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1 Mah. Mega GST Conclave Aurangabad Branch of WIRC of ICAI GST Audit- Planning, Docs, Audit Expectations & Auditor s Responsibility by CA Deepak Thakkar 2 Dec 2018 CA Deepak Thakkar, PHD & Associates, 1 27 Nov Please put your Mobile on Silent Mode 2 27 Nov

2 GST Audit Planning, Commencement, Documentation, Audit Expectations & Auditor s Responsibility Basic Provisions: Sec. 35(5) r/w Rule 80(3) of CGST Rules GST Audit Report Form 9C vide Notifn# 49/ CT/ dt13 Sept 2018) 27 Nov GST Audit by Chartered Accountant [(Sec. 35(5) / Rule 80(3) of CGST]: 1) Registered person whose turnover during a FY exceeds the prescribed limit shall get his accounts auditedby a CA. 2) Rule 80(3) prescribed the said limit as Aggregate turnover Rs. 2 Crore 3) Submit/furnishelectronically, a copy of the audited annual accounts, the reconciliation statement u/s 44(2) [Statement reconciling value of supplies declared in Annual Return with Audited Financial Statements] duly certified,in FORM GSTR-9C, and such other particulars / documents as prescribed. 27 Nov

3 Issues reg. Who is liable for GST Audit? 1) Casual Taxable Person (CTP) liable? 2) Non-resident Taxable Person (NRTP) liable? Note: CTP & NRTP are not liable to file Annual Return as per sec. 44(1) r/w Rule 80(1). 3) Composition Person liable? 4) E-commerce Operator liable? 5) Every Regd. Person whose turnover crosses prescribed limit of Rs. 2 crorein a FY Nov turnover in State or turnover in Union territory Defnu/s 2(112) of CGST Act turnover in State or turnover in UT means the aggregate value of all taxable supplies (excludingthe value of inward supplies on which tax is payable by a person on reverse charge basis (RCB)) and exempt supplies made within a Stateor UT by a taxable person, exportsof goods or services or both and inter-state supplies of goods or services or both made from the Stateor UT by the said taxable person but excludes central tax, State tax, UT tax, integrated tax & cess; 27 Nov

4 aggregate turnover defn u/s 2(6) of CGST Act aggregate turnover means the aggregate value of all taxable supplies (excludingthe value of inward supplies on which tax is payable by a person on RCB), exempt supplies, exportsof goods or services or both and inter-state supplies of persons having the same PAN, to be computed on all India basis but excludescentral tax, State tax, UT tax, integrated tax & cess; 27 Nov exempt supply defnu/s 2(47) of CGST Act exempt supply means supply of any goods or services or both which attracts nil rate of taxor which may be wholly exemptfrom tax (by Notification) u/s 11 or u/s 6 of the IGST Act, and includes non-taxable supply; non-taxable supply means[defnu/s 2(78)] a supply of goods or services or both which is not leviable to taxunder this Act or under IGST Act; Sec. 9: Levy & Collection of Tax:... Except on alcoholic liquor for human consumption... Petroleum crude, HS Diesel, Petrol, Natural Gas & ATF wefnotified date Nov

5 Issues w.r.t. Turnover of Rs. 2 Crore 1) Turnover vs Turnover in a State vs Aggregate Turnover ; No Clarification from Govt or Dept. 2) Turnover Qua Outward side or Inward side or Both? 3) Turnover Qua PANor Qua State or Qua GSTIN? 4) Turnover as per GST Returns or Financials or Books of Account? 5) Turnover of Taxable supplies or also of Exempt supply & Non-taxable supplies? (E.g. Doctor) 6) Law Firm having Legal Services billing of Rs Croreand Sales of Old Capital Goods / Scrap of Rs. 6 Lakhs. Audit Reqd? 7) Petrol Pump s Turnover for Petrol/Diesel & Restaurant/Hotel s Turnover for Liquor to be added to their GST Turnover of Rs. 1 crore? 8) Turnover for GST Rs. 1 Croreand Sale of Land/Building Rs. 5 Crore? 9) Share Broker s Brokerage Income Rs. 1 Crore& Own Share Trading of Rs. 5 Crore? 10) Turnover for Apr 2017 to Mar 2018 or for July 2017 to Mar 2018? 11) GST Tax to be excluded from Turnover to calculate limit of Rs. 2 crore? Whether answer is different when tax is shown or not shown separately in invoice? 12) Separate Report for each GSTIN 27 Nov Audit Expectations & Auditor s Responsibility 27 Nov

