Introduction to GST Audits
Since the launch of the GST Taxation Rule in India on July 1, 2017, the Indian Government has taken several measures to implement the new tax rule efficiently. One such measure is an audit for GST. GST Audit consists of examining the returns, records, and related documents maintained by a GST-registered business executive or an individual.
The mechanism verifies the accuracy of paid taxes, turnover declared, availed input tax credit, and refund claimed. Also, the GST audit mechanism assesses the compliance of any person or business with the GST provisions.
Everyone knows that GST is a trustworthy taxation regime that mandates taxpayers to self-access their tax liabilities, file returns, and pay taxes. Hence, an audit mechanism is essential to make sure that the taxpayers have self-accessed their tax liability with the highest accuracy levels.
When Individuals and Businesses Should Conduct a GST Audit
Every registered taxable individual or business executive with a turnover limit exceeding Rs 2 crore in a financial year to conduct a GST audit of his business account. For this, approach a reputed cost accountant or a chartered accountant. Accordingly, you should file the following electronically-
- An annual GST return with the help of Form GSTR 9 by 31st December of the upcoming Financial Year
- The audited copy of your annual financial accounts
- A certified statement of reconciliation in the GSTR-9C form that reconciles the total value of supplies declared in your GST return with the audited financial statement of the year
Objectives of GST Audit
GST Audit for any business fulfills the following objectives-
- To examine the tax returns, records, and related documents
- To furnish or maintain the tax returns, records, and other documents as per the latest GST law
- To verify the accuracy of the following-
- Paid taxes
- Refund claimed
- Turnover declared
- Obtained input tax credit
In simple words, a GST audit aims to assess the compliance of an auditee with the GST Act rules and provisions.
Role of GST Billing Software in GST Audits
Goods and service taxes, invoicing, and tax compliance for any business have become easy with the latest GST Billing Software. Any good billing and recording software generates invoices automatically according to the latest industrial requirements. The software reduces the probability of calculation mistakes and negligence in recording processes. In this way, the software prepares a flawless GST audit by maintaining easily accessible and accurate transaction records. Also, the software provides precise GST calculations for your GST audit.
Features of GST Billing Software
Accordingly, GST Billing Software offers the following features-
Tax Calculation
GST Billing system determines GST by using the latest applicable GST rates and commodity classification codes applied to diverse items. In this way, businesses can get precise GST input and reduce errors at the time of filing taxes.
Invoice Generation
GST Billing software generates efficient invoicing to capture the mandatory information. These include product/service descriptions, tax applicable, cost per unit, and others related to the latest GST. Also, the software manages your business’ debit and credit notes to adjust tax invoices to maintain financial records accurately.
Goods and Services Billing
The business diversity has created the necessity of GST billing and invoicing software to support goods and services. Besides, GST Billing Software provides you with an easily accessible and updated client-product database, which you may access conveniently while preparing tax invoices. Also, billing software is perfect for tracking product sales and purchases.
Compliance Report
Billing software produces a compliance report necessary to file tax returns. At the same time, it makes sure that your business organization always stays compliant with the latest GST regulations.
Also Read: Advanced Features To Look For In GST Billing Software
Benefits of GST Billing Software
GST Billing Software offers the following benefits-
Accuracy in GST Billing
When you use GST billing software, you remain free from any chance of error while calculating IGST, CGST, and SGST.
GST-Compliant Online Invoice
Good GST billing software lets you design GST-compliant online invoices with a unique QR code and Invoice Reference Number. Accordingly, it generates online invoices for B2C and B2B to provide faster reconciliation and free from error ITC returns.
Tracking to Generate Real-time Reports
The GST software helps you to track your invoices paid, partly paid, pending payment, and many more in a single place. Also, you may check real-time reports for your company.
Saves Time and Money
Regardless of your business scale, GST software offers tons of benefits to your company/business and lets you handle taxation efficiently to save your time and money.
GST Regulations Compliance
Sophisticated GST accounting and billing software helps businesses stay tax-compliant with the latest GST regulations of India.
