Comprehensive Checklist for GST Compliance – GSTR 9/9A, GSTR 9C, and Internal Auditing

Table of Contents

1. Checklist – Inward supply
2. Checklist – Outward supply
3. Checklist – Reports and Notices
4. Checklist – Internal Documents

Checkout Taxmann's GST Annual Return & Reconciliation which provides an in-depth analysis of Forms GSTR-9, GSTR-9A, and GSTR-9C, offering step-by-step guidance. It includes over 40 case studies on GSTR-9, supplemented by more than 50 advanced FAQs on Annual Returns. The book also features a comprehensive checklist for monitoring outward and inward supplies for compliance. In other words, this book is an extensive guide to understanding the fundamentals and complexities of Annual Return and Reconciliation. Designed as a handy reference, it assists registered individuals, professionals, and technical experts in preparing and complying with GSTR-9/GSTR-9C.

1. Checklist – Inward supply

1. Consultant should examine that all inward supplies of Raw Materials, Packing Materials, Fuel, Stores, and spares and services procured through purchase/Service order and from purchase order level itself registered taxable person is in position to determine the eligibility of ITC on such transaction with nature of transaction viz. Composite supply, mixed supply, and ITC were availed with satisfying the conditions of section 16(2) of the CGST Act, 2017, and rule 36(4) of CGST Rules, 2017.
2. Consultant should examine that ITC was availed after receiving of Goods and services according to section 16(2)(b).
3. Consultant should ensure that Proper documentation for partial and full rejection of materials for inward supply and Credit notes issued by suppliers in case of such rejections are duly accounted.
4. Consultant should examine that proper system for accounting in case of materials received in short quantity and proportionate ITC was availed in such scenario.
5. Consultant should also ensure non-availment of ITC in case of free samples received from suppliers.
6. Consultant should ensure that ITC availed based on Eligible documents viz. Bill of entry, Tax invoice, ISD invoice, self-invoice and debit notes issued by the suppliers with supporting of Goods/Service received note.
7. Consultant should examine that prescribed records/electronic records under section 35 of CGST Act, 2017 read with rule 56 and rule 57 of CGST Rules, 2017 are maintained.
8. Consultant should ensure that all inward supply should be bifurcated into input/input services and capital goods.
9. Consultant should ensure that w.e.f. 1-1-2022, ITC on all inward supply will be based on entries reflected in GSTR-2B.
10. Consultant should ensure that e-way bill towards inward supply was received and maintained towards inward supply for the period of compliances, breach of the same for which department may litigate/dispute and department may issue Notice for scrutiny (ASMT-10).
11. Consultant should be examining the transaction of inward supply which falls under Block credit under section 17(5) of CGST Act, 2017 and ensure that no ITC was claimed on such inward supply.
12. Consultant should also ensure that inward supply for which payment towards the value of Goods and GST was not made within 180 days, ensure for reversal of ITC under rule 37 of CGST Rules, 2017 from the date of the invoice along with interest which is calculated from date of ITC taken and date of reversal of ITC. Consultant should also check for reversal of ITC as per rule 37A where ITC has been availed by a registered person in the return in FORM GSTR-3B for a tax period in respect of such invoice or debit note, the details of which have been furnished by the supplier in GSTR-1 or using the IFF, but GSTR-3B for the tax period corresponding to the said statement of outward supplies has not been furnished by such supplier till the 30th September following the end of financial year.
13. Consultant should ensure that no disallowance of ITC should be done when inward supplies are received under Schedule-1 without consideration, in this case, the supplier has been deemed to be paid in terms of section 16(2)(c) of CGST Act, 2017.
14. Consultant should ensure that proper reconciliation between ITC taken on inwards supply shown in GSTR-3B/Input tax credit register and GSTR-2B was prepared during the compliance period.
15. Consultant should ensure that re-credit has been taken for ITC for which payment was made to vendors after 180 days, which was reversed earlier according to rule 37.
16. Consultant should ensure periodical reconciliation of ITC taken on inward supplies as per GSTR-3B vs GSTR-2B vs e-way Bill vs e-invoice.
17. Consultant should ensure that all inward supplies invoices whose turnover is more than 20 Crore (Applicable limit of E Invoicing was applicable in FY 2022- 23) issued tax invoice under section 31 of CGST Act, 2017 read with rule 46 of CGST Rules, 2017 containing IRN in QR code. In the absence of a QR code containing IRN, an invoice will not be valid invoice under rule 48(5) of CGST Rules, 2017 and ITC will not be available.
18. Consultant should ensure that ITC availed based on original invoice/BOE/Self invoice/ISD invoice. ITC will not be available based on Xerox copies of invoices.
19. Consultant should ensure that in case of inward supplies entries not reflected in GSTR-2B, proper communication with suppliers by using the tab under GSTN “Communication with Taxpayers” should be used for communication. In case authorities claim that since the GSTR-3B is not filed by suppliers, the tax is not paid as required by Section 16(2)(c), it can be argued that just CBIC has envisaged such situations and clarified vide a press release dated 18th May 2018, and the similar matter was clarified in GST Council 27th meeting dated 4th May 2018, as under:
    Para (iv) No automatic reversal of credit: There shall not be any automatic reversal of input tax credit from the buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller however reversal of credit from the buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets, etc.
20. Consultant should ensure that all ITC should be availed up to 30-11-2023 for F.Y. 2022-23 under section 16(4) of CGST Act, 2017, care should be taken that in GSTR-2B if suppliers filed their GSTR-1 after 11th November it should be shown in recipient end as an ineligible ITC but which is not ineligible ITC under section 16(4).
21. Consultant should ensure that input tax credits on goods against an invoice are received in lots/instalments, the recipient would be entitled to take credit pertaining to the entire invoice upon receipt of the last lots/instalments, the consultant also ensures proper receipt of delivery challans and e-way bills for goods receipt.
22. Consultant should ensure that the recipient has already availed depreciation on the ITC portion for Plant and machinery and ensure that no ITC would be availed on such tax components.
23. Consultant should ensure that no input tax credit would be availed by the registered person in respect of any tax that has been paid in respect of an order where demand was confirmed on account of fraud, wilful misstatement, or suppression of facts.
24. Consultant should ensure that exempt supplies which attract NIL rate or wholly exempt or non-taxable from levy of GST or transaction of securities and value taken 1% of the sale value of securities or sale of land and value of land taken as value adopted for the purpose of paying stamp duty, also ensure that proportionate ITC was reversed in proportion to such supplies or not.
25. Consultants should ensure that taxable persons have not availed any block credit under section 17(5) of CGST Act, 2017 such as Motor vehicle for transportation of a person having approved seating capacity of not more than 13 persons (including driver), service for general insurance, repairs and maintenance expenses pertaining to motor vehicles, staff welfare expenses, etc.
26. Consultant should ensure that no ITC availed on work contract service when supplied for construction of immovable property (Other than plant & machinery).
27. Consultant should ensure that taxable person availed ITC on foundation and structural support which is needed essentially for installation of plant & machinery.
28. Consultant should ensure that the taxable person has not availed ITC on goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.