6 Audit: Defnu/s 2(13) of CGST Act audit means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunderor under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act/Rules made thereunder; 27 Nov GST Audit Report Form 9C: Part A & Part B (Notifn# 49/CT/dt 13 Sept 2018) Part A of Report: Reconciliation Statementoffigures declared in Audited Annual Financial Statement withthe figures declared in the Annual Return furnished in Form GSTR-9 for a particular GSTIN. Verification by Auditor: I hereby solemnly affirm& declare that the informationgiven herein above is true and correctto the best of my knowledge and belief and nothing has been concealedthere from. (Criminal Proceedings??) Auditor s Signature,stamp/Seal, Name, Membership #, Address, Place, Date) Part B of Report: Certification by GST Auditor Instructions to Fill up GST Audit Report given in said Notifn Inst # 2:Details for FY means for July 2017 to March 2018; -Reconciliation Statement is to be filed separately for every GSTIN 27 Nov

7 Part B of Report: Certification by CA... Part B-I:Certification where GST Auditor & Statutory Auditor is Same Person: Part B-II:Certification where GST Auditor & Statutory Auditor are Different Persons: Q. Statutory Audit Report signed by Partner A of CA Firm ABC, & GST Audit Report signed by Partner B, then to Fill up Part B-I or Part B-II above? Para 1) Certifies/Report that examined the- Balance Sheet Profit & Loss A/c OR Income & Exp A/c and Cash Flow Statement... for the period from... to... Attached herewith Of M/s...Address...GSTIN Nov Part B-I & B-II of Report: Certification by CA... Para 2) Based on Audit,he Reports thatauditee: Has Maintained the Books of A/cs, Records & Documents as required byigst/ CGST/ SGST Act & Rules made / Notifications issued thereunder Has Not Maintained the following accounts/ records/ documents as required byigst/ CGST/ SGST Act & Rules made / Notifications issued thereunder: Nov

8 Accounts & Records under GST Law 27 Nov Accounts & Records (Sec.35 & Rules 56 to 58 of CGST Act) Every Regd. Person shall keep & maintain at his Principal POB a true & correct account of : Inward & Outward supplyof Goods/Services (G/S); Prodn/ manufacture of goods (with Qty details); Stock of goods; Input tax credit availed; Output tax payable or paid; and Such other particulars as prescribed; Failure to account as above, proper Officer shall determine tax payable on such unaccounted G/S as if it had been supplied by such person, which will be demanded & recovered as per Law Where there are Additional POB s then accounts relating to Each AddlPOB shall be kept at Such AddlPOB 27 Nov

9 Accounts & Records as Prescribed U/R 56 to 58 of CGST Accounts, records & documents for Outward/ Inward/ RCB Tax Registers & Docs of Invoices, Bills, Delivery challans, CN, DN, Vouchers Each volume of books of A/c maintained manually shall be serially numbered [Rule 56(9)] Names & Addresses of Suppliers & Recipients Details of Advances received, paid & adjustments thereto Stock record for raw materials, finished goods, scrap & wastages Stock record containing Opening Bal + Receipts Supplies Goods lost/ stolen/ destroyed/ written off/ gifted/ free samples = Closing Stock (Quantity& Values) Address of All Storage places; If goods found at any other place without the cover of any valid document then proper officer shall determine tax on such goods as if it has been supplied Works Contract wise details of description, value & Qty of goods/services received & utilised[rule 56(14)] Agent shall also maintain such A/cs & records of supplies w.r.t Every Principal [Rule 56(11)] 27 Nov Electronic Records (Rule 56 to 58 of CGST Rules) A/cs& Record may be maintained in Electronic Form as may be prescribed & be authenticated by digital signature [Rule 56(15)] Generation and maintenance of electronic records: [Rule 57]: (1) Proper electronic back-upof records shall be maintained & preserved in such manner that when needed it can be restored within reasonable time (2) Electronic records shall be produced, on demand, with documents, duly authenticated by RP, in hard copy or in any electronically readable format. (3) RP shall, on demand, provide the details of such files, passwords, explanation for codes used& any other info required for its access along with a sample copy in print formof the information stored in such files Any entryin registers, a/cs& docs shall not be erased, effaced or overwritten,& all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation& thereafter the correct entry shall be recorded; a log ofevery entry edited/deleted shall be maintained where registers & other documents are maintained electronically [Rule 56(8)] 27 Nov

