Guidance Notes on – GST Audit under Sec.65 read with Rule 101 and Sec.66 Read with 102 of Goods and Services Tax Act, 2017 Part-2
By, B. S. Seethapathi Rao , Tax Consultant, Kakinada. Dated.12.01.2022.
Part-1 . Click here
Part-2, is as below
P) Form GST DRC-01 is the summary of the show cause notice prescribed in rule 142 and must “accompany” a show cause notice. Show cause notice is incomplete unless accompanied by this summary in FORM GST DRC-01. There is a reference number for this summary of show cause notice, and both must be served simultaneously as a single document ti the taxable person.
Q) Structure of show cause notice:- It must include all “ingredients” that will sufficiently be considered that taxable person is “put at notice” . The key ingredients required are:-
(i). Facts are defined to be “incident” , act, event, or circumstances. A fact is something that has already been done or an action in process. It is an event that has definitely and actually taken place, and is distinguishable from a suspicion, suggestion or belief. A fact is a truth as opposed to fiction or mistake”, and only undisputed facts are to be stated as “Fact”. Fact –in-issue is that fact which has a bearing on the issues involved in the show cause notice. Acts that are not relevant to the issues involved are not to be included in show cause notice. Undisputed facts do not require proof. But disputed facts or facts that are likely to be disputed need to be proved.
(ii). Actions that result in violations must be stated very clearly. What exactly has been done by taxable person can reply in defence whether the said actions have or have not been done and submit evidence to establish innocence. It is not sufficient to state “tax has not been paid”, that would be the result of this action. Action itself needs to be proved. Duty to prove (also called onus of proof) lies on person making assertion. In other words, allegation of violation of law requires revenue authorities to substantive the allegation with proof. Higher the violation , greater is the required proof. Proof may be of different types depending on the source and quality. Proof varies in degree, but proof must establish allegation to the satisfaction of a court and not just in the opinion of Proper issuing show cause notice.
(iii). Allegation on taxable person must also be specific. It is not sufficient to approximately lay the charges. That is, if output tax is payable, the actions of taxable person must be clearly specified in the show cause notice . It is not enough to state that “taxable person has made supply is liable to tax”, it must go into more specific details about “form” of supply that is alleged to be made. And explain how that particular form stands satisfied in the “facts” of the case. Form the actions., the violations by taxable person will emerge. That is, whether output ta is payable which has not been discharged or whether output tax which is collected ha snot been deposited. Clue may be taken from the words stated in Section 73 and Section 122 of CGST Act,2017, to frame the exact nature of violations and unclear description of violations are also not sufficient
requirement in law.
iv). Cause of action refers to the exact provision of law that has been contravened by the violation and the course that the law prescribes to be taken in view of the said violation due to the action of taxable person.
This is very important ingredient in the show cause notice. If any cause of action is omitted, even if the demand is valid, it cannot be confirmed by an adjudicating authority or appellate authority or a Court.
Opportunity for personal hearing is a very important constitutional guarantee that must be allowed. Refusal to grant adjournment is not reasonable unless repeated adjournments are sought without any valid reasons.
Demand for tax on outward supply requires allegations to be specific not only regarding supply but the exact form of supply involved.
R. Limitation is the maximum time-limit or the “end date” by when show cause notice must be issued. If show cause notice is issued late, then demand will not be legally valid. As well understood, there are two limitation periods prescribed.
(i) For which the show cause notice may be issued under Sec.73 of CGST Act.
Care must be taken that a show cause must be issued under Sec.73 and not merely as “show cause notice”. The “substance and effect” may be that of a show cause notice but unless stated to be under a Section 73 , not even Section 160 (1) of CGST /SGST Acts,2017 can come to the audit officer’s rescue; and
(ii). For which show cause notice may be issued under section 74 of CGST/SGST Act,2017.
Apart from the points made under Section.74, please note that a show cause notice must also allege and refer the “Special Circumstances” required for a show cause notice under Sec.74. These “special circumstances are , (i) fraud or (ii) wilful misrepresentation or suppression of facts to evade tax. If a show cause notice is issued under section 74 (due to allegation of special circumstances)are not proved by revenue then, such a show cause notice will be “ deemed” to be a show cause notice under Sec.73. Refer Section 75(2) which makes this clear and demand to be now made will stand automatically readjusted to (i)reduced period of demand (ii) with full extent of reduction of penalty in section 73.
S. Issue of Statement and its summary in Form GST DRC-02 under Section 73(3) or Section 74(3): Issue of Statement and its summary in Form GST DRC-02 in a case where it is felt that the short payment of tax is suspected to be present in the periods other than tax periods covered in Form GST DRC-01, a Statement is prepared under Section 73(3) or Sec.74(3) and the same must observed along with the summary of such statement in Form GST DRC-02. This is deemed to be a notice issued under Section 73(1) or Sec.74(1) for the tax periods covered under Section 73(3) or 74(3) as per Section 73(4) or Sec.74(4) as the case may be.
T. Action to be followed:
(i) Show cause notice along with summary in Form GST DRC-01 to be Issued,
(ii) Statement under Sec.73(3) or Sec.74(3) along with Form GST DRC-02, where applicable , to be issued,
(iii) Sections of law under which action is proposed must be correctly referred without omission as it can adversely affect outcome.
(iv) All relevant evidence relied upon must be enclosed with show cause notice.
U. Actions NOT to be followed
Endorsement is not an accepted form of notice . Reference to Section or 74 or 76 of the CGST /SGST Acts,2017 is important to make such endorsements a valid “show cause notice”. Hence , it is suggested to call such notices as “show cause notice” relief instead of “endorsement”.
V. Order of the adjudicating authority must be detailed as it is the start of a long journey to its destination where the interpretation of the law and for appreciation of the facts of the case will be delivered through the process of appeal prescribed in the CGST/SGST Act,2017. The order of adjudicating authority must carefully capture all the ingredients narrated in the show cause notice , objections raised by the party, interpretation of law by the adjudicating authority to reach final findings on facts-in-issue and pass the orders. Such a combined narration of the conclusion of audit proceedings is referred as a “speaking order” by adjudicating authority. Some key aspects to reiterate before going into the components of a speaking order:
(i) The show cause notice which lays down the “framework” of the entire demand must be discussed in the order with extracts. This bring to the fore, the key issues that the adjudicating authority is required to reach a finding on facts and make a determination. Without this groundwork, it would be impossible for appellate authorities to come quickly to determine the issues (in appeal, if any). It also requires that key “Facts” and ‘basis” be recorded in the show cause notice along with the “grounds” which make up the boundaries within which the adjudicating authority has to reach findings as per restrictions placed in section 75(6) and Sec.75(7) of CGST/SGST Act,2017.
The adjudicating authority is barred from coming up with “new grounds” for confirming demand. Grounds missed in the show cause notice CANNOT be introduced during the adjudication proceedings to reach the final finding for supporting the demand. If grounds have been poorly considered in the show cause notice and demand cannot be confirmed on the basis of those same grounds then, adjudication fails. As mentioned earlier, if some grounds have been missed out, a fresh show cause notice should be issued.
