GST Audit Checklist
Gaurav Yadav

Updated on April 13th, 2023

GST Audit Checklist for the financial year end is explained in this short article that every small and medium sized businesses should follow before the end of this financial year. In this article, we have touched upon TEN most important points to be considered before you file your GST returns for the month of March 2023.

Follow the article diligently to understand the 10 most important points for this Financial Year end.

1. GST Refunds

If taxpayers have paid more GST than they owe in certain situations, a streamlined process allows them to apply for a GST refund. In order to receive the refund in a timely manner, taxpayers must complete the necessary paperwork accurately and submit it. The refund will then be deposited directly into their bank accounts according to the GST refund procedure. It is important to note that the deadline for applying for a GST refund is March 31, 2023.

The refund can be requested for several reasons, including:

  • ITC refund for inverted duty structure
  • ITC for export under LUT
  • Deemed export supplies
  • Supplies to SEZ units and developers
  • Finalization of provisional assessment
  • Excess payment due to mistake,
  • Refund of CGST & SGST paid by treating the supply as Intra-State.
  • Supply held as inter-state supply

To learn more on steps to claiming GST Refunds, follow our detailed guide at GST Refunds.

2. Letter of Undertaking – Supply to SEZ/ Exports

According to the CGST Rule-2017 and as per GST Notification No. 16/2017 dated 07-07-2017, any registered person who chooses to export goods or services without paying IGST must provide a bond or a Letter of Undertaking (LUT) in the prescribed GST RFD-11 form.

 To put it simply, all registered taxpayers who export goods must submit a LUT in the GST RFD-11 form in order to export goods without paying IGST. It is important to note that the application for LUT must be completed before March 31, 2023 or prior to exporting goods to SEZ.

3. Six-digit HSN code now mandatory for e-Invoicing

e-invoicing list

This point is by far the most important in the list. It is necessary to look at the HSN codes you enter while e-Invoicing.

According to the Central Tax GST Notification No.78/2020 dated 15th October, 2020, taxpayers are required to indicate 6-digit HSN Codes for their outward supplies with AATO greater than Rs 5 Crores.

To learn more on e invoice in Tally Prime, read our detailed blog in the link provided.

GSTHero’s e Invoicing software allows you to generate e-Invoice with a single click!

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  • Integrates easily with all the major ERPs
  • 1-click e-Invoice generation directly from your ERP
  • 100% compliant with all the GST laws
  • 7-layer data security to protect your sensitive data from misuse
  • 24 x 7 dedicated technical support to assist you

4. Opt-in or Opt-out of GST Composition Scheme or QRMP Scheme

opt-in opt-out in GST
  • GST Composition Scheme
    The GST Composition Scheme enables small taxpayers to pay taxes at a reduced rate. If you want to participate in this scheme during the financial year 2023-24, you must either opt in or opt out by March 31, 2023, using Form CMP-02. This form must be used by both goods suppliers and service providers. According to GST Notification 14/2019, the threshold turnover limit for qualifying as a small taxpayer has been raised to Rs. 1.5 Crores in certain cases, up from the previous limit of Rs. 1 Crore
  • QRMP Scheme in GST
    Individuals or businesses that are registered and have a combined turnover of up to Rs 5 Crore are permitted to submit their GST returns every quarter while making monthly tax payments under the GST Quarterly Return Monthly Payment (QRMP) program. This scheme has been in effect since January 1, 2021, which was the final quarter of the 2020-21 fiscal year. It is important for taxpayers to be aware that the deadline for opting in or opting out of the QRMP scheme for the 2023-24 fiscal year is April 30, 2023.

5. Pending Input Tax Credit under GST

Ensuring that you utilize all your remaining input tax credit before the end of the financial year is crucial. As the financial year was to a close, it is necessary to conduct a GST reconciliation of your GSTR 2B with all your purchase invoices. This is a vital measure in order to obtain any pending ITC. The reconciliation should involve cross-checking the credit that was availed during the year, identifying and following up with any missing credit from vendors, as well as accounting for any additional credits related to expenses.

Why does your ITC remain unutilized?

When there are multiple GST registrations under a single PAN, it is difficult to track down the eligible Input Tax Credit available for all the business sub-units.

If the eligible ITC sits idle, it simply means that the business has to pay its GST liabilities in cash. This affects the working capital of a business, and the accumulated ITC sits idle in the sub-units or depots. Miscommunication between the branches and the head office can also be one of the reasons for this incident.

Businesses need to have a detailed GST Audit checklist report so that decision-makers can clearly understand the unutilized Input Tax Credit accumulated in all of their GST registered business units.

Following are some of the reasons that your business is availing lesser ITC than eligible ITC:

  • Your supplier has not filed his GSTR-1 corresponding to the transaction you are missing out on.
  • There has been an ITC reconciliation error that was not rectified.
  • Your defaulting supplier was not informed about the discrepancy, and this error was never corrected.

6. Important Reconciliations under GST

Reconciliation under GST

a. GSTR-3B vs GSTR-1 reconciliation

GSTR 3B and GSTR 1 reconciliation is crucial because GSTR-1 return CAN NOT be filed if your previous tax period’s GSTR-3B is NOT filed.