2. Checklist – Outward supply

1. Consultant should compare the figures of outward supplies with previous years’ figures and find out the deviation with justified reason.
2. Consultant should verify that Invoice series issued towards the outward supply of goods and services for domestic and export are sequentially maintained. All cancelled/reversed invoices in a computerized system must be examined by a consultant and checked whether the same was reported in GSTR-1.
3. Consultant should ensure that all classification of supplies as composite, non-composite, or mixed supply was done correctly also valuation was done correctly according to section 15 of CGST Act read with respective valuation rules.
4. Consultant should examine that all debit notes/journal vouchers issued towards price difference on which additional GST liability is payable on such additional consideration, also examine that all such debit notes must reported in GSTR-1.
5. Examine the entries in the supplies of goods/services register on which GST was not discharged and find out the reason for the same with any applicability for exemption notification or reason of non-applicability or reason of keeping out of the scope of supply (say dividend, sale of securities, etc.) and in the case were the benefit of cum-tax valuation is taken, the consultant must check if the taxes are not separately collected.
6. Consultant should examine the records maintained towards the outward supply of goods viz. Stock and Supply of goods/Services under section 35 read with rule 56 & rule 57 for electronic records.
7. Consultant should examine All Job work transaction undertaken during the compliance period with examine that the Materials sent was returned within in stipulated time and in case Goods were supplied from the Job worker’s premises GST was discharged on the same and the same was entered in supplies of goods/services register, also ensure that Job worker place was added as an additional place of business prior to supply of goods from there.
8. Consultant should examine the Scrap sales register and find any unusual items sold which are in obsolete nature; verify that adequate GST was discharged on the same.
9. Consultant should examine the price list, and copy of the agreement with customers to ascertain the mode of delivery and terms/conditions for discounts (Cash/Quantity/Price difference). In case of post-supply discounts passed on by way of issuing credit notes ensure compliance of conditions for passing post-supply discounts.
10. Consultant should also verify that any amount viz. Packing charges, freight, and any other charges recovered from the customers are been added in while determining the transaction value also ensure for correct classification of composite supply/Mixed supply was made at the time of issuing an invoice.
11. Consultant should examine that debit note issued towards late payment interest at the time of receiving the interest instead of due basis and such interest added in transaction value for discharging GST Liability.
12. Consultant should verify the components of price added in case of free supply of goods/Warrantee charges in transaction value and also ensure that any amount for which suppliers are liable to pay incurred by the recipient has been added in transaction value.
13. Consultant should examine the delivery challan/non-returnable gate pass issued during the compliance period for goods which was not supposed to be returned, the consultant should ensure that adequate GST was discharged for the same and entries were entered in the sales register.
14. Consultant should examine the Material transfer note issued to branches within the state and outside the state and ensure that GST was discharged for said transaction based on transaction value under section 15 read with rule 28.
15. Consultant should ensure that the correct time of supply is determined under section 12 and 12(3) of the CGST Act, 2017 under the reverse charge mechanism.
16. Consultant should examine the entire supporting document on the basis of which credit note/debit notes are issued to customers as the credit note could be issued only the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply or where the goods supplied are returned by the recipient or where the goods or services or both supplied are found to be deficient as mentioned in section 34(1) and debit note could be issued only in cases where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply as mentioned in section 34(3).
17. Consultant should reconcile the turnover of GSTR-1, GSTR-3B, E-way bill, e-invoice, and books of account and find out the reason for the difference and ensure that GST was discharged correctly.
18. Consultant should check whether ISD/Cross charge invoices raised to their branches in different states with compliance of prescribed provisions of GST.
19. Consultant should ensure that reconciliation of miscellaneous income and components of expenses where such income was netting off should reconcile with GSTR-1 and GSTR-3B outward supplies.
20. Consultant should ensure that in case of supply of capital goods or plant of machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed in section 18(6) of CGST Act, 2017 or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher.