10 Period of retention of Accounts & Records (Sec. 36) Period of Retention of Accounts & Records In normal cases In case of Appeal, Revision, Investigation or any proceeding 6 Years from the due date of furnishing of annual return for the year pertaining to such accounts and records i.e. for FY , annual return is due on 31 st Dec years = 31 st Dec years like for Normal cases or 1 year after the final disposal of such proceeding Whichever is later 27 Nov Certain Offences & Penalties (Sec.122 to 138) Sec. 122(1): Where a taxable person who (i)..supplies. (ii) (iii) ; (x) Falsifies/ Substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; (xvi) fails to keep, maintain or retain books of account and other documents or fails to furnish to Officer, in accordance with the provisions of this Act/Rules;. (xx) tampers with, or destroys any material evidence or document;. he shall be liable to pay a penalty of Rs. 10,000 OR an amount equivalent to the tax evaded OR refund claimed fraudulently, whichever is higher. Sec. 122(3): Any person who (a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1);. shall be liable to a penalty which may extend to Rs. 25,000. Sec. 125: General Penalty: Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to Rs. 25,000. Sec. 132: Certain Offences are Non-bailable... Imprisonment for 6 mths to 5 yrs...with Fine Nov

11 GST Audit Report: Certification Part B-I only (Same Auditor)... Para 3(a):we reportthe following observations/ comments/ discrepancies/ inconsistencies; if any:..... Para 3(b): we further report that, - (A) we have obtained all the information & explanationswhich, to the best of our knowledge & belief, were necessary for the purpose of the audit/ OR were not provided/partially provided to us. (B) In our opinion, proper books of account*have/have not been keptby the registered person so far as appears from*my/ our examination of the books. (C) we certify thatthe balance sheet, P&L A/c/ I&E A/c and the cash flow Statement are *in agreement/not in agreement with Books of A/c maintained at the Principal POB at & AddlPOB within the State. 27 Nov GST Audit Report Certification Part B-I & B-II both Para 4:The documents requiredto be furnished u/s 35 (5) of the CGST Act and Reconciliation Statementrequired to be furnished under section 44(2) of the CGST Act is annexed herewithin Form No. GSTR-9C. Para 5: In our opinionand to the best of our information and according to explanations given to us, the particulars given in the said Audit Form No.GSTR-9C are true & correct subject to following observations/qualifications, if any: (a) (b) (c) Signature, Stamp/Seal of Auditor Place Name of Signatory, CA Membership #, Date, Address. 27 Nov

12 Reconciliation Statement i.e. Part A of Audit Report Form GSTR-9C 1) Pt # 6: Reasons for Un-reconciled difference in Gross Turnover between Audited Financial Statements (FS) & Annual Return (AR) 2) Pt # 8: Reasons for Un-reconciled difference in Taxable Turnover between FS & AR 3) Pt # 10: Reasons for Un-reconciled Tax i.e. Difference in Tax to be paid (i.e. Payable) & Tax Paid as per AR 4) Pt # 11: Additional Tax Payable giving break up of: Tax rate, Taxable Value & Tax Amt; which is to be paid in cash 5) Pt # 13 & 16: Reasons for Un-reconciled Difference in ITC between FS & AR & Tax payable for same 6) Pt # V: Auditor s recommendation on Additional Liability of Tax, ITC, Interest, Late Fee, Penalty, Pay back of Refund recd, O/s Demands, ETC due to Non-reconciliation 7) Auditor has to Solemnly Affirm & declare that the information given in Part A is True and Correct to the best of his knowledge & belief, and Nothing has been concealed there from 8) Sign, Stamp/Seal, Name, Membership #, Address of Auditor, with Place & Date 27 Nov Certificate v/s Report Certificate and Report terms explained by ICAI in Para # 2.2 of its Guidance Note on Audit Report and Certificates for Special Purpose published in 1984 (Revised 2016) as under: A Certificate is a written confirmation of the accuracy of factsstated therein and does not involve any estimate or opinion. A Report, on the other hand, is a formal statement usually made after an enquiry, examination or review of specified matters under report and includes the reporting auditors opinion thereon 27 Nov