(ii) “Grounds of show cause notice” must be carefully considered and should NOT be issued hurriedly without considering all the facts.
W. Order of adjudication may address the following aspects:
(i) Extracts from the show cause notice need to be referred in the adjudication order so that it can be seen by every reader of the order that adjudicating authority was fully aware of the facts, actions and violations, allegations and evidence, cause of action proposed to be taken against the taxpayer under specific provisions of law and fact that the adjudicating authority has been identified these in the said show cause notice to hear the case.
(ii).Objections by the taxpayer (more correctly called “Notice”) must be recorded. Not only the fact whether objections were /were not filled. But also in case it was detailed, details of the objections filed must be recorded. Entire objections need not be reproduced in the adjudication order, but salient features must be recorded. Objections may include decisions of the Tribunal or Courts also, treatment of the same will be discussed in ensuing paragraphs. Reply by taxpayer containing objections must be filed in Form GST DRC-06 under Rule 142(4) of the CGST/SGST Rules,2017.
(iii) Opportunity of hearing must be granted to the taxpayer as per Section 75(4), either in person or through authorized representative as per section 116 of the CGST/SGST Acts,2017. During the hearing, taxpayer may provide the summary of objections already submitted or provide addendum to the objections raised earlier. Refer format of “record of personal hearing” attached for reference. The adjudicating authority is expected to allow a fair hearing and give full attention to the arguments being made. There is no requirement for adjudicating authority to reply or counter the objections raised but only hear the taxpayer or his representative. However, it may be noted that the adjudicating authority is free to ask questions to clarify the objections being conveyed or bring up points where objections are unsubstantiated and vague. Please note that all the objections need not be accepted but are still points that are being raised and are to be discussed in the order. Powers of adjudication authority are not listed in CGST/SGST Acts,2017, but the duty of adjudication authority may be found in the show cause notice itself. It may be seen from Section 75(6) and 75(7) of the CGST/SGST Acts,2017, that the adjudication authority is to make a determination of the allegations/ propositions made in the show cause notice based on the grounds raised in such show cause notice. Departmental representative may also be present during the hearing to counter the objections raised by the taxpayer, if required where the audit officer is not an adjudicating authority . Such officer who wants to be present may require to intimate the Adjudicating Authority beforehand. The adjudicating authority may sometimes require the departmental representative or the person who conducted the special audit to be present and hear the views of the department on the issues adjudicated. The Adjudicating authority should remain objective and unbiased. If the departmental representative is present and submits any counter-objections, the same may also be recorded in the record of personal hearing . Record of personal hearing may be signed, and copies delivered to all parties present against acknowledgement.
(iv). Position of law must be discussed in the adjudication order making regular reference to provisions referred in the show cause notice. A discussion of the legal interpretation that the adjudicating authority considers relevant on the issue involved to support the findings reached form the next part of the adjudication order. Case laws referred in the objections maybe listed with the ration of those decisions stated. It must be examined if these decisions are overruled by any later decisions of high Courts and discussed in this part of the order. Any additional decisions relevant to the case may be introduced in the order at this point which provides the correct position of law applicable to the present case.
(v). Findings by the adjudicating authority are (i) facts (ii) basis and (iii) grounds. It may be noted that if facts of the case are correct but the basis on which conclusions reached in show cause notice are not correct then, the adjudicating authority cannot make corrections, improvements or adjustments to support the demand. If facts and basis are agreeable by adjudicating authority but grounds in the show cause notice are nor agreeable then also, demand cannot be supported.
(vi). From the forging , it is to be noted that only if the adjudicating authority is agreeable on all the factors in the show cause notice, the demand raised be confirmed in order. Once the adjudicating authority accepts that all the facts are agreeable then, these factors )facts, basis and grounds) become the view of the adjudicating authority for purpose of later proceedings in appeal or review. Utmost care must be taken to ensure that the adjudicating authority records “findings” on all these factors in reaching the conclusion, The show cause notice contains the framework for demand and adjudicating authority must pass orders U/s. 73(9) or Sec.74(9) of the CGST/SGST Acts,2017, containing all the aspects referred in the show cause notice and pass the “speaking order”.
(vii) The adjudicating authority is required to pass above “orders” determining whether the demand proposed in the show cause notice is payable by taxpayer or is dropped in favour of taxpayer. This discussion must be made in a clear manner which is the conclusion of the adjudication process. It must cover all aspects of tax. Input tax credit, refunds, interest and penalty.
(x) Adjudication must be completed before “end date” as applicable under Section 73(10) or Section 74(10) of CGST/SGST Act. If adjudication is kept pending beyond this date , then, as per Section 75(10) the proceedings will be “deemed to be concluded” and no adjudication is permitted to be carried our after this “end date” tax authorities is to take care that the proceedings do not extend beyond this date. Tax authorities to also note that where the same issues is pending in “ some other proceedings” before any appellate authority (Tribunal or Court) then, as per Section 75(111) of the CGST Act, 2017, the present show cause notice may be kept pending and the end date prescribed will be “kept in abeyance” until disposal of that case nu such appellate authority . Once hat case is decided then, the time limit under Section 73(10) or Section 74(10)
commences.
xi. Taxpayers must be served this order along with demand in final determination of liability I FORM DRC-07 under Rule 142 (5) of CGST/SGST Act,2017, to be uploaded online along with reference number of assessment order. Please note that summary in Form GST DRC-07 will automatically be considered as per Rule 142(6) as a notice for recover under Section 79 of the CGST/SGST Act,2017. It may be noted that even if demand or calculation of interest is missed out in the order, interest is still payable as per Section 75(9) of the CGST/SGST acts,2017. Consequently, if any amount other than interest is missed out in the order, taxpayer is not liable to pay other than that demanded. Please note that section 78 allows 3 months from date of order for any recovery action to be initiated under section 79 of CGST/SGST Acts,2017. That the time allowed for taxpayer to file an appeal under section 107(1) or for rectification under section 161 of the CGST/SGST Acts,2017. Before any recovery action is initiated (without any further notice to the taxpayer), it maybe noted that Section 107(4) allows 1 month for condonation of delay, if allowed First Appellate Authority (FAA) for filling of appeal. Hence, any recovery action within 3 months is not admissible but recovery action in the 4’th month must be taken due care taking note of any appeal filed by the taxpayer. However, where the proper officer considers it expedient in the interest of the revenue, he may, for the reasons to be recorded in writing, require the taxable person to make such payments within such period less than a period of 3 months as may be specified by him accordance with proviso to Section 78 . However, the recovery action needs to be suspended once the appeal is filed and admitted and this suspension should be limited to the amount of tax disputed, and the recovery action continues for the undisputed amount, please also note that in order to file an appeal, taxpayer is required to submit “Certified copy of order”. Under Rule 108(3) of the CGST/SGST Acts,2017.
xiii. In case there is any “ mistake apparent on record” in the order then, on a request by taxpayer or voluntary , the assessing authority may rectify the mistakes within 3 months under section 161 (and not beyond 6 months) from date of such order and uploaded a revised summary in Form DRC-08 under Rule 142(7) of the CGAT/SGST Rules,2017. However, the said period of 6 months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error arising from any accidental slip or omission. It is important to note that’ mistake apparent on record” Does Not” refer to “reconsideration of the facts or law” to change the conclusions reached in the assessment order. That would be a review of the decision taken which is not permitted and the remedy for aggrieved taxpayer is to file an appeal under Section 107 of the CGST/SGST Act,2017. However, if there is a mistake apparent on record, the assessing authority may take that into consideration and pass the correction by a rectification order and upload the revised demand in Form GST DRC-08 on the portal
xiii. .While confirming the demand, interest and penalty may also be applicable, hence care must be taken to apply the appropriate provisions of the CGST/SGST Acts,2017.