3. Checklist – Reports and Notices

Consultant should scrutinize the following documents to evaluate the implications under GST:

3.1 Director Report

Consultant should scrutinize the ‘Directors’ Report’ in depth to understand the overall financial results of the company, new products launched during the year, new happenings and future plans of the company and changes in marketing patterns, etc. to understand the methodology of the company. The consultant should also review the comments about the internal control system and their adequacy. This enables the taxpayer to have an idea about increasing the GST liability on value addition in case of new products launched during the year and a corresponding increase in ITC availability. In case of a change in marketing pattern/mode of delivery enable the consultant to examine the change in type of supply like composite supply/mixed supply and determination of place of supply.

3.2 Statutory Audit Report

Consultant should examine the ‘Statutory Audit Report’ to find out the qualified/ adverse opinion given by the statutory auditor to link these findings with any liability arising under GST or any impact on GST liability from qualification made by the statutory auditor. The statutory auditor reports that the Company has made adequate provision/written off/written down the value for obsolete inventory items that are currently non-usable, the consultant should examine this note in light of section 17(5)(h) of CGST Act, 2017 which provides that ITC shall liable to be reversed in case of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Consultants should examine and ensure that outstanding GST payable shown in books and GST Return shown at the end of the financial year 2022-23 is matched with GST dues shown in para 3(vii) and also ensure that the company is regular in depositing undisputed statutory dues for Goods and Services Tax, to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than 6 months from the date, they became payable, shall be indicated.

3.3 Cost Audit Report/Cost Accounting Records

Consultant should verify the Cost Audit Report of the company which covers Cost Audit to scrutinize the details regarding quantitative and financial details regarding production, supply of goods, capacity utilization, input-output ratio, and related party transactions according to section 15(2) & valuation Rule 28, reconciliation of annual turnover with a taxable value of Goods produced as per the GST returns. In case of registered person is not covered under Cost Audit, the consultant should scrutinize the cost accounting records prepared by the registered taxable person, wherever applicable. The consultant should cross-check all information shown in the Cost Audit Report/Accounts with Records maintained under section 35 of CGST Act, 2017 read with rules 56 & 57 of CGST Rules, 2017.

3.4 Tax Audit Report

Consultant should examine the Tax Audit Report under Income-tax Act, 1961 to verify the depreciation claimed on capital goods, and details of input tax credit availed and utilized with opening and closing balances, the consultant should ensure that Double benefit is not claimed towards ITC and Depreciation, also consultant should scrutiny of prior period income/expenses incurred and their impact on GST for the time of supply point of view. The consultant should examine that No ITC was claimed for prior period expenses for which the time limit for availing ITC was lapsed similarly consultant should also examine the GST implication on Prior period income like interest for late payment received in subsequent financial years.

