Returns & GST Audit – Semantic Taxgen Pvt Ltd

Returns & GST Audit

GST Audit in India

Step 1

We will set up a seamless process for data collection.

Step 2

Your return will be prepared as required.

Step 3

Before you know it, your return will be ready for filing.

About GST Audit & Return Filing

The Goods and Services Tax is a multi-stage, destination-based indirect tax levied on the manufacture, sale and consumption of goods and services. By subsuming a number of state and central taxes into a single tax, GST aims to eliminate the cascading effect of taxation in a big way. This is in par with the government’s goal of setting up a common national market as well. The new tax regime was rolled out by the Central government on July 1, 2017.

Any individual registered under the GST Act has to produce the details of the sales and purchases of products and services as well as the tax collected and paid. To do so, the individual has to file online returns. GST returns are documents filed by taxpayers with the income tax authorities of India on a periodic basis. Those registered on the GST portal have to provide their business information (sales, purchases, tax collected and tax paid for instance) by filing GST returns online. The tax authorities use this information provided to calculate tax liability.

GST returns can be filed using different forms. They are:

GSTR 1: GSTR 1 has to be submitted by the 10th day of a month. It will contain details of a registered taxable supplier’s outward products supplied and services rendered. Some of the critical headings under form GSTR 1 are:

  • GSTIN (which stands for Goods and Services Taxpayer Identification Number)
  • Legal name of the registered person
  • Previous financial year’s aggregate turnover
  • Taxable outward supplies to a registered person
  • Taxable outward supplies to a consumer
  • Amendments to details of any outward supplies for previous periods

GSTR 2: GSTR 2 has to be filed by the 15th day of a month. It summarizes the details of inward purchases of taxable products and services. GSTR 2 will list the registered dealer’s purchase transactions undertaken in a month. Additionally, it will include purchases where reverse charge is applicable. Some of the critical headings under form GSTR 2 are:

  • GSTIN
  • Legal name of the registered person
  • Inward supplies received besides those attracting reverse charge
  • Inward supplies where tax is applicable on reverse charge
  • TDS and TCS credit received
  • Amendments to details of inward supplies

GSTR 3: GSTR 3 is a monthly return form, auto-generated by pulling information from GSTR 1 and GSTR 2. It should be filed by the 20th day of a month. This form will have the details of the inward and outward supplies of products and services, which are mentioned in GSTR 1 and GSTR 2. Some of the critical headings under form GSTR 3 are:

  • Turnover
  • Inter-state supplies
  • Intra-state supplies
  • Tax effect of amendments made concerning outward supplies
  • Inward supplies attracting reverse charge

GSTR 4: GSTR 4 needs to be filed by taxpayers opting for composition scheme. Under this, taxpayers are required to file their returns on a quarterly basis. Two of the conditions associated with this scheme are: i) taxpayers with a turnover of up to Rs. 75 lakhs can only opt for the scheme and ii) they should only be involved in intrastate trade. Some of the critical headings under form GSTR 4 are:

  • GSTIN
  • Legal name
  • Inward supplies where tax is payable on reverse charge
  • Consolidated statement of advances paid
  • Amendments to details of inward supplies furnished in returns of previous periods

GSTR 5: GSTR 5 is required to be filed by registered non-resident foreign taxable persons. It should be filed by the 20th day of a month. Such individuals are foreign suppliers that have come for a short while to make supplies in India. They do not have a business establishment in the country. Some of the critical headings under form GSTR 5 are:

  • GSTIN
  • Legal name
  • Imported goods
  • Imported services
  • Outward supplies made
  • Details of debit credit notes

GSTR 6: GSTR 6 is required to be filed by every input services distributor. The due date for filing this form is the 13th day of a month. It mentions the documents issued for distribution of input tax credit as well as the manner of distribution of credit. Some of the critical headings under form GSTR 6 are:

  • GSTIN
  • Legal name
  • Amendment to distribution documents and credit or debit notes of previous periods
  • Input tax credit received for distribution

GSTR 7: GSTR 7 has to be filed by the 10th day of a month. It contains the details of tax deductions made in a month. This needs to be furnished by taxpayers, registered to deduct TDS at source. Some of the critical headings under form GSTR 7 are:

  • GSTIN
  • Legal name
  • TDS details
  • Return period
  • Liability – payable and paid

GSTR 8: GSTR 8 has to be filed by e-commerce operators who collect tax at source. The filing for a month is due on 10th of the next month. The main intention of GSTR 8 form is to maintain a complete record of the transactions done on an e-commerce platform. Some of the critical headings under form GSTR 8 are:

  • GSTIN
  • Legal name
  • Details of supplies made via e-commerce operator
  • Tax paid and payable
  • Details of interest

GSTR 9: GSTR 9 is an annual return form which needs to be furnished by all registered taxpayers. The form, which is a compilation of the taxpayer’s 12 monthly GSTR 3 forms, has to be filed by 31st December every year. Form GSTR 9 contains the details of exports, imports and the tax paid by the applicant in a year.

