Introduction
In India’s intricate business landscape, compliance with the Goods and Services Tax (GST) is paramount for businesses of all sizes. The GST regime mandates that taxpayers maintain meticulous financial records that adhere to GST laws and regulations. For private limited companies, in particular, the stakes are high, and adhering to GST compliance is not just a necessity; it’s a financial responsibility.
One of the pillars supporting this financial responsibility is a well-prepared GST Audit Checklist. This checklist acts as a guiding compass, leading businesses through the complex terrain of GST compliance. In this blog, we will delve deeper into the world of GST compliance, the importance of a GST Audit Checklist, and the essential facets of an efficient GST audit.
Understanding GST Audit
A GST audit is a meticulous examination of a business’s records, returns, and various financial documents. Its purpose is clear: to ensure that the recorded turnover is accurate, and that all GST taxes for the fiscal year 2023-2024 have been correctly reported and paid. The audit process is not to be taken lightly; it is to be conducted, reviewed, and verified by an expert authorized under the GST Act. Such experts may include Cost or Chartered Accountants, the Commissioner of Central Goods and Services Tax (CGST) or State Goods and Services Tax (SGST), or officers nominated for this specific purpose. The GST Act bestows upon them the power to assess refunds claimed, input tax credits, and various other compliances.
Requirement of GST Compliance Checklist
To embark on a journey towards seamless GST compliance, one must be well-acquainted with the concept of a GST compliance checklist. This checklist serves as a comprehensive guide, ensuring that businesses are well-prepared for audits based on turnover, general audits, or special audits.
In addition, businesses should familiarize themselves with the notion of a Standard Operating Procedure (SOP) for a GST Audit Checklist in Excel format. Such a format streamlines the audit process, making it more efficient and effective.
Types of GST Audits
There are three key types of GST audits:
- Audit based on Turnover: This audit is triggered when a taxpayer's aggregate turnover surpasses INR 5 Crores. Recent changes in regulations have removed the mandatory engagement of a Chartered Accountant or Cost Accountant for this type of audit, replacing it with the requirement of a self-certified reconciliation statement.
- General Audit: The general GST audit is initiated when the GST Commissioner issues a notice (Form GST ADT-01) to the taxpayer, providing a 15-day notice prior to the audit. The audit is conducted by either the CGST or SGST Commissioner or an authorized individual.
- Special Audit: A special GST audit is conducted upon the order of the Deputy or Assistant Commissioner, with prior approval from the GST Commissioner. In this case, the GST Commissioner may appoint a Chartered Accountant or Cost Accountant to perform the audit.
Types of GST Returns
There are various GST return forms, including GSTR-1, GSTR-2, GSTR-2A, GSTR-2B, GSTR-3B, CMP-08 (formerly GSTR-4 for composition-scheme taxpayers), GSTR-4 (Annual), GSTR-5 (for non-resident taxpayers), GSTR-5A, GSTR-6, GSTR-7, GSTR-8, GSTR-9, GSTR-9C, GSTR-10, GSTR-11, and ITC-04.These are explained in detail in the table given below:
| Return | Description | Due dates | Late fees/Penalty |
|---|---|---|---|
|
GSTR- 1 |
It is a return of reporting as no tax is paid, details of sales, invoices generated, debit note, credit note. To be filed by a normal tax payer a return of sales transactions. Can be paid monthly or quarterly (optional) (for the taxpayer whose last year turnover is less than or up to 1.5 crore) Quarterly (If opted under the QRMP scheme) |
(Monthly) On or before the 11th day of the succeeding month. (Quarterly) Quarterly returns for the tax period Oct 20 to Mar 21 is notified to be 13th of the month following the quarter |
In the case of non-filing of NIL GSTR-1 returns, the maximum late fee payable shall be Rs.500 per return (i.e. Rs. 250 each for CGST & SGST Other than NIL return, the maximum late fee in GSTR-1 is established based on the yearly turnover slab, as follows: -If the preceding fiscal year’s annual turnover is up to Rs.1.5 crore, a late fee of up to Rs 2,000 per return might be levied (i.e. Rs.1000 each for CGST and SGST). -If the turnover is between Rs.1.5 crore and Rs.5 crores, a maximum late fee of Rs. 5,000 per return can be levied (i.e. Rs. 2500 each for CGST and SGST). -If the turnover exceeds Rs.5 crores, a late fee of up to Rs.10,000 (i.e. Rs.5000 per CGST and SGST) can be levied. |
|
GSTR -2 |
Return of Purchases |
Suspended Returns |
Not Applicable |
|
GSTR- 2A |
Purchase related return (A Form with view only option). It contains details of Inward supplies of goods and services. The details filled by your seller in his GSTR 1 will be displayed here. |
No Action Required |
Not Applicable |
|
GSTR -2B |
