GST RETURNS ANALYSIS FROM GST AUDIT PERSPECTIVE

This is a most vital area before commencement of the Audit program. A great deal of the groundwork can be done upon analysis of the available return figures and thereby having a prima-facie idea of the business trend of the auditee.

Illustrative steps that may be considered for an effective Return Analysis:

HSN code of the goods and/or SAC of the services dealt in by the RTP should be verified where available to ensure that such are in conformity with the schedules/notifications and it is to be checked that the proper rate of tax thereupon was applied on outward supplies as shown in Form GSTR-1 & Form GSTR-3B.
Time of filing of returns should be noted and should be checked to confirm whether the returns were filed within the prescribed time.
Outward supplies as declared in Form GSTR-1, Form GSTR-3B and GSTR-9 should be compared with the Books of Accounts as maintained and produced by the auditee. The reconciliation statement, in case of any difference, is required to be examined with supporting documents and explanations along with Form GSTR-9/9A and Form GSTR-9C, if such have been submitted by the auditee.
Claim of the RTP under different heads like – Zero-rated, Nil rated, Exempted and non-GST outward supplies, etc. as shown in Form GSTR-1, Form GSTR-3B. The reconciliation statement, in case of any difference, is required to be examined with supporting documents and explanations along with Form GSTR-9/9A and Form GSTR-9C, if such have been submitted by the auditee.
Amount appearing under the head ―Advance received‖ needs to be reviewed carefully since GST is applicable on ―Advance received‖ against future ―supply of services‖. As per Notification No.66/2017 – CT. dated 15.11.2017; payment has been delinked to determine time of supply in case of supply of goods.
Transactions like import of services and transactions between related parties and activities specified in Schedule-I which are required to be considered as supply even without consideration are required to be examined thoroughly. These cases would require very cautious examination of the books of accounts, final accounts, P/L account and balance sheet to determine whether there are any such transactions which are not reflected in the returns. Some illustrative examples are given in Annexure 15 (p. 219) for understanding of the matter.
Goods sent for approval and goods sent to job workers should be examined with the books of accounts.
Data in respect of e-way bills, both inward and outward, should be verified with the books for compliance level analysis. It may happen that the total value of outward e-way bill grossly differs with the total outward supply. In that case one should go through the details into the accounts.
Refund may be made to the auditee on account of export with or without payment of tax. In such cases, the veracity of export claims need to be checked. For this, the shipping bill details should be checked with the ICEGATE portal; in case of high volume of export through non-EDI check posts where the shipping bill details cannot be verified through ICEGATE portal, extra caution should be exercised in scrutinising the shipping bills in support of the export claims.
In the case of export with payment of tax, if the value of export is found to be significantly higher than similar products sold in the domestic market in depth scrutiny of the payment received in respect of the export is required since there may be a possibility of monetizing excess ITC. (For determining the value of export the value may be calculated as prescribed in rule 89(4)( C) of the CGST Rules,2017 i.e. the value which is 1.5 times the value of like goods domestically supplied by the supplier)
In respect of claim for refund of unutilized ITC on account of zero- rated supply, adequate caution is required to be taken so that, ITC on account of transitional credit, capital goods are not claimed for refund.
Claim for refund of unutilized ITC may be made on account of inverted tax structure. In such cases, (i) verification of the classification of inputs and output supplies and the respective rates of taxes attracted by them is very crucial; (ii) Refund of unutilized ITC in accordance with section 54(3)(ii) of the CGST/SGST Act is provided where credit has accumulated on account of rate of tax on inputs being higher than rate of tax on output supplies.
The claim of ITC of an auditee should be checked against fulfilment of the conditions laid down in the Acts and Rules made thereunder.
If usage of ITC for payment on account of export is significantly high, in depth scrutiny of the availment of ITC is warranted.
In depth checking is needed in respect of goods and services on which ITC is blocked.
Some illustrations in respect of the provisions of input tax credit are attached as Annexure 11 (p.163).
Enquiry should be made to confirm whether any specific Advance Ruling/Appeal Order of Advance Ruling is applicable for any of the supplies made by the auditee.
Output tax payment is required to be examined to ascertain interest liability. Any output liability which has been discharged other than by Form GSTR 3B is required to be examined as to whether interest (if applicable) has also been paid for the same or not.
Checking should be done in respect of interest and late fee payable as per notification(s).
All possible areas related to compliance issues that may result in short payment or evasion of tax are also required to be checked.