(i) Interest as applicable under Sec.50(1) for non-payment of tax and Section 50(3) for erroneous credit shall be collected. Care must be taken to inform the taxpayer by way of a notice about the interest payable on the right amount under the right provision of the CGST/SGST Acts,2017.
(ii) Penalty is applicable under several provisions of CGST/SGST Acts,2017. Care must be taken to confirm demand for penalty under the right the CGST/SGST Acts. Here, it is important to refer to section 126 which provides “general Discipline” about imposing penalty. Although show cause notice may propose imposition of penalty, assessment order must consider the guidelines in section 126 and reach a finding based “ on the degree and severity” of violation . Section 126(4) specified that assessing authority must pass a “speaking order” for the purpose of imposing penalty.
xiv. Action to be followed:
(i) Reply to the show cause notice to be received in Form GST DRC-06,
ii) Hearing must be granted, and adjournments must be granted for bona fide reasons as these are rights of taxpayer in adjudication.
(iii) Oder of adjudication to be passed with summary in Form GST DRC-07,
(iv) Speaking order must discuss demand and separately discuss reasons for imposing penalty.
xv. Actions Not to be followed.
(i) Repeated adjournments are not to be entertained where sufficient reasons for seeking adjournment are not provided,
(ii) Vague/mechanical non-speaking orders are NOT admissible as such orders are considered incomplete,
(iii) Order of adjudication confirming demand must NOT be based on new grounds other than those in show cause notice.
xvi. Whenever the rights of a person are being affected by passing of an order the principles of natural justice must be followed. Adjudication without following these principles will leave the demand merely notional as the proceedings may be considered illegal. Following the procedures in the CGST/SGST Acts and Rules is necessary and once prescribed procedures are followed, taxpayer cannot claim that the demand is illegal on appeal on the grounds of absence of proper grounds, opportunity of hearing and proper appreciation of facts and law. Principles of natural justice are in-built in the above procedures of adjudication and passing of “Speaking Order”.
Suggestive list of documents to be submitted/ to be kept ready for verification by dealer as per DRC-01.
(i) Financial statement and reports i.e. Balance Sheet, Profit and Loss Account, Tax Audit Report, Annual Financial Statement, Cost Audit Report, Trial Balance,
(ii) Summary statement of inward and outward supply of goods or services,
(iii) Ledger copy of RCM along with supporting documents,
(iv) Invoice Copies of Inward and Outward supply of goods and services,
(v) Due to any reason cancelled invoices copies,
(vi) Register of Goods return along with relevant Credit /Debit Notes copies etc.,
(vii) Register of Inward supply Soft Copy,
(viii) Register of Outward supply Soft Copy,
(ix) Register of Zero rates supply and relevant documents like commercial invoice, shipping bills, bill of lading copies, EGM, BRS (Bank Realization Certificate or inward remittance certificates etc.,),
(x) Details of Exempted supply/ supplies to SEZ dealers,
(xi) Refund claim/ availment details if any (export of goods and services, inverted duct stricture etc., any type of refund claimed by the taxpayer),
(xii) TDS payments ,if any,
(xiii) TRAN-1 details ( details regarding credit carried forwarded from previous Act to GST ACT),
(xiv) Details of Form GSTR-2A(Mismatch, Unmatched transactions ),
(xv) Summary Statement of E-Waybills transactions moth wise along with corresponding ledger,
(xvi) If taxpayer is a Service provider, Copies of service contract agreements, Invoices, AMC contract copies and FIRC (Foreign Inward Remittances) etc.,
(xvii) Ledger copy of Advances received along with tax payments details,
(xviii) Details and Ledger of Other Income shown in Profit & Loss Account,
(xix) Details of Input Tax Credit (ITC ) Reversal/Reduction along with documentary evidence,
(xx) If the taxpayer is having any outward supply of Scrap Sales etc, a long with documentary evidence.
(xxi) Ledger copy and details of Exempted Outward supply of goods or services,
(xxii) Ledger copy and details of Zero rated supply of goods or services,
(xxiii) Ledger copy and details of Non-GST Supply of goods,
(xxiv) Ledger copies and details of Job work of Inward and Outward supply of good or services,
(xxv) Ledger copy and details of Credit Ledger/ ITC availment and summary of Capital Asset,
(xxvi) Copy of Cash Ledger and summary of availment of cash ledger,
(xxvii) Details of Reversal of ITC within 180 due to non-payment in 180 days.
