Comprehensive Checklist for GST Compliance – GSTR 9/9A, GSTR 9C, and Internal Auditing

Consultant should scrutinize the following documents to evaluate the implications under GST:

3.1 Director Report

Consultant should scrutinize the ‘Directors’ Report’ in depth to understand the overall financial results of the company, new products launched during the year, new happenings and future plans of the company and changes in marketing patterns, etc. to understand the methodology of the company. The consultant should also review the comments about the internal control system and their adequacy. This enables the taxpayer to have an idea about increasing the GST liability on value addition in case of new products launched during the year and a corresponding increase in ITC availability. In case of a change in marketing pattern/mode of delivery enable the consultant to examine the change in type of supply like composite supply/mixed supply and determination of place of supply.

3.2 Statutory Audit Report

Consultant should examine the ‘Statutory Audit Report’ to find out the qualified/ adverse opinion given by the statutory auditor to link these findings with any liability arising under GST or any impact on GST liability from qualification made by the statutory auditor. The statutory auditor reports that the Company has made adequate provision/written off/written down the value for obsolete inventory items that are currently non-usable, the consultant should examine this note in light of section 17(5)(h) of CGST Act, 2017 which provides that ITC shall liable to be reversed in case of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Consultants should examine and ensure that outstanding GST payable shown in books and GST Return shown at the end of the financial year 2022-23 is matched with GST dues shown in para 3(vii) and also ensure that the company is regular in depositing undisputed statutory dues for Goods and Services Tax, to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than 6 months from the date, they became payable, shall be indicated.

3.3 Cost Audit Report/Cost Accounting Records

Consultant should verify the Cost Audit Report of the company which covers Cost Audit to scrutinize the details regarding quantitative and financial details regarding production, supply of goods, capacity utilization, input-output ratio, and related party transactions according to section 15(2) & valuation Rule 28, reconciliation of annual turnover with a taxable value of Goods produced as per the GST returns. In case of registered person is not covered under Cost Audit, the consultant should scrutinize the cost accounting records prepared by the registered taxable person, wherever applicable. The consultant should cross-check all information shown in the Cost Audit Report/Accounts with Records maintained under section 35 of CGST Act, 2017 read with rules 56 & 57 of CGST Rules, 2017.

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3.4 Tax Audit Report

Consultant should examine the Tax Audit Report under Income-tax Act, 1961 to verify the depreciation claimed on capital goods, and details of input tax credit availed and utilized with opening and closing balances, the consultant should ensure that Double benefit is not claimed towards ITC and Depreciation, also consultant should scrutiny of prior period income/expenses incurred and their impact on GST for the time of supply point of view. The consultant should examine that No ITC was claimed for prior period expenses for which the time limit for availing ITC was lapsed similarly consultant should also examine the GST implication on Prior period income like interest for late payment received in subsequent financial years.

3.5 Internal Audit Report

Consultant should examine the internal audit report for the audit period and examine the points raised relating to the impact on the ITC and GST liability.

3.6 Notices issued by the department

  1. Consultant should check whether all notices/orders (Specified documents) received from the CGST department after 5th November 2019 contain DIN (Document Identification Number) and after 24th December 2019 including e-mails containing DIN in case DIN was not mentioned these documents treated as invalid documents.
  2. Consultant should review the status of pending cases at various stages viz. audit, SCN, and appeals. The consultant should also examine if the assessee follows the same methodology for transactions pertaining to the compliance period by not discharging the GST for transactions that were already disputed by the department and litigation going on for the same, in such case consultant ascertains the disputed liability.
  3. Consultant should ensure that all reply letters filed to the department must be duly acknowledged by the department.
  4. Consultant should ensure that Notices for scrutiny issued in the form of ASMT-10 were timely replied to in ASMT-11 and examined that the matter has been closed or proceeding for issuing Intimation for Demand under DRC-01A and DRC-01 is going on.
  5. Consultant should also examine whether prior to the issue of DRC-01, DRC-01A was issued or not.

4. Checklist – Internal Documents

4.1 Profit & Loss Account

  1. Consultant should scrutinize the Profit and loss account for the supply of goods and services towards domestic and export and scrutinize the other income viz. Scrap sale, Misc. Income, Insurance claims, sale of fixed assets, and Export incentives to examine whether the same are liable for GST and whether appropriate GST was discharged or not.
  2. Consultant should examine the expenditure side of the profit and loss account to ascertain the Input tax credit availed on Raw Materials, packing materials, processing materials, and stores items and also verify the transactions covered under Reverse charge basis under section 9(3) of CGST Act, 2017.

4.2 Trial Balance

  1. Consultant should scrutinize the Trial balance of registered locations for the full periods of compliance. Trial balance statements showing all balances of debit and credit transactions which were clubbed into the group and transferred to the profit and loss account and balance sheet.
    Consultant must ensure for correctness of data for a particular location for which he was appointed and also ensure that trial balance was prepared through Software like Tally/SAP or in Excel.
  2. In the case of the consultant observed that in trial balance grouping Post supply discounts were Grouped/subtracted with Sales turnover, the consultant should examine the conditions of discounts according to section 15(3) of CGST Act, 2017 complied with for admissibility of post supply discounts which are not reflected in Selling & Distribution expenses in trial balance.
  3. Consultant should verify the nature of transactions which are unusual or exceptional nature and select the same for detailed scrutiny from GST point of view. The consultant should examine the extraordinary income/prior period income Grouped in the trial balance under income and find out the impact of GST liability.
  4. Consultant should verify the Nature of transactions which are the nature of income which was shown in the credit side of the trial balance like Job work income, Interest income, Recovery for transportation charges, Commission and recovery from employees, and penalty from contractor/vendors. The consultant must examine that the correct GST liability was discharged on the same.

4.3 Notes of Accounts

  1. Consultant should examine the Notes of accounts carefully to ascertain any kind of GST liability that arises under section 17(5) and reversal of ITC for materials used for unproductive/non-business purposes.
  2. Consultant should examine the Notes of accounts relating to Share capital carefully to ascertain the holding/subsidiary company relationship of an entity or vice versa and the GST impact of the same according to Valuation Rules, 2017 towards related parties’ transactions.

4.4 Contingent liability

Consultant should also examine the disputed tax liabilities towards Customs/Income Tax/GST that were shown in Auditor Report; consultant must ensure that based on disputed tax liability find out any impact of GST liability.

4.5 Evaluation for Anti-profiteering

Consultant should also verify the accounting ratio, input-output ratio, and Gross Profit Ratio from tax audit report and see the impact under GST for anti-profiteering for any reduction in rate on any supply of goods and services and benefit of input tax credit under section 171 of CGST Act, 2017.

4.6 Creditor/Debtor/General Ledger

Consultant should examine the Creditor ageing/ledger, Debtor ageing/ledger, and general ledger and find out any GST liability for a payment not made to suppliers within 180 days and reversal required and similarly, advances received from debtors and applicability of GST on advances.

4.7 Fixed Assets Register

Consultant should also ensure that company also maintained ‘Fixed Assets Register’ and also ensure that proper internal control was there for acquisition and disposal of fixed assets and ensure for GST impact on the same. The consultant should also ensure that proper physical verification of finished goods and raw material was conducted during the year and shortage/excess was accounted properly with GST impact, consultant must ensure that ITC was not capitalized in Fixed assets and GST was discharged on sale of fixed assets according to section 18(6) of CGST Act, 2017 amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher.

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