Features of Billing Software Dedicated to Audit Preparation
Good billing software for GST audit comes with the following special features-
Data Organization and Accessibility
GST billing software organizes and manages customer invoices and tracks payments to create financial reports for goods and services. The system includes a product database, a customer database, and a sales database.
Under the customer database, the system stores details of a customer, like account history, contact details, and purchase history. The product database has information about the products/services offered by any business. These include price, product description, and product quantity. The third is the sales database, which stores information about various sales-related transactions, like product date, customer, and amount.
The billing system generates invoices automatically according to the details highlighted in the sales database. Another vital role of GST billing software is that it allows customers to check and print their invoices online, whether it is a product list, a customer list, or a sales report.
Error Reduction and Accuracy
Advanced GST billing and accounting software reduce the probability of manual accounting and bookkeeping errors based on the following features-
Automation
The software allows automation of various accounting and bookkeeping tasks, like data entry, transaction calculations, and report generation. By automating the mentioned tedious tasks, businesses may reduce errors caused by manual calculations.
Consistency
GST accounting and billing software records and processes various financial transactions consistently to prevent errors caused by data entry inconsistencies.
Real-time Access
Innovative software may give real-time access to financial data so that businesses may identify and rectify errors quickly. Accordingly, businesses may make informed decisions by analyzing the updated information anytime they want.
Security
GST billing and accounting software solutions contain robust security features, like user authentication and encryption. Indeed, it prevents unauthorized access to your business’s crucial financial data.
Integration
Most accounting and billing software integrate with co-business systems, like payroll systems, inventory management systems, and sale systems. In this way, it reduces the likelihood of any error caused by manual data.
GST billing software has proved to be a game-changer for companies and businesses based on their automated checks and balances. The systems may streamline your invoice and payment procedures by reducing the errors. Before the launch of software solutions, accountants prepare billing manually.
However, manual billing involves several challenges, like risks related to GST compliance, calculation errors, and inefficiency in the systems. To overcome such issues, accountants and businesses are now available with automated billing systems. These systems allow dunning management, easy invoicing, and integration with co-business tools.
Also Read: 5 Common Misconceptions About GST Billing Software
Preparing for GST Audit
Before you start to prepare a GST audit for your company/business, you should prepare a corresponding GST audit checklist. Here your installed GST billing and accounting software accumulate and ensure that you have a detailed list of the necessary items required to check during the GST audit.
The checklist will contain details of your business, like its name, postal address, and GSTIN number. In other words, the GST billing software checks that you are ready with every item needed during your business verification and a few compulsory documents, like purchase and sales registers, bills, and invoices.
Also Read: Serenity & Comprehensive GST Audit
GST billing software verifies the following details for your GST Audit checklist-
GST Registration Checklist
- Whether a client has applied for new tax registration or simply migrated to the latest regime according to GST
- Assess the number of client’s registration
- Validate that the client has provided accurate information in his GST Registration Certificate. This includes both the principal and additional place of business, directors/partners’ details, accuracy in the address, relevant HSN codes, and appropriate documentation required for authorized signatories.
- Examination of casual registrations during the complete audit period
- Prominent display of the GSTIN or Registration Certificate at every location highlighted in the GST Registration Certificate.
- Whether the client has a valid ISD i.e. Input Service Distributor Registration
Documentation of Tax Invoice
- Verification of strict compliance with GST provisions related to the issue of tax invoices, debit/credit notes, and bills of supply
- Assurance of including the place of supply for inter-state supplies and RCM applicability in the tax invoice
- Confirm the reporting of credit notes until 30th November of the succeeding financial year
- Determine whether debit notes are required to be issued for the current financial year
- Verify that your tax invoices’ signatory matches with the authorized signatory highlighted in the GST registration certificate.
