TaxTMI 
TaxTMI 
GOODS AND SERVICES TAX AUDIT
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....OODS AND SERVICES TAX AUDIT<br>By: - Sachin Jain<br>Goods and Services Tax - GST<br>Dated:- 7-12-2018<br><br>"Audit Under GST Regime" "Audit" this word is well versed within the industrial and commercial world, where an ordinary man interprets it as a compliance measure or activity to be done on yearly basis and on the other hand big players are well aware about the importance of audit. As we all know GST rolled in July 2017, it is also known as the biggest indirect tax reform in the Indian history. GST is a revolutionary in commodity and services tax. It has brought about an ideal shift in the methodology of levy and collection of taxes. GST being a self-assessment tax, audit procedures are introduced for ensuring proper compliance. U....
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....nder the earlier Central Excise and Service Tax laws, there was no requirement for audit of accounts and furnishing reconciliation statement by an accountant except special audit. However, some state VAT laws stipulate audit of records by a Chartered Accountant and filing of VAT audit reports. Threshold limits were prescribed for such audits. Audit Under GST In order to understand the structure of the GST Audit and its requirement, it would be pertinent for us to understand the legal provisions relevant for GST audit * As per Section 35(5) Every registered person whose turnover during a financial year exceeds the prescribed limit (presently two crore rupees) shall get his accounts audited by * a Chartered Accountant or * a Cost Acc....
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....ountant and shall submit a copy of the audited annual accounts along with a reconciliation statement (reconciling the value of supplies declared in return with audited annual financial statements) GST Form 9C is prescribed for GST Audit. * Section 44(2) produces that every registered person who is required to get his accounts audited shall furnish, electronically the annual return in FORM GSTR 9 along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement. So audit report is to be provided at the time of filing annual return. Key points * Turnover includes value of all exempt supplie....
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....s and exports under the same PAN, on all India basis. * GST period comprises of 9 months i.e. July 2017 to March 2018, whereas the relevant section 35(5) uses the expression financial year, it is reasonable to understand that the turnovers for the whole of the financial year would also include the first quarter of the financial year 2017-18. However, clarification is required in this case from the government. The GST Audit would be undertaken for the first time in India. GST Audit will require a huge preparation from both the auditor and the auditee. It is different form Statutory audit and Tax audit. GST audit would require coverage of a larger number of records. The GST audit requires deep understanding of the GST laws the working of G....
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....ST portal, the nature of supplies, various records of the auditee. Also, GST audit is a newly born concept for the service providers. An auditor can take below mentioned steps before starting any GST audit; * Explain the assesse about the applicability of GST audit; * Understand the nature of business, the products or services of the assesse; * Records to be maintained by the assesse; * A questionnaire may also be prepared by the auditor to understand the operations / activities of the auditee * Auditor can also draft an audit program and list of records to be verified as prepared at the time doing statutory audit. GST Form 9C Has been divided into 2 parts: * Part - A: Reconciliation statement; * Part - B: Certification by a....
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....uditor; * Part - A: Reconciliation statement; Compliance is increased drastically under GST law due to the aspect of uploading invoice wise level details on online portal, E-way bill concept, Monthly return etc. Additionally, the requirement of Tax Audit report is also revised for FY 2017-18 to include certain details related to GST like taxable supply, exempt supply, registered and unregistered dealer etc. This again added to the compliance. A series of aspects need to be considered while preparing the following reconciliations; * Reconciliation of GST Outward Supply i.e. GSTR-1 (Taxable, exempt, export etc.) with books of account; * Reconciliation of GSTR- 2A with Input Tax Credit (ITC) availed in GST Return; * Reconciliation o....
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....f outward supply and ITC between GSTR-3B, GSTR-1 and Books of account; * Reconciliation of GST Payable between GSTR 3B and books. * Reconciliation of Taxable Turnover; * Reconciliation of rate wise liability and amount payable thereon; * Reconciliation of ITC declared in Annual Return (GSTR-9) with ITC availed on expenses as per audited Annual Financial Statement or books of account. (with various subheads of profit and loss account); * Reconciliation of expenses subject to reverse charge as per books of accounts and GSTR 3B; * Reconciliation of balance in E-Cash ledger, E-credit ledger, E-liability ledger with books. Key points * Reasons for un-reconciled difference in all the reconciliation as mentioned above is to be provi....
