AUDIT PROGRAM FOR GST AUDIT
1 Preliminary
- Check GST registration certificate
- Cross check the name of the entity with PAN or Company incorporation certificate
- Check for single registration or multiple registration - ask for documentation
- Name board to contain GST registration
- Ask client to log on to GST portal and verify whether it is active still
2 Transition
- Verify the June 2017 returns of Service tax, Excise and VAT
- Take stock of the closing balances as per those returns
- Verify whether it is reflecting in the Trans 1 statement
- Verify the documentation for Trans 1 filing with the department
- Correspondence with department on Trans 1 credit disallowance if any (specifically ask for it and record)
- Capital goods credit balance 50% under Excise and 1/3rd or 2/3 rd under VAT should be verified
- How Cess is handled in the transition. As per department Cess cannot be carried forward in GST. If company carries document it and ask for their stand on the same
3 GSTR 3B
- Whether GSTR 3B has been filed for all the months - July 2017 to date
- Verify all the returns individually and no test check of the same
- Verify the correctness of the physical copy with the portal numbers and match the same
- GST Liability to be classified separately as IGST, CGST and SGST
- Verify how this is derived - books of accounts
- Whether the liability shown in GSTR 3B matches with the books of account
- If not is there any reconciliation and if available please take a copy of the same as our document
- GSTR3B liability should match with liability shown in GSTR 1
- Discuss how the discrepancy comes on the same
- GL balances should be captured and take a screen shot of the same for our records
- GL balance should always show credit balance and if any debit balance is there record it and ask for explanation
- Check the 3B return status in the portal, submitted or filed status
- Check the GST portal for any queries raised by the department on line and what action taken by the client
4 GSTR1
- Whether GSTR1 has been filed for all months - July 2017 to date
- Verify the physical copy with the portal numbers for correct upload of data
- Check all the returns for correct filling of all the columns, IGST not updated as local and vice versa
- Verify how the purchases from unregistered dealers handled
- Verify how the SEZ or Export transactions are reported
- Cross verify the rate of tax applied with the tariff headings
- State code - whether correctly filled up
- On a random basis check the GST registration of customers in the portal for correctness of the same
- Check the status of the return - Submitted or filed
- Open the dash board and verify whether all the returns are appearing in the portal
- How the data is extracted from the company’s books - manually or downloaded automatically.
- If Excel download is used verify the no. of document control of the Excel and company’s records
- Counter check the documents updated in GSTR 1 form with the Excel download or company’s record - Missing documents to be captured clearly
- Match the sales reported in GSTR 1 and the company records
- In case of difference whether any reconciliation is prepared and why
- Check how the difference is handled by the company
- How debit or credit notes handled in the GSTR 1 system
- Price revisions before GST how handled - no tax charged or erstwhile excise and service tax charged
- Price revisions post GST how handled - whether correct rate of GST charged. Compare the rate with the original rate charged in the invoice
- Documents for issuing credit note or debit note - approval process and how the same is accounted by the company
- Compare the company’s books and GST records for debit note or credit note
- JsOne tool how handled - whether Govt site or private software used - if private software used then carefully check whether all transactions are uploaded properly in the portal
- The liability quantified in GSTR 1 - local and IGST must match with the liability quantified in GSTR 3B
- Cut off procedure - last document no. for each month as per books accounts and first document no. for the next month - take for Aug 2017, Nov 2017, Jan 2018 and March 2018.
- Check whether Tally is closed each month and verify the same for three months during the period of audit
- In case of SAP please verifiy whether period closing is done and ask the concern to open the system and show that the period closure is done. Take a screen shot for our records
5 Input credits
- Verify the input credit disclosed in GSTR 3B under CGST, SGST and IGST
- Verify whether the same reflects in company’s books of account and matches
- If there is difference record the same and ask for explanations
- If rectified subsequently document the same - today there is no concept of interest but may come at a later date
- Capture the % of input credit to the GST liability and record it
- Whether the GL of the company has separate codes for input credit separately for CGST, SGST and IGST - if not it should be opened separately
- Again for more than one state separate IGST GL codes to be opened
- IGST should be used for SGST and CGST and not vice versa - check this aspect
- Ineligible credits as per the GST act should be strictly followed - verify this
- In case of deviations please record the same and bring to the notice of the concerned in GST
- Credit should not be availed for purchases from vendors on composition scheme
- Capital goods credit should be availed fully and not at 50% or 1/3rd as per prior provisions
- Inter plant movement and depot movement should be with GST document and GST payments only. Check whether the same is followed and credit availed in the other plant or depot
- Sub-contract movement will not entail credit availment unless he provides GST invoice
- Import IGST will be eligible for credit and verify the same with Bill of entries
- Take a listing of vendors of the client with GST nos and check whether client has such a list and updation frequency to be verified
- How does the client verify whether the vendors have filed their GSTR 1 returns - Process to verify and document
- For those not filing the returns what steps the company takes to ensure that they file and the credit availed is legal and correct
- Is there any check for ensuring the vendors making GST payments on monthly basis - If so record the same
- Rejection of materials - How handled in GST - Whether the client raises the rejection debit note with GST and reverses the credit or not
- In the alternative for full rejection of invoice client need not avail credit and also raise debit note for rejection. In this case the transportation of materials could be a problem and how handled - verify this
- Manufacturing rejection how handled - Debit note raised with GST or not
- If so on what basis the invoice no. of the vendor is captured and debit note raised
- Credit for capital goods should be reduced from the cost of assets and depreciation to be provided only on the net - check this aspect both from Company Law and Income tax aspects
- Disposal of capital goods would not entail reversal of credit but only charging GST under the GST regime. Let not client reverse any input credit for the same
6 Documents
- Invoice to be as per the format given in GST rules
- Input invoice should satisfy the same - otherwise credit can be denied
- E Way bill to be raised as per rules - documentation for tracking the same
- Sub-contract movement - what document is raised and how tracked
- Whether the company stores the returns in a separate folder or print outs kept in files - recommend storage in soft form in a separate folder
- Trans 1 credit document to be preserved
- Get in writing from the company the places where the client’s materials are kept - input materials and output materials, inventory and sub-contract locations. - verify whether these are captured in the RC
- Any change in director or partner or owner should be intimated and changes to be incorporated in the RC
- Clear back up work sheets for GST liability including IGST, input credits and net liability to be maintained for each month
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