These following Important Documents prepare and to be submit to the Audit Officer for Scrutiny at Desk Review :
Document-1: Ratio Analysis (Goods):
| S. No. | Nature of Ratio/ Method of Calculation | Utility of the Ratio | Source of Document |
| 1 | Input Tax Credit availed : (a). Total Tax paid through (Electronic Cash Ledger+ ITC), (b)= (a)/(b). | a) To identify wrong availment of ITC, b) To identify under valuation of goods as value addition should involve involve adequate difference between the two, c) To identify removal of goods without payment of duty, d) To identify claiming of ITC on inputs used in exempted products | Annual (GSTR-9) or Monthly GST Returns (GSTR-3B), (as applicable) |
| 2 | Total Inward supply cost: Total outward supply value. | a) This ration shows the part of outward supply value represented by inward supply cost. The balance outward supply value represents the value addition on account of non-taxable elements like wages, overheads, depreciation and interest. b) Theoretically , this ratio should have a bearing on the ration of input tax credit: Total tax payment (S.No.a), c) If this ration is lower than ration at S.No.a or more than previous year’s ratio, it may be on account of the following: (i) Wrong availment of credit like cases of availing value of goods as credit or availment of credit of basic customs duties in case of import or double credit on the same account, (ii) Fraudulent availment of credit like availment of credit without receipt/actual use of input, (iii) Rejection /return/ clearances of input without reversal of credit, (iv) Receipt of inputs and availment of credit but clearances of finished goods without payment of duty, (v) Under valuation of finished goods, important points to be considered: 1) Only taxable goods sales value should be considered, 2) Export value to be excluded from sales value, if export is under bond (if export was on payment of duty, in that case, export value should be included), 3) Excluded the GST Tax from sales value, if details are available. | Annual (GSTR-9) or Monthly GST Returns (GSTR-3B), (as applicable), Trial Balance, Profit & Loss Account and Notes to the accounts. |
| 3 | Input Tax Credit availed on Capital Goods purchased during the year; Addition Capital Goods. | Addition to the Plant & Machinery is available from the Fixed Assets Schedule enclosed to the Balance Sheet. | Balance Sheet (Schedule of Fixed Assets) and GST Returns Form GSTR-3B or Annual Returns GSTR-9) |
| 4 | Other Incomes :Sales as per P&L A/c. | 1) If this ration is higher than previous period, it may be on account of the following: (i) Under valuation of finished goods by non-inclusion of other Income like recovery of advertisement expenses, Packing and Forwarding Expenses in the assessable value, (ii) Non-Payment of duty on scrap/ rejects/Job Work. 2) GST Liability on Other income may also be examined. | Balance Sheet & GST Returns Form GSTR-3B or Annual Returns GSTR-9) |
| 5 | Outward Supply of Scrap: Total outward supplies made. | If ratio in the current year is lower, it may be on account of the following: (a) Outward supply of scrap made without payment of duty, (b) Non receipt of Scrap from Job Worker. | Trial Balance /Profit & Loss account. |
| 6 | Value o exempted outward supply: Value of total outward supplies made. | a) To identify outward supplies made in the form of exempted supplies, b) To identify supply of essential parts of outward supply as exempted supplies, c) To identify under valuation of outward supplies by overvaluing exempted outward supply. | Profit & Loss account. |
| 7 | Input Tax Credit availed on inputs: Purchase price of inward supplies. | Non reversal of credit/ payment of duty on inputs rejected/short received/ cleared to other units/ cleared as spare during warranty period. | Annual (GSTR-9) or Monthly GST Returns (GSTR-3B), (as applicable) |
| 8 | Value of Zero Rated supply: Total Supply. | a) To identify outward supplies made in the form of Zero Rated supplies, b) To identify under valuation of outward supplies by overvaluing Zero rated supply of outward supply | Profit & Loss account. |
| 9 | Non-GST Supply: Total Supply | a) To identify outward supplies made in the form of Non-Gst Supplies, b) To identify supply of essential parts of outward supply as non-GST supplies, c) To identify under valuation of outward supplies by overvaluing NON-GST outward supply | Profit & Loss account. |
Document-II: Ratio Analysis ( Services) :
| S. No. | S. No. Source of Documents. | Utility of the Rations in GST Audit and manner of Use. | Nature of Ration/ Method of Calculation. |
| 1 | i). Profit & Loss Account, ii). Income & Expenditure a/c, iii). GST Returns. | Compare the ration over a period of 3 to 4 years. If the ration is increasing three is possibility of the following irregularities: a) Rendering of unaccounted outward supply , b) Undervaluation of outward supply,, c) Diversion of outward supply income into non-taxable income. Compare this Ratio ( I) with (II) If ration II is greater than ration I , then there is a possibility of wrong availment of credit either due to calculation mistake or availment of credit on inward supply being not used properly in outward supply. | Total cost of inputs received (both Goods & Services): Value of Taxable outward supply (i.e. I) Credit availed: Total GST payable (i.e. II) |
| 2 | i). Profit & Loss Account, ii). Income & Expenditure A/c (in case of Non- Profit organisations like clubs and iii). GST Returns. | Compare the ration over a period of 3 to 4 years or with the Taxable person rendering the same services. If the Ration is increasing over a period of time or it is more when compared to other supplies, then there is a possibility of under valuation by showing outward supply income as non-taxable /exempted income. | Other incomes not charged to GST: value of taxable outward supply. |
| 3. | Balance Sheet. | Comparison of this Ration with the rate of growth of the value of taxable outward during the year maybe useful in verifying whether the value of taxable outward supply has been correctly declared. It is particularly to be checked in cases where the additions to plant &machinery /fixed assets directly impact the volume of outward supplies. | Additions to plant &machinery / fixed assets during the year : Total value of assets at the beginning of the year. |
| 4 | GST Returns | Compare the ratio over a period of 3 to 4 years . If the ration is increasing there is the possibility of the following irregularities: i) Rendering of unaccounted outward supply, ii) Under valuation of outward supply, iii) Showing outward supply income as non-taxable outward supply income, iv) Inflation of inward supply credit. | Amount of input tax credit availed on inward supply: Total tax liability on outward supply. |
| 5 | GST Returns | a) To identify wrong availment of input tax credit , b) To identify under valuation of utward supply as value – addition should involve adequate difference between the two. c) To identify outward supplies made without payment of GST, d) To identify claiming of input tax credit on inward supplies used in exempted outward supplies. | Input Tax Credit (I):Total Tax Paid through (Electronic cash ledger + Input Tax Credit)(II)=(I/II). |
| 6 | Balance sheet & GST Returns. | Additional to the Plant & Machinery is available from the Fixed Assets Schedule enclosed to the Balance Sheet. | Input Tax credit available on Capital Goods purchased during the year: Additional to Plant & Machinery. |
| 7 | Profit & Loss Account. | If this ratio is higher than previous period, it may be on account of the following: i) Under valuation of outward supply by noninclusion of other incomes, ii) GST liability on Other Income. | Other Income : Outward supplies. |
Supply of Services:- Method of Verification of transaction and documents during the Audit:
A. Supply of Services and Income verification:
i) File of correspondences with the Client,
ii) Quotation /Tender Files,
iii) Cost sheet to work out approximate cost of service (e.g. Cost of AMC, Advertisement cost),
iv) Price List (in cases where price of services are fixed as in case of Insurance Premiums, Cable Operators, Coaching Centres),
v) Booking Register ( i.e.in case of Mandap Keeper, Convention Centre, Tour Operators),
vi) Service Agreements/Contract copies like agreements for Technical. Consultancy etc.,
vii) Job Cards/work statements (e.g.in case of AMC or repair of vehicle, Job card may show value of srvices and material used),
viii) Invoices/ Receipts,
ix) Income Register/Debit Notes,
x) Customer’s ledger Account ( to verify total amount billed, by way of invoice, debit note, payment received and Credit Note Issued),
xi) GST Returns (GSTR-9, GSTR-1 and GSTR-3B, GSTR-4, GSTR-5,GSTR-7, GSTR-8)
B. Receipts of Inputs (including goods and services- Inward supplies) abd availement of Input Tax Credit thereon:-
i) List of Vendors/Supplers,
ii) Correspondence with Vendor /Supplier,
iii) Tender/Quotation documents,
iv) Purchase Orders copies,
v) Copies of Purchase invoices/bills etc.,
vi) Copies of Debit Notes ( relating to return of input services),
vii) Copy of the Purchase Ledger,
viii) Copies of Ledger Accounts of inward supplies ( to verify the date of payment for inputs),
ix) Copies of Bank Accounts/Cash Account,
x) eVerify use of inputs (eg. Use of telephone for output services or for nontaxable work, insurance for property used for output services),
xi) Verify Input Tax Credit (ITC) register maintained d, if any,
xii) Verify relevant Form GSTR- 3B and GSTR-9/GSTR-9C,
C. Financial Record Scrutiny: (From Trial Balance ) :
i) Check all Income Accounts (Showing Credit balance) in Trial Balance – Compare value of Income Account with value of taxable services shown in relevant GST returns,
ii) Verify invoices/bills/ other documents of Incoem Accounts on which GST is not paid,
iii) Verify major expenses accounts to confirm whether any recovers made form customer/client are adjusted in the expenditure account,
iv) Check Journal Vouchers/Debit Notes to verify recovers for Customers on which GST is not paid.