Hence, taxpayers must understand that the GSTR-3B vs GSTR-1 reconciliation is essential.

Reconciliation between GSTR-3B and GSTR-1 is required because:

  • To avoid late fees and interests for short payment or non-payment of Tax.
  • This reconciliation ensures that there is no duplication of any invoices. It also provides that no invoice mentioned in your GSTR-1 is missing in the GSTR-3B summary.
  • Calculation of Tax payable on outward sales becomes easy for a particular tax period (monthly or quarterly).
  • An automated reconciliation on a platform like GSTHero ensures no mismatches between the two returns.
  • Errors in the integrated taxes are identified while your GSTR 3B filling.
  • Allows your recipient to claim 100% Input Tax Credit under GST based on his GSTR-2B

To learn more on ‘Issues of mismatches in GST returns', check out our detailed blog in the link provided.

b. GSTR-2B vs Purchase records

Reconciliation of GSTR-2B against your Purchase records becomes very important to claim maximum ITC. Any mismatch between these two data indicates that either your supplier has made an error or you have made an incorrect entry. In either of the cases, your ITC gets blocked.

Claiming ineligible ITC can attract GST notices from the department, and your business may incur heavy penalties.

Following are the significant reasons why you should regularly reconcile your GSTR-2B against your Purchase Registers:

  • Helps in the early identification of mismatches between Purchase Records and auto-generated GSTR-2B
  • You can immediately inform the defaulting vendor about the discrepancy and ask him to rectify the errors so that you can utilize this credit for setting off the outward GST liabilities in the upcoming month.

GSTHero’s automated reconciliation solution

GSTHero provides an easy solution to all your reconciliation problems and makes the process errorless & fully automated.

You can claim a maximum of 100 % ITC with our highly advanced and easy-to-use Reconciliation facility.

You get five essential Reconciliation reports that will be highly beneficial for you to claim 100% ITC and help you identify the defaulting suppliers.

  1. GSTR1 Vs. GSTR-3B
  2. GSTR-2A Vs. GSTR-3B
  3. GSTR1 Vs. Book of Accounts
  4. GSTR-2A Vs. Book of Accounts
  5. GSTR1 Vs. E-way Bill

7. Pay your vendors on time

Vendors must receive payment within 180 days. It is essential to ensure all debts are settled promptly before the fiscal year ends to avoid carrying any unpaid invoices into the next fiscal year. If payment to the vendor is not made on time, it may lead to difficulties in reconciling accounts and claiming input tax credits. Therefore, it is crucial to pay outstanding invoices promptly to avoid any backlogs and facilitate the reconciliation process.

8. Reversal of Ineligible ITC and Blocked Credit

In case you decide to write off any inventory at the end of the year, it is crucial to note that as per Section 17(5) of the CGST Act 2017, you must reverse the Input Tax Credit (ITC) claimed on that inventory.

ITC should be reversed as per:

  • Rule 42 of CGST Act, 2017 (ITC Reversal on Inputs)
  • Rule 43 of CGST Act, 2017 (ITC Reversal on Capital Goods)

To learn more on ITC Reversal, follow the link provided.

9. Corrections in your returns

Making corrections to GSTR-1 or GSTR 3B returns for the previous financial year in the March 2023 returns is advisable. Taxpayers should reconcile their books of accounts (Ledgers) with the uploaded returns and adjust any discrepancies in form GSTR 3B. Furthermore, errors made in GSTR-1, such as submitting incorrect GSTIN, B2C invoices instead of B2B invoices, or omitted invoices, can be corrected at this time.

10. Paying Tax under forward charge by a GTA (Goods Transport Agency)

As per Notification No. 03/2022-Central Tax (Rate) dated July 13th, 2022, existing taxpayers who provide Goods Transport Agencies Services and wish to pay tax under the forward charge mechanism have been given the option to do so on the portal. To exercise this option, they can go to Services >> User Services > Opting Forward Charge Payment by GTA (Annexure V) after logging in. The Annexure V FORM must be submitted on the portal every year before the start of the Financial Year, and once submitted, it cannot be withdrawn during the year.

Annexure V FORM filing deadline is March 15th of the preceding financial year. Annexure V is now available on the portal for GTA's to make their selection for the Financial Year 2023-24, and the deadline for submission is March 15th, 2023.


In this article, we have put forth TEN important points to be considered before the end of the current financial year.

You can always use GSTHero’s internal GST Audit tool to run an internal scrutiny of all your GST registrations. This will help you to check the compliance status of your business and identify any gaps in your GST Return filing.

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Gaurav Yadav

About the author

Gaurav is an Engineer by training with a deep interest in Economics & Finance. He has been associated with the Fin-Tech industry for quite some time now. He writes for GSTHero for topics including GST Compliance, GST Structure, etc & aims to break down complicated technical jargon into simple terms for the taxpayers.

His expertise includes GST Laws, Corporate Finance & Macro-Economics.

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