- Validate compliance with time of supply provisions to issue tax invoices
- Check for goods sent on approval or sale beyond 6 months without any proper issuance of tax invoice
- Confirmation of the right delivery challan and maintenance of separate input series sent to any job worker
- Verify that the taxable value of GSTR-1 matches with the data of the e-way bill and prepare a reconciliation statement
- Ensure timely issue of tax invoice for services supply within only 30 days from the date your service completes
- Confirmation of separate series and issue of bill for exempted and non-GST supplies
- Compliance verification with provisions to cancel documents, like Bills of Supply, Tax Invoices, Debit/Credit Notes, Payment, Receipt, Refund Vouchers, and Delivery Challan
- Check revised invoices and confirm their updates as per the GSTR-1
- Confirmation of receipt vouchers issuance for advanced services receipts
- Verification of self-invoice issuance for RCM payments
- Confirmation to maintain delivery challan and e-waybill registration
- Verify that the document series present in GST Returns matches with the series maintained in your accounts’ books.
Supply of Goods
- Payment of GST according to the provisions of Section 12 and Section 13 of the latest CGST Act
- Any change in the taxation rule or provisions of the latest CGST Act
- Whether businesses send goods for approval and certain provisions related to the time of supply compiled with it
- Goods sent as per the job work and not returned within the mentioned time and provisions related to the compiled time of supply
Place of Supply
- Verify the determination of inter-state transactions based on Section 7 of the latest IGST Act
- Verify that intra-state transactions are according to Section 8 of the IGST Act
- Verify to determine the place of supply for goods associated with the domestic supply according to Section 10 of the updated IGST Act
- Verify to determine the place of supply for services associated with the domestic supply according to Section 12 of the updated IGST Act
- Verify to determine the place of supply for goods associated with the international supply according to Section 11 of the updated IGST Act
- Verify to determine the place of supply for services associated with the international supply according to Section 13 of the updated IGST Act
- Confirmation of refund claim for any wrong payment of tax, like CGST/SGST in place of ICGST and vice-versa
Reverse Charge
- Verify the payment of a reverse charge for every inward supply notified under the CGST Act and the IGST Act
- Confirmation of availing ITC of the tax paid according to the reverse charge
- Verify that the payable RCM reconciles with the RCM highlighted in GSTR 3B
Input Tax Credit and GST Payments
Here, your GST billing and accounting software checks and ensures whether monthly ITC reconciles with GSTR 2A and GSTR 3B. Simultaneously, the software checks to ensure the reconciliation of transitional credits with your account books and the timely filing of ISD returns.
Job Work
You may use GST accounting software to check whether goods sent on any job work were received within the stipulated period. Also, one can check the maintenance of documents prescribed primarily for any job work.
Filing of Tax Returns
- Verify the filing of applicable tax returns within their due dates and calculate the late fees in case of late payment
- Check and confirm the timely filing of transitional credit returns
- Check the credit of waived late fees in the cash ledger
Refund
Under the Refund category, the GST audit checklist involves confirming the following-
- Eligibility of the Supplier to get refunds based on Section 54
- Filing of the refund application and its calculation according to the prescribed rules
- Receival, pending, rejection of the refund order
- Confirmation of refund re-credit to the online credit ledger if it gets rejected
- Appropriate accounting of the refund return file in the account books
- Accurate recording of refund rejection
Records and Accounts
- Maintenance of account books according to the latest rules of the GST law
- Both manual and electronic maintenance of account books
- Maintenance of accounts books at every business place
- Availability of agreements or documents
- Maintenance of account books by the warehouse keeper and transporter according to the latest GST law
- Maintenance of the delivery challan or the registered e-way bill according to the latest provisions of the GST law
- Verify the use of e-way bills for valid reasons
- Maintenance of ITC registrations according to the GST law
- Centralized or decentralized maintenance of accounts books
Reconciling Transactions and Financial Reports
Reconciliation of taxation and financial reports is of utmost importance for every business. These reports highlight the excess, short, or zero tax paid. While matching and reconciling transactions, CAs will notice the following differences/mismatches-
- Differences between the input tax credit and sales details highlighted in diverse GSTR forms
- Differences in the claimed provision credit according to the CGST Rule 36 (4) and the actual claimable credit according to the GSTR-2B across the tax return periods
- Differences between the values of ITC available in GSTR-2B and accounts books to get rigorous follow-ups from vendors after the removal of provisional ITC based on the GST law
- Differences in the details of sales between the account books and GSTR-1 as auto-populated from the online invoicing system
- Tax differences payable while comparing the accounts books and auto-populated GSTR-3B.