GSTR 10: GSTR 10 is required to be filed by a taxpayer whose GST registration is surrendered or cancelled. This ‘final’ return should be filed in a span of 3 months from the date of cancellation or date of cancellation order, whichever comes later. Some of the critical headings under form GSTR 10 are:

  • GSTIN (which stands for Goods and Services Taxpayer Identification Number)
  • Legal name
  • Effective date of cancellation/surrender
  • Cancellation order date
  • Tax payable on closing stock

GSTR 11: GSTR 11 needs to be filed by individuals to whom a Unique Identity Number (UIN) has been issued for the purpose of getting a refund on their purchases in India. Only foreign embassies or diplomatic bodies holding UIN can file GSTR 11. It must be noted that this return should only be filed in those months when purchases are made. Some of the critical headings under form GSTR 11 are:

  • Unique Identification Number
  • Name of the person having UIN
  • Details of supplies
  • Tax period

Under the new tax regime, the entire process of filing returns has been automated. However, facilities have been provided wherein taxpayers can manually file GST returns – returns will be prepared offline and uploaded on government portal GSTN by the taxpayer or a facilitation centre.

To file GST returns online, you need to first visit the GST portal. Next, you need to login using your username and password. Once you have access to your profile, head to the “Services” section and click on the “Return” tab. On choosing the return filing period, you can view the various forms available and the due date for filing each return. Click on “Prepare Online” to proceed with filing GST returns.

Some of the key features of GST are:

1.Dual tax structure: There is a centre and state tax levied for every supply of goods and services and these are termed Centre GST (CGST) and State GST (SGST), respectively

2. IGST on inter-state supplies: Integrated GST (IGST) on inter-state supplies where the revenue is shared by both the Centre and the Consumption state.

3. Supply between two establishments of same legal entity taxable: The supply of goods between the agent and the principal are taxable. The “gifts” given by employers to employees exceedding INR 50,000 are taxable.

4. Imports and exports: All imports are treated as inter-state supplies and do attract IGST. all exports are zero rated.

5. Tax administration: An online system for tax, however, there are GST Facilitation centres, GSPs, ASPs that assist taxpayers in filing the returns, registrations, etc.

Composition Scheme

The GST regime offers reduced tax liabilities to businesses under the composition scheme. These businesses must have a supply turnover of under Rs. 50 lakh, and will also not be able to avail of input-credit. This scheme will not, however, apply to the service industry or to businesses making inter-state sales.

Benefits of GST Return Filing

Elimination of the cascading effect

The introduction of GST into the Indian tax system has done away with several other taxes like central excise duty, service tax, customs duty and state level value added tax. Thus a single GST has eliminated the cascading effect of tax on tax .

Higher threshold benefits

Before GST was introduced, VAT or value added tax was applicable for any business that had an annual turnover of 20 lakhs. Services that saw a turnover of less than 10 lakhs did not have to pay service taxes.

Startup Benefits

Earlier startups with an annual turnover of 5 lakh had to pay VAT which would be very difficult for a business during the initial stages. But as GST has replaced VAT, businesses can set off the service tax on their sales.

E-commerce for quick supply of goods

Startups are making a strong presence online offering their services and products through their websites. Under VAT, there were many types of VAT laws, and the supply of goods through online, that is, E-commerce was never a well-defined one. For instance, if you need to deliver goods to various states, then you will have to file the VAT declaration first. After that, you will need to provide registration details about the trucks which deliver the goods. In many instances, goods end up being seized by the authorities due to lack of proper documents. GST has now removed all such confusing processes.

Regulations and accountability

The pre-GST period witnessed a disorganized tax filing system. Presently, all taxes are paid online and major hassles that were a part of tax filing have been eliminated in the process of introducing GST. This has resulted in industries becoming more accountable and tax filing laws are better regulated than before.

Under this recipient could claim extra input tax credit. And for this, it is compulsory for him to make a payment of interest @ 24%. This is applicable on the excess tax amount. Auditors need to reconcile the GSTR 3B with GSTR 2A to make sure that the organization would not claim extra tax credit. If it has been paid in excess, company would pay interest and the tax amount on the applicable date. When the GST authorities come to know about the data gaps between GSTR 3B and GSTR 2A, the tax payers might have to pay the interest and penalty.

Failure to file GST returns on time to can lead to penalties and cancellation of GST registration. If GST return is continuously not submitted for six months, then the GST registration would be cancelled, and the person would not be able to obtain another GST registration – unless all the late filing penalty is paid.