Static statement of ITC, automatic generated ITC return for simplifying ITC. |
No Action Required |
Not Applicable |
|
GSTR - 3B |
Summary return of outward supplies and input tax credit claimed, along with payment of tax by the taxpayer. |
(Monthly) 20th of the next month. (Quarterly) Quarterly (For taxpayers under the QRMP scheme), 22nd or 24th of the month succeeding the quarter |
Late Fee of Rs. 200 per day of delay shall be levied upon the taxpayer (Rs. 100 as per the CGST Act and Rs. 100 as per the SGST Act. Penalty for delayed filing of form GSTR 1 has been reduced to Rs. 50 per day. The late fee in case of NIL returns has been set to Rs. 20 Per day |
|
CMP-08 (Earlier GSTR-4, for composition-scheme taxpayers only |
Quarterly self-assessed statement-cum-payment by composition dealers. |
(Quarterly) On or before the 18th day of the succeeding month of Quarter end. The return will be due on 18th April, 18th July, 18th October and 18th January |
A penalty of Rs. 50 (INR 25/day CSGT and INR 25/day IGST) per day as long as the delay continues. NIL returns under form CMP 08 will be charged a penalty of Rs. 20 (INR 10/day CSGT and INR 10/day IGST) per day as long as the delay continues. The late fee can be up to Rs. 5,000 at maximum and no further for all kinds of assessees. |
|
GSTR 4(Annual) |
It is a GST Return that has to be filed by a Composition Dealer. With the recent changes, it periodicity of filing has been changed to Annual |
(Annually) 30th day of the month after the financial year |
Maximum late fee that can be charged is restricted to Rs.500 per return for nil filing and Rs. 2,000 for other than nil filing. |
|
GSTR-5 (for non-resident taxpayers) |
To be filed by non-resident taxpayers when they do not wish to claim Input Tax Credit (ITC) |
(Monthly) 20th day of the Succeeding month |
Waived off |
|
GSTR -5A |
To be filed by Online Information and Database Access or Retrieval (OIDAR) service providers outside India for their services to unregistered persons in India |
(Monthly) 20th day of the Succeeding month |
For delay in filing a GSTR-5 return, a penalty of Rs.100 per day can be levied up to Rs.5000, for each return filed late. |
|
GSTR-6 |
To be filed by Input Service Distributors for distribution of ITC A summary of the total input tax credit available for distribution during a particular month. |
(Monthly) 13th day of the Succeeding month |
No late fees for the delay in filing a Nil return. Reduced late fees |
|
GSTR -7 |
To be filed by the deductors who are required to deduct TDS under GST |
(Monthly) 10th day of the Succeeding month |
A penalty of Rs.100 under CGST and Rs.100 under SGST shall be levied, and the total will be Rs.200 per day. However, the maximum late fee should not exceed Rs.5,000. There is no late fee on IGST in case of delayed filing. |
|
GSTR-8 |
To be filed by E -Commerce operators to declare Tax Collected at Source (TCS) by them |
(Monthly) 10th day of the Succeeding month |
A penalty of 200 INR per day that includes 100 INR CGST and 100 INR SGST/UTGST. However, the maximum amount of penalty that is applicable to the taxpayer is 5,000 INR. |
|
GST 9 |
To be filed by all the normal tax payers as Annual Return |
(Annually) 31st December of the next financial year. |
A penalty of which Rs. 100 consists of SGST and Rs. 100 for CGST. It is to be noted that the total penalty cannot exceed 0.25% of the total turnover on which the said penalty is being levied. |
|
GSTR-9C |
Self-certified reconciliation statement |
(Annually) 31st December of the next financial year. |
A penalty of Rs. 100 consists of ₹200 per day (₹100 each under CGST and SGST) |
|
GSTR-10 |
To be filed by the taxpayers, whose GST registration has been canceled or surrendered to file final GST returns. |
(Once) 3 months from the date of cancellation or order of cancellation, whichever is later |
A general penalty of Rs 100 per day towards CGST and Rs 100 per day towards SGST will be levied. |
|
GSTR -11 |
To be filed by Unique Identity Number (UIN) holders stating the supplied/received goods and services and claiming a refund |
(Monthly) 28th of the month following the month for which the statement is filed. |
The late fee is Rs. 200 per day, of which Rs. 100 is the SGST and Rs. 100 is the CGST. |
|
ITC-04 |
To be filed by a principal/job-worker about details of goods sent to/received from a job-worker |
(Annually) (for AATO up to Rs.5 crore) – 25th April where AATO is up to Rs.5 crore. Half-yearly (for AATO > Rs.5 crore) 25th October and 25th April where AATO exceeds Rs.5 crore. (AATO = Annual aggregate turnover) |
There is no late filing penalty on the filing of GST ITC 04 in GST form after the due date. |
Checklist for GST Audit & Turnover Limit (FY 2023-24)
Now, let’s explore the checklist that auditors rely on to ensure compliance with GST regulations:
- 1. Interest In GST Late Payments: Auditors must verify that GST tax liability interest computations are set at 18% p.a. and that any late payments are made by taxpayers within the due date.
