Checklist for GST Audit of Traders

CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS

GOODS AND SERVICES TAX AUDIT MANUAL 2019

GSTAM ANNEXURE – XIII

Check list for Audit of Traders

1. INVOICING PATTERN:

1. Whether the invoice issued contains all the information prescribed in Rule 46 of CGST Rules and is being numbered accordingly

2. Whether revised invoice or credit note or debit note issued contains all the information prescribed in Rule 53 of CGST Rules

3. Whether the export invoice is being endorsed with the words “supply meant for export on payment of integrated tax” or “supply meant for export under bond or letter of undertaking without payment of integrated tax”

4. Whether the payment voucher issued for advance payment has been made as per Rule 52 of the CGST Rules.

5. Whether the receipt voucher issued for advance receipt has been made as per Rule 50 of the CGST Rules.

6. In case of a composition dealer U/s 10 of the SGST/CGST Act, whether bill of supply has been issued U/r 49 of CGST Rules.

7. Whether invoice has been prepared in triplicate in the case of supply of goods as per Rule 48(1) of CGST Rules.

N.B. – Significant omission/commission in the invoice should only be taken into consideration for taking action U/s 73 or 74 of the CGST Act.

2. RETURNS:

1. Check the outward supplies made from GSTR-1 and compare it with the sales account maintained.

2. Check whether claim under Nil rated, exempted and non GST outward supplies shown in GSTR-1 is proper.

3. Check whether proper rate of tax was applied to outward supplies shown in GSTR-1

4. Identify Zero rated supplies from the GSTR -1 and compare it with the records maintained by the trader.

5. Check the total taxable supplies from GSTR-1 and compare it with the sales account maintained to identify any suppression of sales.

6. Check whether the trader is filing returns within the time prescribed in Section 39 of CGST Act.

7. Cross-check the GSTR 1/2/3 with GSTR 3B of the corresponding month

3. INPUT TAX CREDIT AVAILMENT:

1. Check whether the trader possesses all the invoices on which ITC was availed.

2. Check whether input tax credit was claimed on any negative list of goods mentioned in Section 17(5) of CGST Act

3. Check whether input tax credit availed by the trader is in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, wilful misstatement or suppression of facts which is not eligible in terms of Rule 36(3) of CGST Rules

4. Check whether the calculation for reversal of tax when the input / input services are partly used for the purposes of business and partly for other purposes was done properly in terms of Rule 42 of CGST Rules.

5. Check whether the calculation for reversal of tax when the capital goods are partly used for the purposes of business and partly for other purposes was done properly in terms of Rule 43 of CGST Rules.

6. Check items on which ITC availed from GSTR-2 with purchase account maintained to ensure that the ITC was taken on the items actually purchased.

7. Check whether the trader has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 and availed the input tax credit on the said tax component which cannot be allowed in terms of Section 16(3) of CGST Act.

8. Check whether the trader has paid the value of supply to the supplier within 180 days from the of issue of invoice by the supplier in terms of Section 16(2)(d) of CGST Act to ensure that ITC was not taken in cases where consideration was not paid within the stipulated time.

9. Check whether ITC was taken within the time limit stipulated in Section 16(4) of CGST Act.

10. Detailed TRAN-1 Verification

a) To cross-check the veracity of information furnished under TRAN-1 vis-a-vis the books of account and last returns filed under the repealed Acts.

b) To check whether ITC has been properly claimed on Capital Goods as per the existing provisions of the State VAT Act.

c) Whether Inputs/Semi-finished goods/Capital Goods have been returned back to the Principal Place of business which were sent to Job Worker within the prescribed time as per Section 143.

d) To check proper availment of credit on transactions where trader has not submitted statutory forms under the CGST Act within the prescribed time.

e) Check whether the ITC taken after filing GST Tran-1 / Tran-2 is proper

4. VALUATION

1. Whether “Time of supply of goods” was properly determined in terms of Section 12 (2) of CGST Act while discharging the tax payable.

2. Whether time of supply of goods was properly determined in terms of Section 12(3) of CGST Act in case of payment under reverse charge and tax liability was discharged properly.

3. Check whether the discounts allowed are in accordance with regular practice of the dealer and the purchaser has paid the sum originally charged less the discount.

4. Check whether any amount , that the supplier is liable to pay but incurred by the purchaser has been included in the value of supply

5. Check whether interest or late fee or penalty for delayed payment of any consideration for any supply collected from the purchaser is included in the value of supply

6. Check whether there are supporting documents for the credit notes issued for the sales made

7. Check whether there are supporting documents for the debit notes issued for the sales made

8. To check the time of supply of goods in cases where there is change in rate of tax U/s 14 of CGST Act.

9. Whether the time of supply in case of Composite and Mixed Supply has been correctly made as per Section 8 of the CGST Act.

10. Check whether transactions have been made between related persons. If so, check whether there is significant variation in the value in comparison to similar transactions with unrelated buyers. If there is significant variation in the value of goods or services, market value of the goods/services should be taken by rejecting the value disclosed between the related persons.

11. Whether the value has been made in accordance with the Valuation Rules from Rule 27 to 35 of the CGST Rules 2017.

N.B. – Debit Note and Credit Note should have direct link to a transaction having implication on tax liability. Debit Note and Credit Note if not linked to implication of tax liability should be ignored.

5. PLACE OF SUPPLY

1. In respect of interstate supplies & Imports, check whether place of supply of goods has been properly determined in terms of Section 10 & 11 of IGST Act and IGST has been paid accordingly

2. To check whether place of supply of services has been properly determined in terms of Section 12 of IGST Act and IGST has been paid accordingly.

6. STOCK VERIFICATION

1. Check the physical stock of taxable and risk-prone commodities which can be quantified.

2. Check whether the stock-in-trade found at the time of Audit Visit tallies with the books of accounts maintained.

8. OTHER CHECKS

1. Total taxable turnover as per GST Return vis-à-vis turnover as per financial accounts.

2. Ratio between net purchases vis-à-vis Net Sales (Net Purchase = O.B. + Purchases – C.B.)

3. Value of Closing Stock vis-à-vis ITC balance.

4. Value addition percentage vis-à-vis cash payment of GST to total liability

5. Any other registrant in the name of family member just on paper.

6. Turnover before GST introduction to check suppression in value.