The penalty for late filing GST return is different for persons having NIL return and persons having turnover. In case a person has no business, NIL GST return must be filed. Failure to file NIL GST return can lead to a penalty of Rs.20 per day for each of the GSTR-3B return and GSTR-1 return. So, failure to file NIL GST return can result in a penalty of Rs.40 per day or Rs.1200 per month.

In case a person has business activity during the period for which GST return is late-filed, then a penalty of Rs.50 per day will be applicable for late GSTR-3B return and Rs.50 per for GSTR-1 return. Hence, a penalty of more than Rs.3000 per month would be applicable.

In addition to the above late filing fees, the person would also have to pay interest at the rate of 18% on GST payment remitted late to the Government.

  • The first step before filing your GST will be to review the GST filing before submission. We, at Vakilsearch, give you an opportunity to do the same.
  • The second step is your approval.
  • After your approval, we will be filing your online returns
  • Our GST experts will file the GSTR returns using a challan. The ARN number generated will be shared with you.
  • Once the process is completed successfully, we will mail you an acknowledgement about the same to the registered email id provided by you.

A proper refund mechanism is necessary for effective tax administration, as trade is facilitated via the release of blocked finances for modernisation, expansion and working capital requirements of a business. The situations that could lead to refund claims include the following:

  • Exports of commodities or services
  • Deemed exports
  • Refund of taxes when embassies make purchases
  • Supplies to developers and units in special economic zones
  • Refund of accrued input tax credit on account of inverted duty structure
  • Refund of pre-deposit
  • Refund arising from order, judgment, direction or decree of the Appellate Tribunal, Appellate Authority or any court of law
  • Refund of taxes when embassies make purchases
  • Finalisation of provisional assessment
  • Excess payment because of an error
  • Refund due to issuance of refund vouchers for taxes paid on advances against which commodities or services haven’t been supplied
  • Refunds to overseas tourists of GST paid on commodities within the country and carried to an international location when they depart India
  • Refund of SGST and CGST paid by considering the supply in the course of inter-state commerce or trade

Refund Process under GST

In order to process a refund claim, the following procedure must be adhered to:

  • Visit the GSTN portal and fill in the application form meant for claiming refund.
  • You will receive an email or SMS which contains an acknowledgment number after the filing of application is done electronically.
  • The cash and return ledger will be adjusted and the “carry-forward input tax credit” will be reduced automatically.
  • The application for refund along with the documents you have submitted will be scrutinised by the authorities with a 30-day period after you have filed the refund application.
  • “Unjust enrichment” (explained below) is a concept that will be thoroughly scrutinised by the authorities. In case the application does not qualify, the refund will be transferred to a Consumer Welfare Fund (CWF).
  • In case the refund claimed by the individual in excess of the predetermined amount of refund, a pre-audit process will be conducted before the refund is sanctioned.
  • The credit of the refund will be done electronically to the applicant’s account through NEFT, RTGS or ECS.
  • Individuals are allowed to make their applications for refund at the end of each quarter.
  • In case the amount of refund is below Rs.1000, no refund will be provided to the individual.

Documents Required

Applicants who wish to make a claim will have to file elaborate documents in addition to the refund claim. The documents that have been prescribed for the same are standard. Therefore, for each claim, the primary document that has to be submitted is a statement of relevant invoices relating to the claim. If the refund is made on account of export of services, not including the statement of invoices, the relevant bank realisation certificates verifying receipt of payment in overseas currency should also be furnished. In case a claim is made by the supplier to the Special Economic Zones (SEZ) unit, the authorised officer will have to make an endorsement verifying the receipt of such commodities or services in the SEZ and submit the same along with the other documents. Moreover, the SEZ unit will also have to provide a declaration stating that ITC of the tax paid by the supplier has not been availed.

General rules for filing GST appeals

All appeals must be made in prescribed forms along with the required fees.

Fee will be-
–The full amount of tax, interest, fine, fee and penalty arising from the challenged order, as admitted by appellant,
AND
–10% of the disputed amount

In cases where an officer or the Commissioner of GST is appealing then fees will not be applicable.

Can an authorized representative appear in court?

Yes. Any person required to appear before a GST Officer/First Appellate Authority/Appellate Tribunal can assign an authorized representative to appear on his behalf, unless he is required by the Act to appear personally.

An authorized representative can be-

  1. a relative
  2. a regular employee
  3. a lawyer practising in any court in India
  4. any chartered accountant/cost accountant/company secretary, with a valid certificate of practice
  5. a retired officer of the Tax Department of any State Government or of the Excise Dept. whose rank was minimum Group-B gazetted officer.
  6. any tax return preparer

Retired officers cannot appear in place of the concerned person within 1 year from the date of their retirement.

