Financial year 2017-18 was first year of Goods and Service Tax implementation, so many mistakes had came to notice at the time of GST audit. It was natural to make mistakes, but it’s important to learn from the mistakes and to correct it. So, following are few common mistakes which have been seen and need to take care of for GST audit of FY 2018-2019 :
1. Confusion in GST Audit turnover
There was a big confusion of turnover for determining applicability of GST audit for FY 17-18. But now onwards, turnover will be of whole year, i.e, from 1st April 2018 to 31st March 2019. The GST audit will be required by the taxpayer having annual turnover more than Rs. 5 Crore.
2. Reconciliations for GST Audit
Many taxpayers were not ready with the reconciliation of the returns and books of accounts maintained. Different data entered in GSTR 1 and GSTR 3B as per the understanding of the taxpayer. For avoiding last minute chaos, it is advisable to make sure you are ready with following pairs of reconciliations :
- Accounting Books vs GSTR 3B
- Books vs GSTR 1
- Books vs GSTR 2A
If any mistake is noticed in the reconciliation, same should be drilled in deep and get it resolved, so correct data can be identified and reconciled in the GST audit.
Read Also: GST Notice – Top Reasons, Types & Response
3. Reversal of Input Tax Credit for non – payment in 180 days
Input tax credit shall be reversed, if payment is not made within 180days of date of Invoice. Hence, we need to check the invoices from the month of October 2017.
For example, if there was purchase invoice, having date as 21st Oct 2017, in case of non payment, ITC shall be reversed in the month of April 2018. Though, this invoice pertains to the FY 17-18, credit is required to be reversed in FY 18-19. This is most common mistake and need to be taken care of.
4. Rate wise classification of Taxes for GST Audit
Rate wise classification of liability is required to be calculated. As GST Audit was new in last year, many have not prepared proper books of accounts, so this classification was available not much readily, though it can be traced from GSTR 1 filed. Hence, it is advisable, if it’s not available now even, better you start preparing it now.
5. Taxes on Reverse Charge Mechanism (RCM)
The tax on RCM is payable in cash and also ITC on same can be availed in the same month. This was not clear in the FY 17-18, but it’s clear now. But needs to be taken care whether taxes on RCM has been paid in cash properly or not.
6. Turnover of 17-18, declared through amendments in FY 18-19 :
This is most important point from audit prospective. There are major chances that supplies/ taxes might be declared in next year, hence we need to consider properly in the reconciliation of turnover and taxes as well.
7. ITC availed for 17-18, but claimed in FY 18-19
Again this is similar to the point 5, so it is important to consider effect of this Input Tax Credit (ITC) in the reconciliation of ITC.
8. Taxes paid/credit availed in FY 19-20
Now this is the opposite of the above point, if taxes are claimed or paid in next year which are relevant for FY 18-19, this should also be verified and accounted properly in the reconciliation statement.
9. LUT details
The date on which LUT is generated and from when export supplies are made, should be cross verified. If export supplies are made before the LUT, same shall be done after payment of taxes.
10. Refunds and Demands issued
If any refund has been claimed, sanctioned, or demand has been issued, proper maintenance and understanding of record is required to go through these matters at the time of Audit.
11. Computation of Interest and late fee
Interest calculations on liability @ 18% p.a. is required to be made and auditor is required to check whether same has been deposited timely by the taxpayer. Also, if notices have been issued by department for the payment of interest, whether same has been properly dealt with.
12. Self invoicing in case of RCM
In case of RCM, taxpayer is required to do self invoicing for payment of GST under Revese Charge Mechanism (RCM).
13. Bifurcation of ITC availed
The ITC has to be bifurcated in purchases and different kind of expenses like Freight, Employee’s cost, Bank charges, Capital Goods, etc. From Profit and Loss Account, expenses can be identified easily, it should be classified in proper heads.
14. Checking the correct availment of ITC for GST Audit
The supplies which are used for personal purpose, or partly for exempted and partly for taxable supplies should be identified. The taxes on same shall be disallowed in the proportion.
This is the list of precautions to be taken by the taxpayer and auditor for the GST audit of FY 18-19. These are the points, which has consumed lots of time or attention while conducting the audit of FY 17-18. The above list is not limited.
Read Also: Form 26AS importance in GST
15. Matching GST Audit Turnover with Income Tax Turnover
Disclosing Turnover under Goods and Service Tax and Income Tax is matter of confusion now-a-days. As GST Turnover definition is somewhat different from Income Tax Turnover. However, now both the department will exchange the information with each other. Therefore, one needs to take care in reporting turnover under Income Tax and GST. Read More : GST Turnover v/s Income Tax Turnover
For any questions, you may reach us at Discussion Forum
The author of above article is CA Ankita Gandhi.