How you verify GST before Statutory Audit?
Verification of Outward Supplies (i.e. Payable side):
1. Check the Credit side of the Statement of Profit and Loss (SPL) in order to track the items which are chargeable to GST. Even, some amounts of credits have also been credited to Expenses account which is to be deeply scrutinized. Main Focus should be on Reimbursements, Interest on Delayed Payments, Liquidated Damages which are chargeable to GST.
2. Make a Reconciliation of Sales as per GSTR 3B (Summary Return), GSTR 1 (Return of Outward Liability) and Sales as per Sales Register. You can track the completeness of the Revenue by ensuring the Serial Number of Invoices issued from GST Return.
3. Check whether the Invoices have been issued within the prescribed time (i.e. On Removal in case of Goods or 30 days from the date of service in case of services).
4. Check whether any stock is standing with any Agent (C&F etc.) and ensure that adequate GST has been paid on removal of goods to agent even without consideration (i.e. where only commission contract exist with the Agent).
5. Check the Property, Plant and Equipment (PPE) Register (FAR) in order to track the location of the PPE to ensure that no PPE has been transferred to non-business purpose even without consideration.
6. Check whether Credit Notes are raised only for value reduction, quantity reduction, tax reduction and Goods Returns and not for any other purpose.
7. Ensure proper tax treatment of Discounts especially that discounts which have not been shown in the Invoice. Discounts are not allowed to be deducted in order to ascertain value for GST unless:
a. Shown on Invoice.
b. Not shown on Invoice but agreed on or before supply and linked to invoices BUT PROPORTIONATE ITC SHALL BE REVERSED.
8. Check the compliance of Reverse Charge Mechanism (RCM) in case of procurement from unregistered Persons under Section 9(4) of the CGST Act, 2017 for the period from 01.07.2017 to 12.10.2017.
9. Check whether Zero Rated supply (i.e. Exports or SEZ) has been made with duty payment or under Letter of Undertaking (LUT). In former case, ensure that the GST payable shall be booked by debiting GST Refundable. In the latter case, check the LUT and its period.
10. Ensure provisions in relation to Composite and Mixed Supply. (Composite Supply: Time, Rate and Place of Supply as if Principal Supply has been made, Mixed Supply: Time, Rate and Place of Supply as if Highest Rated Supply has been made) if you come across combined supply.
11. In case any Job Worker has been engaged, then check the details of goods sent, whether quarterly returns under form GTR ITC-04 have been filed by the Company.
Verification of Inward Supplies (i.e. Credit side)::
1. Check month on month (MOM) balance of Electronic Credit Register with the Input of GST accounted for in the books of account.
2. Blocked Credit: No ITC Zone (i.e. No ITC will be available) for:
a. Purchase of Motor Vehicle, Aircraft etc. (except B2B).
b. Transportation of Passengers.
c. Insurance Policies.
d. Restaurant/ Food Bills.
e. Work Contract (e.g. Repair and Maintenance of Immovable Property).
f. Procurements for Free Samples, Goods Lost, Destroyed, Stolen.
g. Hotel accommodation services received from outside the state.
h. Club Membership.
3. Check proper particulars are mentioned on the Invoices of Inward Supplies received by the Company otherwise no credit is allowable.
4. In case any Capital Good has been sold, check whether proper adjustment on utilization basis (i.e. allowing 5% per quarter or part thereof) have been carried out.
5. Check the Transitional Credit taken by the Company from the Transitional records as well as returns of earlier IDT regime.
6. Check whether the liability on account of RCM has been properly paid and taken as credit only after payment of the same (and not from utilization of Credit).
7. Check the ageing of the Creditors and scrutinize the creditors outstanding from more than 180 days as on March 31, 2018. Obtain Invoice wise details of the same and GST paid on the same is to be paid as output tax liability in the month in which 180 days expires.
8. Make sure that no credit of Swach Bharat Cess (SBC), Krishi Kalyan Cess (KKC), and Education Cess will be carried forward on transition date and the same has been expensed off.
Returns and Interest/Late Fees:
1. Ensure that the Company has filed all the GST Returns timely otherwise proper late fees have been paid for the delay period.
2. Check whether the payments of GST have been made within the prescribed time, otherwise Interest at the rate of 18% is required to be for the period of delay.
Netting of for the purpose of Financial Statements
1. Netting off of GST Liability and GST Credit is to be made State wise and Nature wise (CGST/SGST/UTGST/IGST). However, State wise netting can be made of IGST with CGST/SGST/UTGST and vice versa since credit of IGST is allowable from the amount of CGST/SGST/UTGST to be paid and vice versa.