Note-
Any difference highlighted between the returns results in the issue of scrutiny notices to taxpayers or suspension of the GST registration.
Common Causes of Mismatch in Taxation Reconciliation
- When the vendor declares liability but does not get credit based on GST returns. One should avail of such credits early before the due date of Annual or September returns.
- The vendor fails to declare liability on its supplies but businesses received credits on the respective procurements in their GST returns. If such situations take place, businesses must follow up with the vendor to declare the liability.
- Other than that, mismatch takes place in the furnished details, like the GSTIN of the recipient or the supplier and, the date and number of the debit note or invoice. To resolve this mismatch, you must make changes in the monthly GST returns followed by the relevant month of your committed mistakes.
Role of GST Billing Software to Reconcile Taxes and Rectify Errors
Good GST billing software always comes equipped with the most advanced and powerful reconciliation tool with the necessary features. Also, it possesses the intelligence to match entries, automatically identify errors, and make sure of 100% ITC claims. Key roles of the software are-
- Comparison of GSTR-1 and GSTR-3B entries with your account books and their graphical representations so that clients understand the difference in terms of tax liabilities. Besides, the comparison helps clients prevent any penalty or GSTN legal notice.
- Comparison of GSTR-2B and GSTR-3B with the account books and their graphical representations to identify any excess ITC claim.
- Innovative billing and accounting software provides a summary of the monthly tax paid and ITC received by each GSTIN.
Regular Reviews and Compliance Checks to Enhance GST Audit Readiness
Inaccurate invoices or the ones that fail to comply with the latest GST regulations are easy targets to suffer penalties. Luckily, the most updated GST billing and accounting software possesses multiple features to ensure the accuracy and conformity of the GST bills. These software solutions generate GSTINs automatically and check invoice details against the current regulatory requirements. Such solutions thus protect any business from fines due to mistakes in paperwork.
Companies must access insightful tax analytics and detailed monitoring of GST audit entries to track their status of GST compliance. The advanced GST billing software lets businesses generate customized reports based on their specific requirements. Accordingly, companies and businesses may identify their potential improvement areas and address compliance concerns proactively based on the available reports. In this way, businesses receive valuable insights into certain compliance indicators.
Conclusion
GST Audits are vital procedures associated with GST compliance. The audit is also mandatory for businesses whose turnover exceeds Rs 2 crore. Moreover, the annual GST audit checklist is crucial to covering every aspect of GST compliance and the latest GST regulations. However, preparing a GST audit checklist is a tedious task.
To overcome this problem, businesses today look for sophisticated GST billing and accounting software equipped with real-time updates, automated tax calculations, and robust security of client information. Suppose you own a business venture and want innovative GST billing software. In that case, you should try a free trial of Captain Biz software via the link https://www.captainbiz.com/register/ to experience its outstanding features today.
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How I should prepare for my business’ GST audit?
The preparation for the GST audit of any business is easy. Only, the accountants and CAs need to prepare a checklist followed by a reconciliation statement by using sophisticated GST billing and accounting software.
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How can businesses ease the tedious GST audit task?
Businesses should use the most advanced GST billing and accounting software to prepare their GST reports and file their GST returns seamlessly. Indeed, the use of GST software will ease the tedious GST audit task.
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How GST billing and accounting software works?
GST billing and accounting software automates sending regular invoices and collecting payments. It also tracks invoices and expenses frequently in a billing system.
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What are the benefits of GST billing and accounting software to businesses?
GST billing and accounting software manages your accounts receivables and integrates them with co-financial systems to achieve comprehensive financial management.
