SUB GST p2.7

Preparation, Practices & Planning under GST audit

22 May 2020

Audit means the examination of records, returns and other documents maintained or furnished by a registered person under Goods and Services Tax Act are the rules made thereunder any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claim and input tax credit availed, and to assess his compliance with the provision of Goods and Services Tax Act and the Rules made thereunder.

Preparation for GST audit 

An auditor can take in connection with the GST audit may be listed as below: 

• Applicability of the GST audit to be informed to the concerned assessee. 

• Confirm the eligibility to be the GST auditor under the related legislation. 

• Understand the nature of the business, the products or services, requirements of records to be maintained, and advise the client to maintain accounts and records so required. 

• Prepare a questionnaire to understand the operations/activities of the auditee, and specifically develop questions on which the GST law would have an impact. 

• Preparation of detailed audit program and list of records to be verified. 

• The host of elementary cancellations. 

Practices to be adopted for GST audit 

The auditor should evaluate internal controls to identify the areas to be focused on. For this purpose, college practices adopted: 

• Auditor main verifies the following: 

• Statutory audit report which has specific disclosure with respect to the maintenance of record, stock, and fixed assets. 

• Information system audit report and internal audit report. 

• Internal control questionnaires may be designed for GST compliance. 

• Generalized audit software baby used for GST audit which would and sure adoption of modern practices of the risk-based audit. 

• Reconciliation of the books of account or reports from the ERP’s to the return is also useful. 

• A trial balance should be reviewed for detecting any set-off of expenses against incomes. 

• Purchase/expenses are to be reviewed to examine the applicability of reverse charge applicable to goods/services. 

• Reconciliation of foreign exchange outgo would also be necessary to identify the liability of the import of services. 

• Ratio analysis may provide important information on areas of non-compliance. 

Audit planning 

The auditor should obtain an understanding of the organization processes with respect to: 

1. Accounting of transactions 

2. Reporting to the GSTN portal 

3. Reconciliation of field data 

4. Internal control system implemented 

In planning the position of the audit which may be affected by the client’s CIS environment, the auditor should obtain an understanding of the significance and complexity of the activities and the availability of data for use in the audit. 

Before starting his work, the GST audit cal conducts a preliminary review to assess the CIS controls and the risk that could impact his work by considering the following points: 

1. Knowledge of the business 

2. Understanding the technology deployed 

3. Understanding internal control system 

4. Risk assessment and materiality 

Consequences of failure to submit the annual return and not getting the accounts Audited

In case of failure to submit the annual return within the specified time, a late fee shall be leviable. The state did she would be a hundred rupees per day during which such failure would have a continuous maximum of a quarter of the turnover in the state/union territory. There would be an equal amount of late fees under the respective state/union territory GST law. 

However, there is no specific penalty prescribed in the GST law for not getting the accounts audited by a Chartered Accountant or a Cost Accountant therefore in terms of the GST Act he shall be subjected to a penalty of up to RS.25000.