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Internal Audit in GST - GSTR-1, GSTR-3B, GSTR-2A, and More

Shweta 
on 14 December 2020

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What is an internal audit under GST?

Internal audit under GST refers to the examination of the accounts and records of a GST registered business/individual by a certified accountant. This is done by analyzing the turnover, GST paid, refund availed, Input Tax Credit claimed, etc. The internal audit team is responsible for analyzing books of records against GST returns to identify and rectify any mismatch and ensure compliance with the GST laws.

For an internal audit, specific testing procedures need to be kept in mind. Here is a checklist of a few of the methods that need to be adhered to:

1) Matching GSTR 3B with GSTR 1 and GSTR 2A

Every registered business has to file a monthly self-declaration of the summary of the inward and outward supplies in GSTR 3B and pay the tax liability accordingly. They also have to file GSTR-1 on a monthly or quarterly basis based on the turnover limit. In GSTR-1, invoice-wise details of outward supplies are detailed. Based on the GSTR-1, the GST portal auto-populates GSTR 2A return, which is a purchase-related tax return. The internal auditor has to ensure that there are no contradictions between the values in GSTR 3B, GSTR 1, and GSTR 2A forms.

Internal Audit in GST - GSTR-1, GSTR-3B, GSTR-2A, and More

a) While matching GSTR 3B with GSTR 2A, the auditor should ensure that the assessee has not claimed excess Input Tax Credit. A higher claim attracts an interest of 24% on the extra tax amount claimed. In case a higher input tax credit has been claimed, the assessee should make sure that they pay the interest and tax amount before the due date.

b) There might be instances where the supplier has shown an invoice in GSTR-1 but has not paid tax on that invoice in GSTR-3B. The auditor's responsibility is to reconcile the total summary figures as per GSTR 3B with that of the outward invoices in GSTR 1 for a given month.

2) If there are some data gaps in GSTR1, the auditor must recommend the management to make amendments to each invoice and details at the summary level.

3) GST Compliant Invoices

The internal auditor should make sure that the invoices are in the correct format and the requirements of GST invoice rules are met. In case the invoice is not according to the rules, a fine of INR 25,000 may be imposed. To avoid this, the auditor must make the checks and ask the management to make the necessary changes.

Apart from this, the auditor is also responsible for checking the date of issuance of an invoice and the payment date against such an invoice. This is to figure out the transactions where the recipient has made the payment to the supplier after 180 days. In case the payment exceeds 180 days, the recipient organization's input tax credit is reversed and is added to output tax liability.

 

The auditor should also check if the payment amount is equal to the invoice amount with GST. If the payment amount is less than the invoice amount plus GST, then input tax credit to the extent of deficit payment must be reversed.

4) E-way Bill with Invoices

An e-way bill must be generated in certain conditions when the transporter moves goods from one place to another in a motor vehicle. It is generated when the value of goods being transported is more than INR 50,000. However, there are certain specified goods for which the e-way bills need to be developed even if the value of the consignment is less than INR 50,000. It is to be noted that an e-way bill once generated, can't be edited or deleted. However, it can be canceled within 24 hours if no movement of goods occurs or if the movement is different from the one mentioned in the bill. You can read more on e-way bills here.

 

It is the auditor's work to ensure that the business is complying with the rules concerning e-way bills as any discrepancy can attract a penalty.

5) The auditor has to see to it that the stock and capital goods lying with the job workers are received back within one year and two years of GST implementation (30th June 2017), respectively.

If the goods and machines are received back after the due date then it will be considered as a purchase from an unregistered supplier.

Thus, for the purpose of internal audit, it is essential that the records are clearly categorized and maintained so that the examination is conducted in a hassle-free manner. o:p>


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