GST AUDIT IN PUNJAB

GST AUDIT IN PUNJAB 

AUDIT BY CHARTERED ACCOUNTANT       

• Audit of accounts

Every taxable person, whose gross turnover in a year exceeds Rs. 50 Lacs, shall furnish the annual statement with Part ‘B’ thereof duly certified by an Accountant.

• Define Gross Turnover

Gross turnover is the aggregate of the amounts of sales and/or purchases made by any person during the given period.

Gross turnover shall include:

• any sum, charged on account of freight,
• any sum, charged on account of storage,
• any sum, charged on account of demurrage,
• any sum, charged on account of insurance; and
• Any sum, charged on account of for anything done by the person in respect of the goods at the time of or before the delivery thereof.

Gross turnover shall not include:

• The proceeds of any sale made outside the State by a person, who carries on business both inside and outside the State.
• The sum receivable or received from any person in respect of transaction of forward contract, in which goods are actually not delivered.

Note on hire-purchase or payment in installments:

In respect of transactions of delivery of goods on hire-purchase or any system of payment by installments, Gross turnover shall include:

• Total sum payable by the hirer under a hire-purchase agreement in order to complete the purchase of goods; and
• Any sum as payable by the hirer under the hire-purchase agreement by way of any deposit whether this sum has been paid to the owner or to any other person whether by payment of money or by any other means.

Gross turnover shall not include:

• Any sum payable as a penalty or interest or compensation or damages for breach of the agreement.

Note on works contract:  The amount to be included in the gross turnover in respect of movable goods, agreed to be sold under a works contract, shall be its sale price.

• Accountant means:

Accountant means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 and includes any person, who by virtue of the provisions of section 226(2) of the Companies Act, 1956, is entitled to be appointed to act as an auditor of companies.

However, Rule 41 and Part-B of Form no. 20 expressly states that this has to be signed by a Chartered Accountant.

Chartered accountant means a person who is a member of the Institute of Chartered Accountants of India.

• Submission of GST audit report

Every taxable person, whose gross turnover in a year exceeds Rs.50 lacs, shall furnish the annual statement in Form no. 20 with Part ‘B’ thereof duly certified by a Chartered Accountant.

• Who is Taxable person?

Taxable person means a person, who is registered for the purpose of paying Goods and Service tax under this Punjab GST Act.

Note: No GST audit report is required to be submitted in case of a person is registered for paying turnover tax only. In other words GST Audit report requirement is vis a vis payment under GST Act when turnover exceeds Rs. 50 Lacs.

• GST Audit report Form 22, 22A and 22B

Government of Punjab vide Notification No. G.S.R. 28/P.A. 8/2005/S. 70/Amd. (2)/2006, dated 8th June, 2006 substituted all the forms with new Forms. In this there was GST Form 22, 22A and 22B was also prescribed. All these forms are titled GST Audit Report. However, these forms are not mentioned in Act or Rules, thereby statutorily these forms are redundant. Besides this practically also there is no relevance of these forms. Every person shall bear in mind that under no circumstances department can insist on the filing of Form no. 22, 22A and 22B.

• Analysis of Form 20 Part-B

Clause by Clause analysis of Part ‘B’ of annual statement by a taxable person (Form GST 20)

Rule 41 states that every taxable person whose gross turnover in a year exceeds 50 lacs, shall furnish the annual statement (GST Form 20) along with Part ‘B’ duly certified by Chartered Accountant. This part is required to verified and certified by a chartered accountant, which means responsibility of preparation of this part lies with the auditee (client).

Clause 10 – DETERMINATION OF OUTPUT TAX ON SALES

The auditor should check whether the person has determined its correct output tax liability or not. For this he will check whether:

1. Calculation of tax on the prescribed rates of tax has been done.
2. The correct rates of tax have been applied on the sales.
3. Correct Bifurcation of the turnover 

Output tax is a source of revenue for the government so it is important for a C.A. to verify whether person has correctly calculated its output tax.

Clause 11 - BREAK UP OF ZERO RATED SALES

Taxpayer has to provide break up of Zero rated sales as Gross & Net Sales of Export out of India & Sale against ‘H’ forms. Sales Return & Discount should also be shown separately.

Auditor should check that this clause does not include the taxable sales.

Clause 12 - BREAK UP OF DEDUCTION FROM SALE & PURCHASE

Punjab GST legislation allows several deductions to be made from purchase and sale. In this clause all these deductions are to be detailed.

Deductions from sale are sales return, cash /trade discount, amount charge separately as interest for sale by Hire purchase/ installment purchase, cancellation of sales, change in nature of sales, change in sales consideration, purchase value of goods purchased from exempted unit and sold to person other than ‘taxable person’.

Deductions from purchase are purchase return, cash /trade discount.

Auditor have to verify whether the deduction are taken in proper manner and check whether the values shown are correct as it reduces the turnover, which ultimately reduces the output tax liability.

Clause 13 – DETERMINATION OF TAX ON PURCHASE

Purchases made under section 19 & 20 should be shown separately.

The auditor should check whether the person has determined its correct tax liability on purchases or not. For this he will check whether:

1. Calculation of tax on the prescribed rates of tax has been done.
2. The correct rates of tax have been applied on the purchases.

Clause 14 – PURCHASE TAX PAYABLE

Under this clause dealer has to bifurcate purchase turnover and purchase tax payable under each rate separately so that purchase tax payable should be calculated.

As a C.A we can verify whether the person has correctly shown its turnover under proper/correct rate because ultimately if wrong rate is taken it will reduce or increase the tax liability.

Clause 14(a),(b),(c) - DETERMINATION OF INPUT TAX

The auditor should verify the input tax credit availed by the person is correct or not.

For this he will have to check whether:

1. Correct calculation of tax on the prescribed rates of tax
2. the correct rates of tax have been applied
3. the set off of input tax correctly claimed

Clause 15 – Tax Liability

At last but not the least, this clause provides us the actual tax liability of the person.

For this calculation a person has to show its output tax which is calculated above in Clause 10, reduced by Income Tax Credit and taxes paid during the year.

Clause - OTHER INFO

This clause is just to provide proper and correct info of the person related to payment of tax, TDS and sales made to government.

It is implied that in audit the auditor will check;

1. Sales made to government at lower rates
2. The payment of tax in time or late payment which attract the interest
3. returns are correctly filled up
4. Late filing of the returns and penalty
5. Non compliance of various other provisions of the Act and further to initiate proceedings to impose the penalties and interest

The auditor will verify the facts and figures as true and correct; hence the auditor will take much responsibility of audit under the GST Audit.

Clause – Calculation under Central Sales Tax Act.

In this part auditor is required to verify:

• Sale in course of export outside the territory of India.
• Interstate sale.
• Total taxable interstate sale, as per books of accounts.
• Central sales tax payable.
• Whether there is delay in payment of tax.
• Input tax adjustment information.

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