Crucial areas to be covered in GST Audit
The main objective of GST Audit is to check the veracity of declaration of information in records in accordance with the GST Rules. The most pivotal role play of GST audit is to ensure the reconciliation of records in the books to avoid GST evasion.
In this article, I have tried covering the core areas whose reconciliation carries most importance:
#1 Reconciling GSTR 3B with GSTR 1 & GSTR 2A
The two important points to be covered under this heading are:
Interest and penalties in GST Act
Under this sometimes recipient can claim extra input tax credit, which attracts the liability to make payment of interest @ 24% on the extra amount. The auditor needs to reconcile the GSTR 3B with GSTR 2A (an autopopulated return generated when seller furnishes their GSTR 1) to make sure that the organization does not claim extra input tax credit. When the GST authorities might come to know about inconsistencies between GSTR 3B and GSTR 2A, the tax payers might have to bear additional penalties.
Amendment in GSTR 1
When the auditor comes across such disparities in data, he shall recommend the management to make amendments in the summary details of GSTR 1.
#2 Examining the particulars of Invoice
There are well-defined rules for details to be incorporated in the invoices. If the format of the Invoice deviates from the prescribed standards, the auditor shall advise the management to make amendments and include the requirements of the GST Rules.
#3Reversal of input tax credit for non-payment in 180 days
Sec. 16(2) of the Central Goods & Services Tax (“CGST”) Act, 2017 provides for reversal and reavailment of ITC on account of non-payment.
At this juncture, the auditor has to examine that:
- The difference between Invoice date and date of payment should not exceed 180 days.
- The payment made should be equal to the amount of Invoice inclusive of GST. If the amount of payment appears to be less than the invoice amount plus GST, the Input tax credit availed earlier to that extent shall get reversed and added to his output tax liability, along with interest thereon.
#4 Matching e-way bill with Invoices
To further dwell in this process, we first need to understand about an e-way bill.
What is an E-way bill?
E-way bill is an electronically generated document which is required to be generated for inter-state and intra-state movement of goods except Delhi. A GST registered person cannot transport goods in a vehicle whose value exceeds Rs 50,000 without an e-way bill. For movement of goods within Delhi, the value of goods should be more than Rs 100,000.
An e-way bill is generated:
- In relation to a ‘supply’
- For reasons other than a ‘supply’ ( say a return of goods)
- Due to inward ‘supply’ from an unregistered person
During the review of e-way bill against invoices, two important points to be considered are as follows:
- The details mentioned in e-way bill should match with that in invoice. It should be further noted that an e-way bill can neither be altered nor cancelled. However, it can be cancelled within 24 hours of its generation. In case of movement of goods without an e-way bill, a fine can be imposed by appropriate authorities.
- Whenever transportation of goods takes place in non-motorized vehicles, the necessity of issuing e-way bill does not arise. As some business houses are maligning such practice in order to avoid the e-way bills, the internal auditors need to scrutinize closely.
#5 Cross – checking the stock pending with job worker
According to sec 19 of CGST Act the input goods lying with the job worker must be received within one year i.e. 31st June 2017 and capital goods must be brought back within three years i.e. 31st June, 2019.