GST Audit Check list for Composition Taxpayer

Bimal Jain  on 15 July 2019


The CBIC has issued GST audit Manual 2019 after approval by the Board. The Board vide its letter F. No. 221/03/2013 - CX-6 dated August 30, 2018 requested to Directorate General to prepare a manual on Audit in GST for the consideration of the Board. The said GST audit manual contains check List for the audit of Composite Dealers in GSTAM - Annexure XIV.

Detailed Checklist as per GSTAM -Annexure XIV is as under:


S.No.

Source Documents Manner of Ratio Calculation/ Study

Utilisation of the Ratios/Study in Audit

1.

GSTR 9 A as well as Profit & Loss account

Reconciliation of Turnover

To check whether turnover is under prescribed limit or not as P & L account provide turnover of all business related to a PAN

2.

GSTR 9 A & Profit & Loss Account/ Income & Expenditure Account

Break up of Sales/Revenue from operations

Break up is to be checked with regard to income from Supply of Goods or Services with regard to study of exclusion as provided under Section 10 of CGST Act, 2017
3.

Balance Sheet & GSTR-9 A Return

ITC availed

Availment of ITC can be checked with regard to study of exclusion as provided under Section 10 of CGST Act, 2017

4. GSTR-9 A Return ITC reversal ITC reversal is required while opting in composition scheme
5.

Profit & Loss Account and GSTR 9A Return

Expenditure incurred on inward supplies vis a vis tax paid under RCM

The expenditure incurred on inward supplies (on which tax is liable to be paid under RCM) as provided in expenditure side of P& L Account can be matched with the value of such inward supplies as mentioned in GSTR 9A, if any discrepancy found, checks can be performed in details during audit.

6.

Profit & Loss Account and GSTR 9A Return

Amount of GST shown in expense side

As per Section 10 (4) of CGST Act, 2017, a composition dealer cannot recover tax from his customers on outward supply and tax is supposed to be borne by him from his own pocket. In other words Tax amount should be a part of the cost and should reflects in the expense side of P&L account. This can be verified and also reconciled with GSTR-9A return
7.

Profit & Loss Account/Trial Balance.

Scrap Sales: Sales

If ratio in the current year is lower, it may be on account of the clearance of scrap without payment of Tax

8.

Director’s Report in Annual Report and Quantitative details of production from Profit & Loss Account

Power Consumption/Fuel consumption(Qty): Production Quantity

To identify suppression of production resulting into supply of unaccounted Goods without payment of Tax

9.

Annual Report and documents pertaining to installed machinery.

Quantity of actual production (Nos./Kgs./Lt) : installed capacity

If the ratio is decreasing, there is a possibility of suppression of production and subsequent supply of Goods without payment of Tax

10.

Schedule of Quantitative details of tax Audit Report as required under Section 44AB of Income Tax Act,1961

Study of Quantitative details of raw Material as well as Finished Goods

Along-with the Profit & Loss Account, quantitative details of the consumption of major raw materials is also required to be given. Such quantitative details show the quantity of major raw material consumed and Production thereof. Such information may be helpful in working out the input-out ratio which can indicate suppression of production of goods and supply thereof without payment of Tax.

11. Balance Sheet Schedule of Current Liabilities

From the grouping of this schedule, Advance received from Buyers can be noticed. If any advance is received, then payment of Tax in the light of “time of supply of services” can be verified.

12. Notes on Accounts Study of Notes on Accounts

Notes of Significant Accounting Policies may be studied to find out the accounting policy in the areas like revenue recognition

13. Trial Balance Study of Income Accounts

Unusual income accounts may also be noticed in the Trial Balance. However, such accounts will not be reflected in the Profit & Loss Accounts as these accounts are adjusted against other accounts. Such account may be selected for finding of exact nature and detailed scrutiny.

14. Trial Balance Study of Expenditure Accounts

Some of the expenditure accounts on which RCM is applicable should also be selected to find out whether Taxpayer has paid Tax or not. For instance, Payment made towards Sponsorship services may be clubbed in the category of Advertisement and Sales Promotion Expenses which can be identified only from the Trial Balance. Similarly, freight paid may be clubbed with Purchases or Fixed Assets.


The Complete GST Audit Manual 2019 - GSTAM can be accessed here


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