GST Audit Checklist Explained: Compliance Failures That Trigger Tax, ITC Reversal & Deemed Supplies; GST Audit Reveals ITC Risks Due to Section 16, Rule 42/43 & RCM Non-Compliance; GST Audit Checklist: Why Incorrect Classification, LUT Lapses & Export Errors Invite Scrutiny; GST Audit Findings Explained: Vendor Payment Delays, Capital Goods Sale & ITC Reversal Issues; GST Audit Checklist Highlights Deemed Supply Risks in Job Work & Sale-on-Approval Transactions; GST Audit Focus Areas: Branch Transfers, Related-Party Valuation & Rule 86B Cash Payment.
The GST Audit Checklist provides a comprehensive framework to verify end-to-end compliance under the GST law by examining registration accuracy, transaction classification, tax payment, and input tax credit (ITC) eligibility. It begins with validating GST registration details, amendments, branch registrations, and any cancellation or suspension impacts, followed by checking applicability and compliance with e-invoice and e-way bill provisions. On the outward supply side, it requires verification of correct GST payment on taxable income, proper classification of supplies, accurate rates, HSN/SAC, place of supply, and treatment of advances, particularly for services. Special focus is placed on exempt, nil-rated, non-GST, export, and zero-rated supplies, including ITC reversals under Rules 42 and 43, LUT validity, refund accuracy, and timely realisation of export proceeds. For inward supplies, the checklist emphasises reconciliation of ITC with GSTR-2B, fulfilment of Section 16 conditions, adherence to time limits under Section 16(4), reversal of ineligible ITC under Section 17(5), treatment of capitalised expenses, and compliance with reverse charge mechanism (RCM). It also covers vendor payment within 180 days, re-availment of ITC, GST on advances, and tax treatment on sale of capital goods. Further, it addresses ITC reversals on sale of securities, treatment of interest income, utilisation rules including Rule 86B, job work compliances and deemed supply implications, GST TDS/TCS reconciliation, valuation and taxation of branch or related-party transactions, and sale-on-approval provisions, ensuring that missed timelines correctly trigger deemed supplies and tax liability.
GST AUDIT CHECKLIST
| Particulars | Remark |
| Registration & Basic Profile | · Verify GST registration details (legal name, trade name, address, nature of business).
· Check additional places of business and branch registrations. · Verify amendments made during the year (timely filing). · Check cancellation / suspension, if any, and its impact. |
| Applicability of E-Invoice | · Check the compliances |
| Applicability of E-Way Bill | · Check the compliances |
| Outward Supplies / Income Side | · Verify whether GST is correctly paid on all taxable income.
· Classification of supplies: taxable, zero-rated, exempt, NIL-rated, non-GST. · Verify correct GST rate, HSN/SAC, place of supply. · Check advances received and GST liability (especially for services). |
| Exempt / Nil Rated / Non-GST Supplies | · Identify exempt, nil-rated and non-GST supplies.
· ITC reversal under Rule 42 & Rule 43 correctly computed and reversed. |
| Export & Zero-Rated Supplies | · Export with payment of tax – refund correctness.
· Export without payment of tax: |
| Inward Supplies / Expenses Side | · Verify ITC availed with books vs GSTR-2B.
· Compliance with Section 16(2) conditions: · Time limit under Section 16(4) – ITC not claimed beyond statutory limit. · Check ineligible ITC reversed correctly (Section 17(5)). · Verify capitalization vs revenue expenses impact on ITC. · Check RCM liability on notified services and supplies. · Verify timely payment of RCM and ITC availment thereafter. |
| Creditors & Payments | · 180 days payment condition: ITC reversal for non-payment to vendors.
· Re-availment of ITC on subsequent payment. · Check GST implication on advances received for services (GST paid on advance?). |
| Capital Goods / Fixed Assets | · Sale of Fixed Assets: • Check whether GST paid on transaction value OR • ITC reversed as per applicable provisions. |
| Investments & Other Income | · ITC reversal on sale of shares, mutual funds, securities. The value of security shall be taken as 1% of the sale value of such security (Explanation to Rule 45).· Interest income treatment and related ITC impact. For the purpose of Rule 42 & Rule 43, interest on loan or FD will be excluded from exempted income (except Bank, FI & NBFC) as per Explanation 1(b) of Rule 43. |
| Utilisation & Payment of Tax | · Rule 86B applicability – minimum 1% cash payment compliance. |
| Job Work Transactions | · Movement of goods under job work challans.
· Timely return of goods from job worker: |
| TDS / TCS under GST | · Applicability of GST TDS / TCS provisions.
· Reconciliation with GSTR-7 / GSTR-8. · Timely deduction/collection and deposit. · Credit reflected in electronic cash ledger. |
| Branch Transfers / Related Party Transactions | · Supplies between distinct persons.
· Valuation as per GST rules. · ITC availment by recipient branch. · Proper invoicing and tax payment. |
| Sale on Approval Basis | · Identification of goods sent on approval.
· Time limit for return of goods. |
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