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Insurance on car
Ramesh Rao (217 Points)
Kunal Mittal (FINANCE OFFICER) (575 Points) --> Replied 21 June 2019
NO SIR, you cannot claim car insurance itc nor can you claim its service or repair itc. its blocked.
Online GST Certification Course
Madhur Bindal (Account Officer) (35 Points) --> Replied 25 January 2020
CA Naveen Chand (Chartered Accountant) (12724 Points) --> Replied 26 March 2020
ITC on car insurance , servicing , repair maintenance is ELIGIBLE if MOTOR VEHICLE used for the following purposes :
1. for transportation of GOODS
2. for transportation of PERSONS (sitting capacity > 13 )
3. Motor Vehicle used for the further supply
4. used for transportation of passengers
5. for training on driving
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Departmental Audit under GST | Types & GST Audit Handling Procedure
Article broadly speaks on how to handle Departmental audit under GST, document and the risk parameter to avoid the notices and penalties in GST. As we know, GST (Goods and Services Tax) works on the ‘ trust-based system ’. Accordingly, the registered taxable person himself carries out the following compliances/ tasks under GST –
- Measures the tax liability on a self-assessment basis;
- Pays the said self-assessed tax liability; and
- Prepares and files the requisite GST annual return .
As all the above compliances/ tasks are performed by the registered taxable person, it becomes highly important to verify the correctness of the same.
However, practically it is not possible to carry out the GST audit of each and every registered person by the departmental officers. Thus, by and large, the department carries out the GST audit on the basis of specific pre-fixed parameters.
In the present article, let us thoroughly understand the different types of Departmental audit under GST ; selection parameters based on which departmental audit is done; illustrative list of documents/ information generally sought during audit and also the manner in which the departmental audit should be handled.
What is Departmental audit under GST?
The term ‘Audit’ is defined under section 2(13) of the Central Goods and Services Tax Act, 2017 read with rule 101(3) of the Central Goods and Services Tax Rules, 2017. Accordingly, under GST, the term ‘Audit’ means –
- Examination of records, returns and other documents which are maintained/ furnished by the registered taxable person;
- Such examination will be done to verify the correctness of the declared aggregate turnover for GST audit ; input tax credit availed and utilized; taxes paid; exemptions and deductions claimed; refund claimed and various compliances undertaken by the registered taxable person under the CGST Act and CGST Rules.
How Many types of Departmental audit under GST
There are two types of departmental audit under GST. The briefing of the same is tabulated hereunder
Let us one by one understand both of the above referred departmental audits –
1. Audit by the tax authorities
The following table simplifies the audit by the tax authorities as per section 65 read with rule 101
2. Special audit
The following table simplifies the special audit conducted by the Chartered Accountant or the Cost Accountant as per section 66 read with rule 102
In both the above types of departmental audit, the proper officer may initiate action under section 73 [non-fraud cases] or under section 74 [fraud cases] of the Central Goods and Services Tax Act, 2017, if it is concluded post audit that –
- There is any tax not paid or short paid; or
- Amount is erroneously refunded; or
- Input tax credit is wrongly availed or utilized.
You can find the complete GST audit checklist for procedure and required documents through our article, to avoid discrepancies during audit go through this article.
Departmental audit under GST : Risk Parameters
Generally, the registered person under GST is selected for departmental audit based on the risk parameters. Some of the probable risk parameters are highlighted hereunder –
- Size of the turnover;
- Change in turnover as compared to previous year’s turnover;
- High difference in input tax credit availed and input tax credit reflected in Form GSTR-2B;
- Failure in filing periodical returns or payment of tax;
- Size of the refund claim;
- Registered person who requested waiver or is declared bankrupt;
- Financial ratio analysis;
- Based on specific information received from other governmental authorities for example income tax; RBI; ROC etc.
The GST audit tool identifies mistakes in GST returns and suggests ways to fix them so that businesses can mitigate risks before they become costly.
What documents are required for GST audit?
Before going into the nitty-gritty of handling of Departmental audit under GST , firstly let us check the illustrative list of documents which are generally sought by the department during the conduct of an audit.
Here, it is important to note that it is the basic duty of any registered person to provide required documents, information as well as records, as needed by the proper officer, during the conduct of the audit.
The illustrative document list is highlighted hereunder –
- Copy of balance sheet, income tax return, audit report, annual return repor t , Form 26AS, etc.;
- Copy of relevant GST returns i.e. Form GSTR-1, Form GSTR-3B , Form GSTR-2B, Form GSTR-9, GSTR 9C applicability or any other applicable returns;
- Copy of invoices issued by the registered person;
- Copy of invoices based on which input tax credit is availed by the registered person;
- GST Reconciliation of Turnover reflected in Profit & Loss account as against Turnover reflected in GST returns;
- GST Reconciliation of input tax credit availed in GST return as against input tax credit reflected in auto-populated Form GSTR-2B ;
- The sample copy of purchase orders, work orders, agreements, etc.
How to Handle Departmental audit under GST
Because of the past experience, it has become a general perception that the ‘ departmental audit ’ is super scary. The registered person thinks that they will be trapped and will have to accept, declare and deposit the tax as determined by the officer during the audit by department . However, surprisingly the departmental audit is not so scary if the same is handled vigorously.