D. Use of inputs/Input Services in Exempted Services:
i) Check details of Input Services on which Input Tax Credit Availed,
ii) Check, if any record maintained for quantifying inward supplies used for exempted outward supply services or non-taxable activity,
iii) Verify use of inward supplies by verifying documents,
iv) Check costing of outward supply (prepared for submitting quotation or prepared for calculation of cost of output services) job card/ work statement to find out exact quantum of use of input services.
Risk Parameters for selection of taxpayers for AUDIT under GST Law:
The Audit Wing at the time of selection of audits may consider all or some of the below norms, depending on available data and resources and resources and may also use additional criteria not listed below:
- The taxpayer did not provide or delayed in providing documents sought by the Audit Team,
- The taxpayer was not previously audited,
- The taxpayer is newly registered,
- Length of time since last audit,
- The taxpayer had/ did not have substantial assessment during previous audits,
- The volume of the taxpayer’s turnover/net profit,
- The volume of the taxpayer’s loss, if any,
- The volume of the taxpayer’s refund, if any,
- The volume of change in the taxpayer’s turnover/net profit from the previous year,
- The volume of the impact detected mistakes had on the Taxpayer’s turnover/net profit,
- The ratio of expenses/turnover,
- The ratio of turnover/total assets,
- The ratio of loans/total assets,
- The volume of income from high risk activates (e.g. real estate income),
- The volume of exemptions, if any,
- The percent of the net profit in comparison to the activity average,
- The percent of the total profit compared to the activity average,
- The taxpayer requested waivers or is bankrupt,
- The taxpayers files inconsistently,
- The taxpayer is currently involved in legal disputes,
- The taxpayer’s return was previously investigated for evasion,
- The taxpayer received notices from other government entities,
- The quality of the taxpayer’s books nad records (manual/automated, not well kept),
- The taxpayer’s returns is prepared by questionable accountants,
- The special sector, in which the taxpayer operates (e.g. typical high-risk activates include restaurants and hotels, apartment rentals, professionals, car rental, spare parts for vehicles, chemicals, telecommunications, retail),
- The form of the legal entity (e.g. corporate/ partnership ),
- The multitude of the taxpayer’s legal relationships with other entities,
- Tax taxpayer has multiple branches ,
- The taxpayer has multiple activities,
- Audit differences (past audit assessments),
- The taxpayer has supplied goods on which there has been reduction in rate of duty, in order to examine the possibility of profiteering under Sec.171 of the CGST/SGST Act,2017,
- The taxpayer has stopped filling GST returns,
- The taxpayer has applied for surrender of its registration,
- Where there is increase in ration of Exempted Supplies/Total supplies of a taxpayer over time,
- Where higher incidence of supplies without issuance of E-Way Bills have been noticed,
- The taxpayer who does not file periodical returns but issues E-Way Bill regularly,
- The tax payer who was not audited in the Pre-GST era for the last 4 to 5 years,
- Tax taxpayer whose turnover increased substantially after enactment of GST,
- Tax taxpayer who is not filling GSTR3B but in their electronic cash ledger, amount of TDS us reflected.
Annexure-I
Important Documents to be submit for Scrutiny at the time of DESK Audit or DESK Review Stage.
Part-1: GOODS:
1.Verification of Documents during DESK Stage:-
| S. No. | Name of the Document | Importance documents and Checks to be done |
| 1 | Annual Report & Director’s Report. | |
| The Annual Report prepared by a company inter alia contains the following; a) Director’s Report (ii) Statutory Auditor’s Report (iii). Balance Sheet and Profit & Loss Account (iv). Financial Statement of subsidiary companies, if any. Director’s Report: This gives information like overall financial results of the company, important happenings during the year and future plans of the company. Some of the important happenings like fire and loss of material in the company, details of new products launched, change in the marketing pattern etc., reported in the report may be useful to the auditor. Auditor’s Report: These may be reports of statutory auditor or Internal Auditors or C&AG Audit. In the case of statutory audit, a separate report under CARD (Companies Auditor’s Report Order,2003/2015) is required to be given. Nature of Verification: (i).The Auditor’s Report should be studied to find out any qualified/adverse opinion given by the auditors which may have impact on GST liability. For ex: Auditor may report that goods meant for outward supply, available in stock were not reconciled or provision for obsolete items have not been made during the year. Tax auditor may like to examine such opinion in detail. (ii). Company Auditor’s Report Order (CARO) may be studied to find out whether the fixed assets records have been maintained properly or whether physical verification of inward supplies and goods mean for outward supply was undertaken and whether any discrepancies were noticed on such verification or whether the company has maintained proper records for unserviceable or damaged goods. iii). CARO also shows disputed tax liabilities separately for Customs, iv). In the case of Public Sector unit, C&AG report and comment of the company available in the Annual Report should be examined. | ||
| 2 | Profit & Loss Account: | |
| Nature of the Account: The Profit and Loss account shows major items of expenditure and income. This is one of the important documents used during desk audit to review and to find out the overall working of the unit. Types of Verification: (i). Scrutiny of supplies: Supplies may include inter-state supplies, intra-state supplies, Zero rated supplies including supplies to SEZ. Study of the pattern of supplies will give a idea about the volume of indigenous/ internal market for the registered person’s supplies. | ||
| 10 | (ii) Other Income: Other income like scrap, insurance claims, receipts, profit on sale of fixed assets, commission received, erection and commission , freight and insurance recovered etc., may be examined in details to find out the exact nature of such incomes and whether these have any bearing on the valuation or whether these are liable for GST. (iii) Expenditure side: Value of inward supplies on which GST is payable under RCM as per Sec.9(3) should be examined in detail, for this purpose, the relevant ledger account may be scrutinized as discussed under the head of General Ledger. Ratios like (a). Inputs consumed to inputs purchased, (ii) ITC availed on inputs to outward supplies, raw material purchased and ITC taken on inputs etc., may be worked out. (iv). Notes given along with the said schedule should be studied carefully to find out cases of use of material for non-production activities. (v). The expenditure or income of the major heads should be compared with the previous year’s amount in order to find out cases of major variations. | |
| 3 | Balance Sheet | |