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....ded by the auditor; * Auditor is required to recommend on additional Liability due to non-reconciliation. Other vital aspects from GST prospective and Audited books of account Outward Supply * Disclosure of annual and monthly turnover is mandatory requirement for GST return and if same is not in tune with books of accounts then reason for the same is identifiable; * The supply is required to bifurcate in to Taxable supply, Zero-rated supply, Exempt supply, Nil rated supply, non-GST supply; * The taxpayer should have been considered and paid the GST on the supply pertaining to FY 2017-18, on or before September 2018 if any not included while filing of GST return of the financial year 17-18; * Identify related party transaction if ....
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....any. GST is required to be paid on the same in some cases even when same is without consideration. Inward Supply and Input Tax Credit (ITC) * Re-check the nature of ITC availed; * Check all ITC which is not allowed as per section 17(5) of the CGST Act.; * A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note pertaining to FY 2017-18 after filing GSTR 3B of September 2018. Given this, the taxpayer should identify all the invoices of inwards supply where ITC is not availed; * It is to be noted that once the same is not availed it will become the cost for the Company; * The ratio of reversal of ITC is required to recomputed on the basis of yearly details of supply and effect of th....
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....e must have been considered while finalizing books; * The taxpayer shall identify ITC where vendor's payment is pending for more than 180 days from the date of invoice; * The amount of such ITC pertaining to FY 2017-18 must have been reversed along with interest on or before September 2018, the auditor should verify the same. Others The entity should also ensure the proper classification of goods and services and respective rate (mainly in case of composite supply and mixed supply). Further, it is to be noted that GST law does not specify the principle to classify the goods and services to apply correct GST rate. * Part - B: Certification by auditor; As discussed above certification is to be done by a chartered accountant or a cos....
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....t accountant. There may be two cases as reproduced below; * Certification - Where the reconciliation statement is drawn up by the person who had conducted the audit of the aoounts. * Certification - Where the reconciliation statement in is drawn up by a person other than the person who had conducted the audit of the accounts. While certifying the GST audit form it is very pertinent for the auditor to understand the difference between Certificate and Report. Guidance Note on Audit Report and certificates for Special Purpose issued by the ICAI notes the difference between the term 'certificate' and 'report' as under; A Certificate is a written confirmation of the accuracy of facts stated there in and does not involve any estimate or th....
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....e opinion; on the other hand A Report, on the other hand is a formal statement usually made after an enquiry, examination or review of specified matters under report and includes the reporting auditor's opinion thereon. Thus, where a certificate is issued the auditor shall be responsible for accuracy of what is stated therein. In case of a report, he is responsible for ensuring that the report is based on the factual data, true and fair to the best of his belief, knowledge and information furnished to him. * Other types of Audit under GST Audit u/s 65 Audit u/s 66 1) Not compulsory, audit only for selected registered person only (By general or special order) 2) Audited by commissioner or officer authorized by him. 1) Not compulso....
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....ry, audited id special direction issued by officer considering complexity of case. 2) Auditor to be nominated commissioner. * Future Prospects GST and the structure of GST having compliance measures such as GST audit provides a very free and transparent picture of indirect tax structure and its stakeholders for future. The objective of GST is made clear as to purpose of ensuring the correctness of Turnover declared, Taxes paid, Refund claimed, and Input Tax Credit availed in addition to compliance of GST Act and Rules. Though by wordings it appears the objective to be very simple going by the intent it is clear that entire compliance of GST law has to be confirmed in GST audit. GST audit will work as a watchdog for the entities compl....
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....iance structure and also the internal controls. Auditing is a systematic and independent examination of the books and records of an entity to ascertain and report upon the facts regarding its financial operations and results thereof. The systematic and independent examination of the books and records may be limited to transactions and performances of an entity for a stated purpose, say audit under GST. However, the outcome of the audit is very beneficial for the auditee. Such an audit may be conducted to ascertain whether they present a true and fair view of the financial transactions vis-a-vis returns filed with the authorities. As present the due date for furnishing GST Audit report in the aforesaid format is 31 December 2018. However....
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...., till date no GST utility is provided by authorities, also the Tab for the same is not available on GST portal. A number of clarification is required in relation to the details to be furnished in GST audit report. As GST audit is the first time activity for the stakeholders. The due date provided by the authorities does not seems to be feasible. Extension of due date is expected from the authorities. "HOWEVER ONE CANNOT FORECAST THE UPCOMING SURPRISES AND CHALLENGES UNDER GST" WE NEED TO WAIT AND WATCH HOW THIS NEW TAX STRUCTURE TURN UP WITH Thank you Amol Manoj Jain<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....