Internal-Audit

Internal Audit in GST – GSTR-1, GSTR-2A, GSTR-3B, and More

CA Hema Pandey

Updated on February 2nd, 2024

Table of Contents
List of companies required to apoint internal auditor
In case of GST, a very detailed checking is required.
Internal audit in GST: Following areas need to be checked by auditor
GSTR-1 Details of Outward Supplies
GSTR-2A Details of Inward supply
GSTR-3B (Monthly/ Quarterly Return)
E-way bill
Input service distributor (ISD)

Internal audit in GST  is a very crucial aspect especially where the organisation has voluminous transactions. Internal auditor is required to check the accuracy of books of accounts and give his report to management.

Management relies upon internal auditor for correctness of account as he is works in employee capacity under an organisation.

As per the Companies Act, 2013, following companies are required to appoint Chartered Accountant/ Cost Accountant or any other professional as an internal auditor or firm of internal auditors: -

List of companies required to apoint internal auditor

GST Return Filing

Every Listed Company

Every Unlisted Public Company having

  • Paid up share capital during Preceding F.Y ≥ Rs. 50 Crores
  • Turnover during Preceding F.Y. ≥ Rs. 200 Crore
  • Outstanding Loans and Borrowing for Banks or Financial Institution at any time during previous F.Y > Rs. 100 Crore
  • Outstanding deposit at any time during previous F.Y. ≥ 25 Crores

Every Private Company having

  • Turnover during Preceding F.Y. ≥ Rs. 200 Crore
  • Outstanding Loans and Borrowing for Banks or Financial Institution at any time during previous F.Y > Rs. 100 Crore

In case of GST, a very detailed checking is required.

In case of Internal audit in GST, a very detailed checking is required.

  • We know that GST is a very complex law and is included in all major transactions of an organisation. GST compliances are also very critical as returns, payments, reconciliation etc. is to be done every month on GST portal.
  • The role of internal auditor in case of GST becomes quite vital as he has to go for detailed checking in order to get accurate results.
  • The role of internal auditor in case of GST becomes quite vital as he has to go for detailed checking in order to get accurate results.

Internal audit in GST: Following areas need to be checked by auditor

1

GSTR-1 Details of Outward Supplies

internal audit
  • Every taxpayer registered under GST is required to file GSTR-1 monthly or quarterly based on its turnover.
  • GSTR-1 determines the total tax liability (before availing input tax credit) and therefore, correct filing of GSTR-1 is required.
  • Various aspects such as Place of Supply, Time of Supply, Rate of Supply, Value of Supply, Composition scheme, B2B/ B2C etc. everything should be checked by the internal auditor of an organisation.

Following areas need to be checked by internal auditor in GST:

B2B Invoice (Supply to registered person)

  • GSTIN
  • Invoice Number
  • Date
  • Taxable Value
  • Rate
  • Head (IGST, CGST, SGST, UTGST, Cess)
  • All invoices uploaded
  • Total Taxable Value, Tax and total value of supply

B2B Invoice (Supply to unregistered person)

  • Total taxable supply
  • Tax liability
  • Total value of supply

Credit/ Debit Notes (Sale or Purchase returns)

  • Total taxable supply
  • Tax liability
  • Total value of supply

Zero rated Supplies (Exports Supply to SEZ)

  • Shipping Bill (invoice number must match with shipping bill details, otherwise will be rejected by ICEGATE)
  • Tax must have been paid, otherwise no refund claimed will be rejected.
  • Shipping Bill number, shipping bill date and Port code must be correct
  • Invoice having incorrect port code are likely to get rejected
  • Total taxable supply
  • Tax liability
  • Total value of supply

Nil Rated Supply

Supply of essential goods & services includes:
  • Nil rated supply
  • Exempted supply
  • Non-GST supplies
  • Intra-state to registered
  • Intra-state to unregistered
  • Inter-state to registered
  • Intra-state to unregistered

Advances

Tax Liability of Advances Received and adjustment of advances
  • Gross Advance received
  • Total tax liability

2

GSTR-2A Details of Inward supply

internal audit in GST
  • As per notification no. 94/2020, a registered person can avail credit only up to 105% of credit available in electronic credit ledger.
  • Therefore, it is very important to ensure that the suppliers have filed their GSTR-1, so that the credit is reflected in GSTR-2A of recipient of supply of goods or services. (In this case GSTR-2A reconciliation tool will help)
  • For this, the internal auditor should check details of inward supplies and make sure that the taxpayer is able to claim appropriate credit.