| Nature of document: Balance sheet is a statement of assets and liabilities of a unit on a particular day. The overall financial health of a company can be determined from the study of a Balance sheet Types of verification: (i). Study of schedule of Share Capital may reveal if the company is subsidiary company and in case the companyis holding company, in that case, the name of subsidiary company will be disclosed in the Schedule of Investment. If there are supplies between holding company and subsidiary company & vice versa, valuation aspects need to be examined in the light of CGST/SGST Rules,2017. (ii).Study of fixed assets schedule may show additions and deduction to the fixed assets during the year. For the deductions made during the year, verification may be made as to whether appropriate GST has been paid. | ||
| 5 | GST on Accounts | |
| These notes are part of the Profit & Loss Account and Balance Sheet. These notes may be inserted by the Company as per the requirement of the companies Act or may be added at the instance of Statutory Auditor. These notes are very important to a Tax Auditor as these reveal important transactions or the important accounting policies followed by the unit. | ||
| 6 | Nature of Verification: (i) Notes of Significant Accounting Policies may be studied to find out the accounting policy in the areas like revenue recognition or determination of obsolete stock. (ii) Notes on quantitative information on inward and outward supplies may reveal number of interesting aspects. Cases of use of inputs for other purposes (not in the course of business or furtherance of business) may also be noticed from the study of such information, Adjustment for shortages, losses etc., may also be reported in the said Information. (iii) Any important transaction/happening during the year like non reconciliation of accounts of inputs lying with job worker, major expenditure on research and development, destruction of record and reconstruction of duplicate records may also be noticed from the study of such notes, iv). As per the Accounting standard issued by the Institute of Chartered Accountant of India, the specified companies are required to disclose transactions with the related parties under the Companies Act as part of the Notes to the Accounts. The said information gives all types of transactions, payments made or payments received from various related parties. Such information is very useful to find our the details of the related parties and the type of transactions made by them. However, the related parties as per the Companies Act may not be considered as “related person” under the GST Law. | |
| 7 | Trial Balance. | |
| Nature of documents: Trial Balance is a statement showing balances of all accounts in the ledgers as on a particular date. In other words, it is a summary of the ledger accounts maintained by a Taxable Person. The final accounts, namely Profit & Loss Account and Balance Sheet are prepared from the Trial Balance only. From the Trial Balance, similar accounts are grouped together, and these are transferred to the Profit& Loss Account and Balance Sheet. Types of verification: ( a). Acquaint with account coding system and understanding the grouping of sub-account under main account for the purpose of summarization into Profit & Loss Accounts and Balance Sheet. (b) Main purpose is to select the accounts for further scrutiny as a part of audit plan ,Accounts which have a prima facie relevance for GST payment or availment of ITC need to be identified during Desk review. There might be some of the ledger accounts whose exact nature may not be clear on reading of Trial Balance and these accounts may also be identified for further inquiry during the further course of audit, (c) Unusual ledger accounts like loss of inputs or unusual income accounts may also be noticed in the Trial Balance , However, such accounts will not be reflected in the Profit & Loss Accounts as these accounts are adjusted against other accounts. Such account may be selected for finding of exact nature and detailed scrutiny. (d) Various income accounts (credit balances ) available in the Trial Balance like Job Work , Income Account, Erection and Commissioning Income Account, Commission Account, Recovery of Freight/Advertisement Charges Account, Technical Consultation Income Account etc., should be selected to verify whether this income can be added to the assessable value for payment of GST or whether these are liable for payment of GST. | ||
| 6 | Cost Audit Report | |
| Cost Audit Report provides quantitative and financial details regarding productions, clearance, capacity utilization, input-output ration, related party transaction, valuation of production along with reconciliation of annual turnover with taxable value of Goods produced as per the GST returns. The Cost Auditor in his report gives the information /details on the cost data for the company as a whole as well as in the respect of each plant /unit of the company located at different location/details across the plants and units. The details of relevant paras useful for GST Audit are given in the table below: The auditor may examine the following aspects from the Cost Audit report. | ||
| S. No. in Anne to the Cost Audit Report and Analysis furnishing | What us to be seen | |
| 1,2 & 3 – General Information | Auditors may use this information at the time of Desk Review. | |
| 4-Quantitative Details | It contains details of: i. Total available quantity, ii. Samples/Quantity Captive consumed, iii. Outward supplies-with breakup of Export & domestic clearance Auditors should reconcile this data with GST Return and major variation (if noticed) should be booked into. | |
| 5- Cost Statement/Cost of production statement. | Separate cost statement would be available in respect of each product/ activity group. Auditors may utilize the same for valuation aspects. It also helps to compute taxable value under cost Construction method under Rule 30 of CGST/SGST Rules,2017. | |
| 6. Operating ration analysis. | Auditors may use the same for comparison of operating costs of each group, over a period of time. | |
| 10-Related transactions. | Auditors may use this information with regard to valuation of related party transactions under Rule 28 of CGST/SGST Rules, 2017 | |
| 7 | Scrutiny of the Tax Audit Report | |
| 1) Clause 18 of the Tax Audit Report provides information about amount of depreciation under Sec.32 of Income Tax Act,1961 and that of ITC availed on capital goods, 2) Clause 27(a) of the Tax Audit Report gives the details of ITC claimed. It also provides the details of credit available and carried forward to the next year. Hence, the Auditor can authenticate the amount of credit carried forward in the GST returns with the information provided in terms of this clause. 3) Clause 21(b) of the Tax Audit Report also gives information regarding prior period incomes and expenses booked in the year under Tax Audit . The Auditor shall ensure that GST on such supplies is paid on these amounts as per the provisions of Time of Supply under CGST/SGST Act,2017. 4) Clause 38 of the Tax Audit Report provides the information relating to Cost Audit, if such an audit has been carried out, the Auditor should examine the Cost Audit Report. 5) Clause 40 of the Tax Audit Report provides the important accounting ratios. |
Part-II. SERVICES.