Appeal cannot be filed in certain cases

The Board or the State Government may, on the recommendation of the Council, fix monetary limits for appeals by the GST officer to regulate the filing of appeal and avoid unnecessary litigation expenses

Can all decisions be appealed against?

No. Appeals cannot be made for the following decisions taken by a GST officer-

  1. An order to transfer the proceedings from one officer to another officer
  2. An order to seize or retain books of account and other documents; or
  3. An order sanctioning prosecution under the Act; or
  4. An order allowing payment of tax and other amount in installments

A person unhappy with any decision or order passed against him under GST by an adjudicating authority can appeal to the First Appellate Authority

If they are not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to High Court and finally Supreme Court.

The following are the mandatory GST Audit checklist that requires strict compliance:

1. Checking of GSTR 3B in relation to GSTR 1 & GSTR 2A:

Two important points get covered under this heading:

a) Interest and penalties in GST Act:

Under this recipient could claim extra input tax credit. And for this, it is compulsory for him to make a payment of interest @ 24%. This is applicable on the excess tax amount. Auditors need to reconcile the GSTR 3B with GSTR 2A to make sure that the organization would not claim extra tax credit. If it has been paid in excess, company would pay interest and the tax amount on the applicable date. When the GST authorities come to know about the data gaps between GSTR 3B and GSTR 2A, the tax payers might have to pay the interest and penalty.

b) Amendment in GSTR:

When the auditor comes to know about the data gaps, he would recommend the management to make amendment of the invoices at summary levels in GSTR 1.

2. Checking particulars of invoice:

It is very clear that there are specific rules related to the details in the invoices. If the format of the invoice varies, he would advise the management to make amendment of the invoice and include the requirements of the GST rules.

3. Reversal of input tax credit for non-payment in 180 days:

At this stage the GST auditor has to check the following details:
a) Difference between invoice date and date of payment. And this would not exceed 180 days.
b) The amount of payment needs to remain equal with invoice amount and GST. If the payment amount is less than invoice amount plus GST, the input tax credit to the extent of short payment would get reversed.

4. Reviewing e-way bill and matching with invoices:

This step consists of three stages, such as:
a) Results of any mismatch shown in the e-way bill in relation to invoice. As it is a familiar fact that an e-way bill is not alterable and it is not possible to delete it. But it is permissible for cancellation within 24 hours of its generation. When the goods get shifted without e way bill, the designated authority could impose fine for this.
b) Important points:
• Whenever it is necessary for business, e-way bill is quite unavoidable.
• And details given in the e-way bill need to match with invoice.
c) Movement of goods in non-motorized vehicles:
Whenever transportation takes place in non-motorized vehicles, the necessity of issuing e-way bill does not arise.  As some businesses are taking to this practice in order to avoid the e-way bills, internal auditors need to closely scrutinize the e-way bill is more worth more than fifty thousand rupees.

5. Cross-checking the stock pending with job-workers on 30th June, 2017:

As it is mandatory that goods lying with job workers on 30th June 2017 need to get received within a period of one year. The capital goods lying with job workers require to be brought back before 30th June, 2019 (within a period of two years).

Frequently Asked Questions

What are the different kinds of GST returns applicable?

There are 11 types of returns that can be filed under GST.

GSTR 1 – return for outward supplies

GSTR 2 – return for inward supplies

GSTR 3 – return containing details from GSTR-1, GSTR-2, GSTR-6 and GSTR-7 filed by taxpayer

GSTR 4 – to be filed by taxpayers opting for composition scheme

GSTR 5 – to be filed by non-resident taxpayers

GSTR 6 – to be filed by input service distributors

GSTR 7 – to be filed for TDS transactions

GSTR 8 – to be filed by e-commerce operators

GSTR 9 – annual return to be filed by every registered taxpayer

GSTR 10 – to be filed when permanently terminating business activities

GSTR 11 – to be filed by taxpayers holding Unique Identity Number

Are e-commerce operators required to file GST returns?

Yes. GSTR 8 has to be filed by e-commerce operators who collect tax at source. The filing for a month is due on 10th of the next month. The main intention of GSTR 8 form is to maintain a complete record of the transactions done on an e-commerce platform.

How to file GST returns online?

To file GST returns online, you need to first visit the GST portal. Next, you need to login using your username and password. Once you have access to your profile, head to the “Services” section and click on the “Return” tab. On choosing the return filing period, you can view the various forms available and the due date for filing each return. Click on “Prepare Online” to proceed with filing GST returns.

What GST returns have to be furnished by a non-resident taxable assessee?

GSTR 5 is required to be filed by registered non-resident taxable persons. They are referred to foreign suppliers that have come for a short while to make supplies in India. They do not have a business establishment in the country. Some of the critical headings under form GSTR 5 are:

  • GSTIN
  • Imported goods
  • Imported services
  • Outward supplies made
  • Details of debit credit notes

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