CHECKLIST FOR COMPOSITE DEALER
Sr No | Source Documents | Manner of Ratio Calculation/ Study | Utilization of the Ratios/Study in Audit |
1 | GSTR 9 A as well as Profit & Loss account | Reconciliation | To check whether turnover is under the specified limit as per the Act |
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 PGST Act, 2017 |
3 | Balance Sheet & GSTR-9 A Return | ITC availed | As Composition taxpayer is not entitled to availment of ITC it needs to be verified. |
4 | GSTR-9 A Return | ITC reversal | ITC reversal is required while opting in composition scheme from regular tax regime. |
5 | Profit & Loss Account and GSTR 9A Return | Expenditure incurred on inward supply vis a vis tax paid under RCM | The expenditure incurred on inward supply (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 supply 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 on expenditure side | As per Section 10 (4) of PGST 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- 9 Are turn |
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/Fu el 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 | 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. |
13 | 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 |