- 2. Reverse Charge Mechanism: The Reverse Charge Mechanism (RCM) necessitates that due taxes on supplies of goods or services must be paid in cash. It's essential to ensure that the Input Tax Credit (ITC) for such reverse charges is claimed in the same month.
- 3. ITC-Availed Bifurcation: Input Tax Credit (ITC) must be accurately divided and recorded under various purchase categories. For instance, expenses should be categorized into items such as goods, bank charges, employee costs, capital goods, and more.
- 4. Non-Payment Of Reversal Of Input Tax Credit Within 180 Days: As per the GST audit turnover legislation for FY 2023-24, the date of the invoice and the payment date of supplies made should not be more than 180 days apart. Failure to comply may result in the reversal of Input Tax Credit (ITC).
- 5. Stock Transfer: For companies with multiple branches, it's crucial to reconcile intra-branch and inter-branch stock transfers across all locations.
- 6. Income Tax Turnover Matching With GST Audit Turnover: Taxpayers and auditors must ensure that the returns submitted to GST and Income Tax authorities accurately reflect the turnover under the GST and IT Acts.
- 7. GSTIN Turnover Audit: GSTIN turnover must be validated and verified on a PAN-India basis, confirming that all supplies include exempted services and goods made throughout India. This verification is conducted during a GST audit.
Essential Document Checklist for GST Audit
To initiate a GST audit, specific documents are essential. These include financial statements, trial balances, invoices for both inward and outward supplies, and various GST returns such as GSTR-1, GSTR-3B, GSTR-2A/2B, GSTR-9, GSTR-9C, and more. It’s important to note that additional documents may be requested based on the nature of the business.
Prerequisites for Conducting GST Audit Program
Prior to embarking on a GST audit, certain prerequisites are essential:
- Thorough Understanding of Business Operations: Auditors must have a comprehensive grasp of business operations.
- Comprehensive Understanding of Automation/ERP Systems: Knowledge of automation systems and GST-related reports is critical.
- In-Depth Review of Outward and Inward Supplies: A meticulous examination of the supply of goods/services is crucial, including an analysis of financial statements to determine the GST impact.
- Assessment of Classification and Valuation: The proper classification and valuation of goods or services supplied under GST should be carefully examined.
- Analysis of Financial Statements: This includes a review of related party transactions and more.
- Review of Input Tax Credits: It's essential to assess input tax credits and associated documentation.
- Calculation of Turnover per GSTIN: Entities with multiple GSTINs must calculate turnover for each GSTIN based on audited financial statements.
- Reconciliation of Differences: Identification of transactions causing variances between turnover as per books of account/audited financial statements and the Annual Return (GSTR-9).
Compliance Threshold
Businesses with an annual turnover exceeding ₹5 crores fall within the compliance threshold for a GST audit. Compliance with the GST audit checklist becomes pivotal for these businesses to avoid penalties and ensure smooth operations.
Conclusion
In conclusion, adherence to GST compliance is not just a legal obligation; it’s a financial responsibility. With annual turnovers exceeding ₹5 crores, businesses must undertake a GST audit. This checklist provides the roadmap for a successful audit, covering essential aspects such as late payments, ITC bifurcation, and document requirements.
Ensuring GST compliance is no small feat, and getting it right is essential for your private limited company. To navigate these waters successfully and ensure your business is prepared for GST audits, consider seeking the expertise of professionals who can guide you through the process. Remember, in the world of GST, compliance isn’t just a requirement; it’s a strategic advantage.
At Smart Accountants, we understand the challenges of GST compliance. Our mission is to relieve you of the compliance burdens in your business by using automated solutions. With our expertise and innovative tools, we can streamline your audit preparations, making the process smoother and more efficient.
Don’t let GST compliance be a daunting task. Embrace it with confidence, knowing that you have a partner in Smart Accountants. Take the first step towards seamless GST compliance today by reaching out to us. Let us help you ensure your business is in perfect harmony with the GST regulations, and let’s embark on a journey to a worry-free and prosperous financial future.
Contact us now to get started on your path to effortless GST compliance. Your business deserves it, and so do you.