There cannot be any specific step by step method which can be adopted to handle the departmental audit. However, the probable manner in which it can be dealt with is summarized hereunder –
- First and foremost, don’t panic when you receive the notice informing conduct of audit by tax authorities under section 65 or a special audit under section 66 of the Central Goods and Services Tax Act, 2017 .
- Check the notice informing audit thoroughly and confirm the designation of issuing officer.
- Ensure that no parallel audit or investigation is being conducted for the same period as specified/ covered in the notice.
- Prior to submitting any documents/ information to the audit team, the said documents/ information should be thoroughly vetted.
- As and when any documents/ information is submitted to the audit team, it should always be submitted along with a covering letter. Always take acknowledgement of the submission on the o/c i.e. office copy of the covering letter for record purpose.
- Be ready with all the necessary GST reconciliation and appropriate replies for any differences thereof.
- In case any discrepancies are observed and the same is not acceptable, draft an appropriate reply and submit the same along with all the relevant proofs. Make it a point to provide a reply only and only in the written form.
- However, if the discrepancies are acceptable and you are ready to pay the differential amount. Deposit the said differential amount via Form DRC-03 and communicate the same to the proper officer.
- Never accept and deposit any amount under pressure.
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About the author
Poonam Gandhi is a Chartered Accountant and a Lawyer. She is a Professional Freelance Content Writer/ Editor and an Educator. She masters in creating result-oriented as well as Search Engine Oriented Content. Currently, she is associated with some of the topmost leading sites of India. She holds more than 3 years of experience in the content field. Before entering the content writing field, she possessed a wide practice experience of more than 9 years, specifically, in the field of Indirect Taxation.
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Crucial areas to be covered in GST Audit
The main objective of GST Audit is to check the veracity of declaration of information in records in accordance with the GST Rules. The most pivotal role-play of a GST audit is to ensure the reconciliation of records in the books to avoid GST evasion.
In this article, I have tried covering the core areas whose reconciliation carries the most importance:
#1 Reconciling GSTR 3B with GSTR 1 & GSTR 2A
The two important points to be covered under this heading are:
Interest and penalties in the GST Act
Under this sometimes recipient can claim the extra input tax credit, which attracts the liability to make payment of interest @ 24% on the extra amount. The auditor needs to reconcile the GSTR 3B with GSTR 2A (an autopopulated return generated when the seller furnishes their GSTR 1) to make sure that the organization does not claim the extra input tax credit. When the GST authorities might come to know about inconsistencies between GSTR 3B and GSTR 2A, the taxpayers might have to bear additional penalties.
Amendment in GSTR 1
When the auditor comes across such disparities in data, he shall recommend the management to make amendments in the summary details of GSTR 1.
#2 Examining the particulars of Invoice
There are well-defined rules for details to be incorporated in the invoices. If the format of the Invoice deviates from the prescribed standards, the auditor shall advise the management to make amendments and include the requirements of the GST Rules.
#3Reversal of the input tax credit for non-payment in 180 days
Sec. 16(2) of the Central Goods & Services Tax (“CGST”) Act, 2017 provides for reversal of ITC on account of non-payment.
At this juncture, the auditor has to examine that:
- The difference between the Invoice date and date of payment should not exceed 180 days.
- The payment made should be equal to the amount of the Invoice inclusive of GST. If the amount of payment appears to be less than the invoice amount plus GST, the Input tax credit availed earlier to that extent shall get reversed and added to his output tax liability, along with interest thereon.
#4 Matching e-way bill with Invoices
To further dwell in this process, we first need to understand about an e-way bill.
What is an E-way bill?
E-way bill is an electronically generated document that is required to be generated for inter-state and intra-state movement of goods except for Delhi. A GST registered person cannot transport goods in a vehicle whose value exceeds Rs 50,000 without an e-way bill. For the movement of goods within Delhi, the value of goods should be more than Rs 100,000.
An e-way bill is generated:
- In relation to a ‘supply’
- For reasons other than a ‘supply’ ( say a return of goods)
- Due to inward ‘supply’ from an unregistered person
During the review of the e-way bill against invoices, two important points to be considered are as follows:
- The details mentioned in the e-way bill should match those in the invoice. It should be further noted that an e-way bill can neither be altered nor canceled. However, it can be canceled within 24 hours of its generation. In the case of the movement of goods without an e-way bill, a fine can be imposed by appropriate authorities.
- Whenever transportation of goods takes place in non-motorized vehicles, the necessity of issuing an e-way bill does not arise. As some business houses are maligning such practice in order to avoid the e-way bills, the internal auditors need to scrutinize closely.
#5 Cross-checking the stock pending with job worker
According to sec 19 of the CGST Act, the input goods lying with the job work must be received within one year i.e. 31 st June 2017 and capital goods must be brought back within three years i.e. 31 st June 2019.
Akash Arora is a Chartered Accountant. His expertise areas include Indirect Tax (GST), Direct tax, and Internal Auditing. Reach out to him at +918588918033 or [email protected]
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