B2B Supplies (Supply from registered person)

  • GSTIN
  • Invoice Number
  • Date
  • Taxable Value
  • Rate
  • Head (IGST, CGST, SGST, UTGST, Cess)
  • All invoices uploaded
  • Total Taxable Value, Tax and total value of supply

B2B Invoice (Supply to unregistered person)

  • Details uploaded by all the suppliers
  • Correct rate is entered
  • Invoice values are correct
  • All invoices are as per

Credit/ Debit Notes (Sale or Purchase returns)

  • Total taxable supply
  • Tax 
  • Total value of supply

ISD Credits (Credits distributed to us by ISD)

  • Proportion of supply received by us
  • Proportion of credit transferred to us

TDS Credits (TDS deducted by recipient of supply)

  • Adequate deduction of credit
  • TDS reflecting timely on Portal

Import of goods from overseas on Bill of entry (Goods imported from outside India)

  • Invoice as per Bill of entry
  • IGST levied on goods as per Customs Tariff Act, 1975
  • Credit of IGST on import of goods can not be taken under GST and hence not taken

Internal Audit in GST: Other points in case of GSTR-2A 

  • Blockage of Input Tax Credit leads to blockage of working capital as the recipient pays GST to supplier and if due to any reason, he does get credit, he will have to pay tax from his own pocket for his output tax liability. Therefore, internal auditor must check whether all the suppliers have properly uploaded the details and credit is available on it.
  • Internal auditor should check whether the ITC under GST availed by the taxpayer is genuine. Which means all the invoices on which credit has been availed is real.
  • Sometimes, fake companies are created just to generate fake invoices and avail fake credit. Where there are too many transactions, it will be difficult for an auditor to check authenticity of all invoices. In that case, he should perform test check to see the details of supplier.
  • If the internal auditor finds that there is difference between the data maintained by supplier and GSTR-2A, he should find the reason of difference and inform to management about it. So that they can ask their supplier to upload appropriate details and correct credit can be claimed.
  • If the registered person claims excess ITC, he will have to pay interest @ 24% p.a. on such excess claim. This would cost the company. So, internal auditor shall intimate the company if he finds any excess ITC.

3

GSTR-3B (Monthly/ Quarterly Return)

internal audit under GST

Internal audit in GST : Following details should be checked by internal auditor: -

Tax on outward supplies and Reverse Charge inward supplies (Detail of output tax liability)

  • Outward supply (other than Zero Rated, nil rated and exempt)
  • Zero rated supply
  • Nil Rated, Exempted
  • Reverse charge INWARD supplies
  • Non-GST outward supplies

Interstate supplies (Details of supplies made to other state or union territory)

  • Taxable Value
  • IGST on outward supply

Eligible ITC (Input tax credit available for set off the output tax liability)

  • ITC on
  1. Import of goods
  2. Import of services
  3. Inward supply under reverse charge
  4. Inward supply from ISD
  5.  All other ITC
  • Blocked credit u/s 17(5)

Exempt, Nil Rated, Non-GST inward supplies (Inward supplies not eligible for credit)

  • Inter-state supplies
  • Intra-state supplies

Interest and late fee (Payable, if any)

Payment of TAX (GST payable)

  • IGST
  • CGST
  • SGST
  • Cess
  • Interest
  • Late Fee

Internal auditor should go through: -

  • Whether returns are furnished on time.
  • Internal auditor should check that the details of GSTR-1 filed matches with 3B.
  • Internal auditor should check that the details of GSTR-2A filed matches with 3B, i.e., credit claimed is accurate, neither more nor less.
  • If there is any refund in respect of exempt or zero-rated supplies, it is claimed properly
  • If any interest is leviable, proper interest is calculated and paid.
  • If any late fee is leviable, it is been paid.
  • GST return matches with Books of accounts.
  • GST return matches with Income tax or any other return.

4

E-way bill

GST internal audit
  • E-way bill generation is mandatory to be generated if the amount of invoice is more than Rs. 50000 in case of movement of goods. Internal auditor should go check that.

5

Input service distributor (ISD)

  • Input service distributor receives all the invoices of services received by its branches and it has to distribute the ITC to all the branches depending upon its usage of particular service.
  • Internal auditor should check whether the credit of a particular period is distributed properly.

To sum up, we can say that an internal auditor plays a very important role where the organisation has large number of transactions.

It helps the management to gain confidence about the accuracy of Financial statement, which it can finalise.

This is it from my side about Internal audit under GST. Please feel free to write your feedback about this article.
GSTR-2A-Reconciliation

As we know GST has became a very integral part of accounting, checking its accuracy from financial as well as taxation point of view has become vital.

In the long run, any error may lead to the problem which may affect the operations of an organisation. Thus, focusing on its accuracy is important.

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CA Hema Pandey

About the author

Hema is a Chartered Accountant who is having about Eight years of experience in taxation and accounting. She is in practicing as a Chartered Accountant since 2020. She is a writer by passion and thus shares her experience and knowledge through her articles at various platform.

Predominantly her area of interest is GST. Since GST is a very new concept for India, every practitioner is looking for clarity in this area. She likes to share her experience with everyone and therefore tries to put them in form of articles.
Apart from this, she is also well-worsed in Financial market.

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