13 Audit: Basics Appointment of Auditor Acceptance of Audit Management Representation Letter Materiality Concept Disclosure in Report Disclaimer in Report Relying on Other CA s Report Relying on Expert s Opinion Audit Working Papers/ Notes Professional Ethics Code of Conduct by ICAI 27 Nov Selection of Effective and Sufficient Sample SA 530 OF ICAI Design & select audit sample, perform audit procedures thereon, and evaluate sample results so as to provide sufficient appropriate audit evidence Sample Selection Methods 1.Random Selection: applied through random number generators, from random number tables 2. Systematic Selection: The number of sampling units in the population is divided by the sample size to sampling interval; e.g. 50, and having determined a startingpointwithinthefirst50,each50 th samplingunitthereafterisselected. 3. Monetary Unit Sampling is a type of Value-weighted selection in which Sample Size, selection and evaluation results in a conclusion in monetary amounts 4.Haphazard Selection, in which the auditor selects the sample without following a structured technique. Auditor would avoid any conscious bias or predictability (e.g. avoiding difficult to locate items or always choosing or avoiding the first or last entries on a page) and thus attempts to ensure that all items in the population have a chance of selection. 5.Block Selectioninvolves selection of a block of contagious items within the population 27 Nov

14 Ceiling limit of GST audit under CGST Law Company s Act 2013:As per Sec. 141 (3)(g) the Limit is 20 company audit per person Income Tax Audit: The limit is 60 Tax Audit per Person as per The Council Guideline # 1-CA(7)/02/2008, dt8 Aug 2008 [In Chapter VI "Tax Audit assignments under Section 44AB of the Income-tax Act, 1961 ", in Explanationgiven in Para 6.1, in sub-para(a) & (b), the figure "45" be substituted with the figure "60 ] GSTAuditUnderGSTLaw:NOLimit Follow other procedures reg Appointments, etc as percodeofconductforcasasframedbyicai 27 Nov Late fees for default in filing GST Audit Report Sec. 47(2) of CGST Act:Any registered person who fails to furnish the return required u/s 44 (i.e. Annual Return, alongwithaudit Report) by the due date shall be liable to pay, a late fee of Rs. 100 for every dayduring which such failure continues, subject to a maximum ofan amount calculated at 0.25% of his turnover in the Stateor UT. 27 Nov

15 Default in filing GST Audit Report- Offence under which Law? Offence under CGST Act; Offence under SGST Act; Offence under IGST Act: 4 th Proviso to Sec. 20 of IGST Act: Where penalty is leviable under CGST Act and SGST/UTGST Act, the penalty leviable under IGST Act shall be sum total of said penalties (Late fees is not specified in sec. 20 of IGST Act) 27 Nov Issues w.r.tgst Audit Report (Form GSTR-9C) 1) GSTR-9C available on GSTN Portal? 2) Whether due date of 31 Dec 2018 for FY may be extended? (GSTR-9C Offline Tool & Online Form is not available as on 21 Nov 2018) 3) If GST Regncancelled during the year then whether to file GST Audit Report? 4) Whether GST Audit Report can be Revised? 27 Nov

16 Role & Responsibility of GST Auditor 1) Technical Guide on GST Annual Return & Audit : published by ICAI in Oct ) Role of Auditor in GST : an Article authored by Mr. Deepak Mata, Asst. Director, NACIN, in The Chamber s Journal for Nov 2018 published by CTC, 3) Certifications/Audits under GST Act & Professional Ethics : an Article authored by CA C. N. Vaze, in The Chamber s Journal for Nov 2018 published by CTC, 27 Nov * Best Wishes for GST Audit * THANK U All CA Deepak Thakkar PHD & Associates deepak@phd-ca.com Off: Mob: Nov