Checklist for GST Audit of Composition Taxpayers

By | July 11, 2019
(Last Updated On: July 13, 2019)

CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS

GOODS AND SERVICES TAX AUDIT MANUAL 2019

GSTAM ANNEXURE – XIV

CHECKS FOR COMPOSITE DEALER

 

Source DocumentsManner of Ratio Calculation/ StudyUtilisation of the Ratios/Study in Audit
1GSTR 9 A as well as Profit & Loss accountReconciliation of TurnoverTo check whether turnover is under prescribed limit or not as P & L account provide turnover of all business related to a PAN
2GSTR 9 A & Profit & Loss Account/ Income & Expenditure AccountBreak up of Sales/Revenue from operationsBreak 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
3Balance Sheet & GSTR-9 A ReturnITC availedAvailment of ITC can be checked with regard to study of exclusion as provided under Section 10 of CGST Act, 2017
4GSTR-9 A ReturnITC reversalITC reversal is required while opting in composition scheme
5Profit & Loss Account and GSTR 9A ReturnExpenditure incurred on inward supplies vis a vis tax paid under RCMThe 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.
6Profit & Loss Account and GSTR 9A ReturnAmount of GST shown in expense sideAs 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
7Profit & Loss
Account/Trial
Balance.
Scrap Sales: SalesIf ratio in the current year is lower, it may be on account of the clearance of scrap without payment of Tax
8Director’s Report in Annual Report and Quantitative details of production from Profit & Loss AccountPower Consumption/Fuel consumption(Qty): Production QuantityTo identify suppression of production resulting into supply of unaccounted Goods without payment of Tax
9Annual Report and documents pertaining to installed machinery.Quantity of actual production (Nos./Kgs./Lt) : installed capacityIf the ratio is decreasing, there is a possibility of suppression of production and subsequent supply of Goods without payment of Tax
10Schedule 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.
11Balance SheetSchedule of Current LiabilitiesFrom 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.
12Notes on AccountsStudy of Notes on AccountsNotes of Significant Accounting Policies may be studied to find out the accounting policy in the areas like revenue recognition
13Trial BalanceStudy of Income AccountsUnusual 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.
14Trial BalanceStudy 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.

 

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