| Sr. No. | Name of the Document | Importance of the documents and checks to be done. |
| 1 | Annual Report & Director’s Report | |
| The Annual Report prepared by a company inter alia contains the following: 1). Director’s Report, (2). Statutory Auditor’s Report (3). Balance Sheet and Profit and Loss account (4) . Financial Statements of Subsidiary Companies, if any. 1). Director’s Report:- Director’s report may, inter alia , contain information about:- i). Foreign Exchange earned during the year, ii). Foreign Exchange paid during year , e.g. may be on account of taxable services provided by the Registered person / Taxpayer where he is liable to pay GST under RCM, iii) Information on the operations carried out by the Registered person/Taxpayer during the year under report. This may help in finding the exact nature of services provided by the Registered person /Taxpayer, iv) The facts stated in Director’s Report Should be reconciled with the GST Returns. 2. Auditor’s Report: It is the most important report contained in the Annual Accounts of a Company. The statutory auditor certifies as to whether the books of accounts of the company are properly maintained or not and also whether internal control mechanism is commensurate with the size of and extent of business of the company. Any adverse noting of the Statutory Auditor has to be replied by the management of the Company. Nature of Verification: (a). The Auditor’s Report should be studied to find out any qualified /adverse opinion given by the auditor’s which may have impact on GST liability. (b). CARO Report may be studied to find out whether the fixed assets records have been maintained properly or whether physical verification of capital goods was undertaken and whether any discrepancies were noticed on such verification or whether the company has maintained proper records for unserviceable or damaged capital goods or not, (c ). CARO Report also shows disputed tax liabilities separately for Customs and income Tax, Cases booked under Income Tax Act may be examined to find out any implication on the GST. (d). In the case of Public Sector unit. C&AG report and comment of te company available in the Annual Report should be examined | ||
| 2 | Profit and loss of account. Nature of Account: The profit and Loss Account shows major items of expenditure and income . This is one of the important documents used during desk review to find out the overall working of the unit. In the main body of the Profit & Loss Account, only major heads of expenditure and income are given and the constituents of these headings are given in a separate annexure. The said annexure should be studied in detail. The expenditure or income of the major heads should be compared with the previous year’s amount in order to find out cases of major variations. Nature of Verification: The auditor is required to examine income and expenditure accounts in the Profit and Loss Account. Auditor should analysis both debit and credit side of the profit & Loss A/c, trial balance, ledger etc., because it is a myth that while ascertaining the tax liability, one has to look only at the credit side of P&L A/c. Debit side is equally important or rather more prone to frauds and errors. Therefore, the auditor needs to pay attention towards debit side also. Debit side is important because of :- a. Reverse charge mechanism:- Under this mechanism, the recipient of services is liable to pay GST (e.g. GTA services, services received from abroad, Services notified under Section 9(3) of & 9(4) of CGST/SGST/Acts, 2017.Therefore, nothing appears on the credit side of the P&L account . However, GST has to be calculated on the amount paid towards taxable services received. b. Reimbursement: -Unless the concept of “Pure Agent” is applicable a stipulated under Rule 33 of CGST.SGST Act,2017, reimbursements are included in the value of Taxable supplies. Reconciliation should cover all receivables including reimbursements, supply of goods etc., 1.Income Accounts: Normally, the Profit and Loss Account would show a consolidated entry for business income from all sources, According to accounting standards, non-business income such as interest income or dividend income is required to be shown separately, | |
| To begin with, auditors should call for the groupings of business income shown in the Profit & Loss Account. The said grouping would show the different heads under which the incomes have been accounted for. They should carefully study the nature of these services may be determined from the supporting documents such as vouchers, bills or contracts. In doing so, auditors need to be guided by the nomenclature (used for each service) in the Trial Balance or Annexures to the Profit and Loss Account. It is possible that the true nature of the services may be obscured or disguised by using a nomenclature that us either non-taxable of exempted. Other incomes like insurance claims receipt, sale of capital goods, commissions received, erection and commissioning income, freight and insurance recovered etc., may be examined in detail to find out the exact nature of such income and whether these are liable for GST and have any bearing on ITC utilisation. 2. Expenses Account:- Scrutiny of expense accounts would enable the Audit to identify major expenditure heads. In specific terms, such, scrutiny may be useful in the following manner: (a). Useful for verification of out-of-pocket expenses where deductions for these have been claimed from the value of taxable supplies, (b). Correlation between expenditure head and value of taxable supplies e.g. fuel expenses and the value of taxable service in the case of tour operators. | ||
| 3 | Balance Sheet. | |
| Nature of document: Balance sheet is statement of assets and liabilities of a unit on a particular day. The overall financial health of a company can be determined form the study of a Balance Sheet.. Types of Verification: (a) Study of schedule of Share Capital may reveal if the company is subsidiary company and in case the company is holding company , in that case, the name of subsidiary company will be disclosed in the Schedule of Investment. If there are transactions with the holding /subsidiary company, in that case, the valuation of such supplies needs to be examined in the light of Valuation Rules. (b) Study of fixed assets schedule may show additions and deductions to the fixed assets during the year, For the deductions made during the year, verification may be made as to whether appropriate GST was paid, if the ITC was availed in the past. | ||
| Notes to the Accounts: | ||
| These notes are part of the Profit & Loss Account and Balance Sheet. These notes may be inserted by the company as per the requirement of the Companies Act or may be added at the instance of Statutory auditor. These notes are very important to a Tax Auditor as these reveal important transactions or the important accounting policies followed by the unit. | ||
Nature of verification: In case of debtors, notes indicate debtors which are outstanding for a period exceeding 6 months. Foreign Exchange related transactions are also given in the notes on accounts. Management can use these figures to show book profit to suit their requirements. Netting of amounts of revenue of expenditure can also be resorted to by the management although as per accounting standards it is mandatory to specify the figures separately. Scrutiny of Notes will also reveal as to whether there was any change in the system of accounting. For example: a taxable person changes from cash system of accounting to mercantile system. The notes also indicate the impact of accounting Policies on various liabilities including the tax liability of the Taxable Person. Therefore, the auditor must read the notes carefully. | ||
| 5 | Trial Balance. | |
