

Whether ISD invoice is issued properly

Whether proper distinction of eligible or ineligible credit done before distributing ITC

8 Returns

Review all returns filed by a registered person

Reconcile GSTR-9 with GSTR-1 and GSTR-3B

Check interest liabilities, if the interest is payable, whether paid or not

Check late fees paid adequately while filing the return

Whether amendment details filed correctly in the return

9 GST collections and payments

Whether timely payment of due taxes made

Check taxes paid under incorrect heads, i.e. IGST paid in place of CGST & SGST and vice-versa

Check whether any excess collection of tax

10 Reverse Charge

Check the compliance of provisions of sec 9 of CGST Act

Check whether RCM paid under incorrect heads

Check corresponding ITC on RCM correctly claimed

Whether conditions of paying tax under RCM fulfilled

11 Value of Supply

Check all inclusions in the amount of supply correctly done to arrive at the value for taxability as per section 15 of the CGST Act

Whether treatment of discount correct

Whether valuation rules apply correctly wherever applicable

12 Place of Supply

Identification of Intra/Inter-state supply

Whether conditions of inter-state supply fulfilled

Whether conditions of intra-state supply fulfilled

Whether conditions of export fulfilled

Whether export made under LUT/Bond

Whether exports with payment of GST

If the supplier is an intermediary, requirements fulfilled or not

Whether supplies correctly reported in returns, i.e. exports, imports, etc

13 Refunds

Whether the supplier is eligible for claiming the refund

Whether any application for refund filed, any refund sanctioned.

Any refund re-credited to E-cash ledger

Check any wrong claim of refunds

14 Inward Supplies

Proper classification of inward supplies into intra-state, inter-state, imports etc

HSN classification of inward supplies

Check inward supplies with monthly returns

Check register of inward supplies whether any deviations from the invoices in possession.

Check whether ITC included in cost whose ITC is not allowable

Check any deletion or destruction of fixed assets

Check whether any stock is stolen or theft whose ITC has been claimed.

15 Maintenance of Books of Accounts

Whether books of accounts and records maintained as per the applicable provisions of GST law

Check how records are kept – Manual or Electronic

Whether a separate set of books maintained for each place of business

Whether all required registers under GST maintained as per the law

16 General

Whether the Anti-profiteering clause complied

Are there any department proceedings or inspections in force

Check carefully significant points in statutory, internal audit reports

Check all adverse aspects in previous year reports

Check any judicial pronouncement that can apply to the registered person

Be careful of any unusual transactions

Discuss every adverse point in your findings with the client

Use appropriate audit tools during the audit

How is GST Auditor appointed?

A registered person can appoint a GST auditor at the beginning of the year. Auditors can be selected by the following:

Proprietor – In case of sole-proprietorship

Partner – In case of Firm or LLP

Board of Directors – In case of Companies

What are the records examined by a GST Auditor?

Below are the records and documents examined by the auditors while performing audit procedures:

Register of Outwars Supplies

Register of Inward Supplies

Inventory Register

Ledgers of expenses

Register of Input tax credits

ITC claimed and utilized

GST payables and actual payments

Generation of e-way bills

Any other necessary documents or records for the period relevant to the audit

Comments required by an Auditor

In case the auditor discovers any mismatch in the accounts and records, he shall add comments on such a mismatch in the reconciliation statement in Form GSTR-9C.

Submission of GST Audit report

An auditor shall report the following things:

Whether records and transactions correctly kept and maintained

Whether Financial Statements prepared, conform with the books of accounts

To confirm the authenticity of the information in GSTR-9C.

To mention any observations or comments in the report thereof.