| Nature of Document:- Trial Balance is a statement showing balances of all accounts in the ledgers as on a particular date. In other words, it is a summary of the ledger account maintained by a Taxable Person. The final accounts, namely, Profit & Loss Account and Balance Sheet are prepared from the Trial Balance only. From the Trial Balance , similar accounts at grouped together and these are transferred to the Profit & Loss Account and Balance Sheet.. The perusal of the Trial Balance could achieve the following a). Familiarization with chart of accounts/ account code and understand as to what extent the information is detailed and integrated with other subsystems, few samples Journal Vouchers may also be seen to understand the information mentioned therein. ). Understand the grouping of sub accounts under main accounts for the purposes of summarization into Profit and Loss account and the Balance Sheet, c ). Identification of accounts, which have a prima facie relevance for GST payment (may be direct or indirect). These accounts may have to be seen in details at later stage of audit depending upon the result of subsequent audit processes. d). Understand the tax accounting system in so far as it pertains to Tax payment and treatment of credit of GST on input services. During the study of the Trial Balance Sheet/ Profit and Loss Account all income accounts should be studied in detail. The most important use of Gross Trial Balance is that it contains balances of individual accounts whereas in Balance sheet and Profit and Loss Account many accounts are grouped together, e.g. i). In the Profit & Loss Account all the incomes are clubbed together under the head ”Gross Receipts, “Sales” as case may be. However, Trial Balance shows income earned under each category of revenue separately ii). Not only the Trial Balance is important in relation to income side, but it is very important in relation to expenditure side also. For instance, Payment made towards sponsorship services may be clubbed in the category of Advertisement and Sales Promotion Expenses which can be identified only form the Trial Balance iii). Similarly, freight paid may be clubbed with Purchases or Fixed Assets.. | ||
| 6 | Cost Audit Report. Cost Audit Report provides quantitative and financial details regarding related party transaction, valuation of services rendered as per GSTR-9/Periodical return under GST. The auditor may examine the following aspects from the Cost Audit Report. S .No. in Annexure to the What is to be seen Cost Audit Report and subject. 1&3 – Auditors may use this information at time of Desk Review. General information. 5 – Royalty & as the information contain in product wise , the auditor may find it Technical Know- useful in determining the tax liability of the Taxable person under how Charges RCM if any in case the same was paid to foreign entities. Moreover auditor may go through the source documents about the scope of work and terms of payment to asses the tax compliance on Royalty & Technical Know- How. 10 – Related party Auditors may use this information with regard to valuation of transactions, related party transactions. | |
| 7 | Scrutiny of the Tax Audit Report. | |
| 1) Clause 18 of the Tax Audit Report provides information about amount of depreciation under Section 32 of the Income Tax Act,1961 and that of ITC availed by the service providers on capital goods.. 2) Clause 27(a) of the Tax Audit report gives the details of ITC claimed. It also provides the details of credit available and carried forward to the next year. Hence, the Auditor can authenticate the amount of credit carried forward in the GST returns with the information provided in terms of this clause. 3) Clause 21(b) of the Tax Audit Report also gives information regarding prior period incomes and expenses booked in the year under Tax Audit. The Auditor shall ensure that GST is paid on these amounts in case they are subject to GST. 4) Clause 39 of the Tax audit Report provides the information relating to Cost Audit. If such an audit has been carried out, the Auditor should examine the Cost Audit Report. Clause 40 of the Tax Audit Report provides the important accounting ratios | ||
| 8 | Scrutiny of Tax Deducted at Source (Income Tax TDS ) Certificates or Form 26AS. | |
| The total receipts can be verified from TDS certificates in the following manner:- a). BY deducting the amount of GST from the value on which tax has been deducted at source, the receipts appearing in the books of accounts can be reconciled. b). The nature of supplies can also be confirmed form these certificated and in case of any discrepancy in the categorization of services under proper head, elaborate checks need to be carried out by the Auditor. c). Details of TDS credit claimed in the Income Tax Return may also be examined. |
COMPARATIVE CHART OF TEMS FROM FINANCIAL STATEMENT RETURNS. ANNEXURE-II
Only for those registrants who are required to file Annual return U/s. 44 of the CGST/GST Act,2017. Goods:
| S. No. | Item | Registers/Accounts maintained U/s. 35 of CGST/SGST Act,2017 read with Rule 56 of CGST/SGST Rules,2017 (+) | GSTR-9 (++) | Cost Audit Report (Annual) | I.T.R. Sec.44AB of I.T.Act,1 961 | Trial Balance (annual | Annual report (B.S. P&L a/c. | ITR-6 Annua l (@@ ) |
| 1 | Quantity Manufactured | Production/ Manufacture account. | 28 bB(iii) | Schedule to B.S. | Part AQD ©(5) | |||
| 2 | Goods cleared | |||||||
| a).Quantity | Inward & Outward A/c of goods | 17(3)+ 18(3) | S.No.4(8) of Annexure | 28bB(iv) | Sch.to B.S | Part AQD(c)(6) | ||
| Value | Do | 17(4)+ 18(4) | S.No.8(1) of Annexure | Sch.to B.S | ||||
| 3. | GST Paid | 9 | ||||||
| (i).Cash | 9(3) | |||||||
| (ii). ITC | 9(4+5+6+7) | |||||||
| (iii)Credit Ledger | S.NO.11 of Annexure | |||||||
| (iv).Cash Ledger | S.No.11 of Annexure | |||||||
| Total GST Paid | 9(3)+9 (4+5+6 +7) | |||||||
| 4 | Exports (Value & Quantity) | 4(C+D+ E)5 (M) | S.No.4(8) of Annexure | |||||
| 4.1 Under Bond | ||||||||
| a) Quantity b) Value | Sch.to B.S.(Earni ng in Foreign Exchange -FOB of Export | |||||||
| On payment of GST i) Quantity ii) Value | 4(C+D) | |||||||
| 5 | Details of ITC taken and utilized | |||||||
| Opening Balance | ||||||||
| i).ITC Taken | 6D | 22(a) | ||||||
| iii).ITC Utilized | 9 (4+5+6+7) | 22 (a) | ||||||
| iii). Payment of duty on Goods | ||||||||
| iv).Payment of duty on Services | ||||||||
| iv).Payment of duty on Services | ||||||||
| v).Removal of Inputs & Capital Goods as such | ||||||||
| 6 | Consumption of major Raw Material in Manufacture | |||||||
| i).Quantity | 28(b)(A) (iii) | Sch to B.S | Part AQD( b)( 4) | |||||
| ii) Value | Sch.to P&LA/c. and B.S. | |||||||
| 7 | Sale of Waste & Scrap | |||||||
| i). Quantity | ||||||||
| ii Value | 28(b)(A) VIII 28(b)(B) VI | Under head ”’Other Income | ||||||
| 8 | Power & Fuel | Under Head of Expendi ture, Power & Fuel | Annexure to Director’s Report Sch.to P&L A/c | |||||
| 10 | Written of stocks | Accounts of Stock of Goods | 28(b)(A) VIII 28(b)(B) VI | Expense s for Written off | Obsolete |
Note: Numbers mentioned in the blocks denote S. No. of respective return/financial statement.
#-Specified assesses among the notified industries under Cost Accounting Record Rules, Under Sec.233B of Companies Act,1956. Sec.233B of Companies Act,1956,
##-Units whose turnover is more than Rs.40 Lakhs , return under Sec.44AB of Income Tax Act,1961
@-Under Section 211 of the Companies Act,1956,
@@-Companies other than the Companies claiming exemption under Section 11 of the IT Act,1961,
@@@Unit’s manufacturing Bulk Drungs & Formulations under Drugs (Prices Control) Order,2013
(+)- Auditor to obtain the information from the Auditee while forwarding GST ADT-01,
(++) – Annual Return to be filed the Registered Person, under Rule 80 of CGST/SGST Rules, 2017 other than an Input Service Distributor, other than an ISD, a person paying tax as TDS/TCS, a Casual taxable person and a non-resident taxable person,
NOTE: Wherever it is possible , the data may be download from GSTIN Portal.
ACKNOWLEDGMENT:
I would like to express my heartfelt gratitude to a number of people without whose guidance, support and encouragement this GUIDANCE NOTES would not have been possible. I thank Dr M.V.K.Murthy ,Sri P.VSubbarao, Sri.M.V.J.K. Kumar, Senior Standing Council, Central Excise, Customs, Service Tax and GST of High Court of A.P, for their in stinted encouragement, support, finally, Finally My special thanks department friends and my son c.a. Brahmananda Rao for believing me and supporting for my endeavour. This guidance notes is very useful to every gst professionals. To prepare this guidance notes, I have referred some of state gst manuals and cgst and sgst act and rules, 2017, income tax act and company act,1956.
THANK YOU.
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