3.5 Internal Audit Report

Consultant should examine the internal audit report for the audit period and examine the points raised relating to the impact on the ITC and GST liability.

3.6 Notices issued by the department

1. Consultant should check whether all notices/orders (Specified documents) received from the CGST department after 5th November 2019 contain DIN (Document Identification Number) and after 24th December 2019 including e-mails containing DIN in case DIN was not mentioned these documents treated as invalid documents.
2. Consultant should review the status of pending cases at various stages viz. audit, SCN, and appeals. The consultant should also examine if the assessee follows the same methodology for transactions pertaining to the compliance period by not discharging the GST for transactions that were already disputed by the department and litigation going on for the same, in such case consultant ascertains the disputed liability.
3. Consultant should ensure that all reply letters filed to the department must be duly acknowledged by the department.
4. Consultant should ensure that Notices for scrutiny issued in the form of ASMT-10 were timely replied to in ASMT-11 and examined that the matter has been closed or proceeding for issuing Intimation for Demand under DRC-01A and DRC-01 is going on.
5. Consultant should also examine whether prior to the issue of DRC-01, DRC-01A was issued or not.

4. Checklist – Internal Documents

4.1 Profit & Loss Account

1. Consultant should scrutinize the Profit and loss account for the supply of goods and services towards domestic and export and scrutinize the other income viz. Scrap sale, Misc. Income, Insurance claims, sale of fixed assets, and Export incentives to examine whether the same are liable for GST and whether appropriate GST was discharged or not.
2. Consultant should examine the expenditure side of the profit and loss account to ascertain the Input tax credit availed on Raw Materials, packing materials, processing materials, and stores items and also verify the transactions covered under Reverse charge basis under section 9(3) of CGST Act, 2017.

4.2 Trial Balance

1. Consultant should scrutinize the Trial balance of registered locations for the full periods of compliance. Trial balance statements showing all balances of debit and credit transactions which were clubbed into the group and transferred to the profit and loss account and balance sheet.
   Consultant must ensure for correctness of data for a particular location for which he was appointed and also ensure that trial balance was prepared through Software like Tally/SAP or in Excel.
2. In the case of the consultant observed that in trial balance grouping Post supply discounts were Grouped/subtracted with Sales turnover, the consultant should examine the conditions of discounts according to section 15(3) of CGST Act, 2017 complied with for admissibility of post supply discounts which are not reflected in Selling & Distribution expenses in trial balance.
3. Consultant should verify the nature of transactions which are unusual or exceptional nature and select the same for detailed scrutiny from GST point of view. The consultant should examine the extraordinary income/prior period income Grouped in the trial balance under income and find out the impact of GST liability.
4. Consultant should verify the Nature of transactions which are the nature of income which was shown in the credit side of the trial balance like Job work income, Interest income, Recovery for transportation charges, Commission and recovery from employees, and penalty from contractor/vendors. The consultant must examine that the correct GST liability was discharged on the same.

4.3 Notes of Accounts

1. Consultant should examine the Notes of accounts carefully to ascertain any kind of GST liability that arises under section 17(5) and reversal of ITC for materials used for unproductive/non-business purposes.
2. Consultant should examine the Notes of accounts relating to Share capital carefully to ascertain the holding/subsidiary company relationship of an entity or vice versa and the GST impact of the same according to Valuation Rules, 2017 towards related parties’ transactions.

4.4 Contingent liability

Consultant should also examine the disputed tax liabilities towards Customs/Income Tax/GST that were shown in Auditor Report; consultant must ensure that based on disputed tax liability find out any impact of GST liability.

4.5 Evaluation for Anti-profiteering

Consultant should also verify the accounting ratio, input-output ratio, and Gross Profit Ratio from tax audit report and see the impact under GST for anti-profiteering for any reduction in rate on any supply of goods and services and benefit of input tax credit under section 171 of CGST Act, 2017.

4.6 Creditor/Debtor/General Ledger

Consultant should examine the Creditor ageing/ledger, Debtor ageing/ledger, and general ledger and find out any GST liability for a payment not made to suppliers within 180 days and reversal required and similarly, advances received from debtors and applicability of GST on advances.

4.7 Fixed Assets Register

Consultant should also ensure that company also maintained ‘Fixed Assets Register’ and also ensure that proper internal control was there for acquisition and disposal of fixed assets and ensure for GST impact on the same. The consultant should also ensure that proper physical verification of finished goods and raw material was conducted during the year and shortage/excess was accounted properly with GST impact, consultant must ensure that ITC was not capitalized in Fixed assets and GST was discharged on sale of fixed assets according to section 18(6) of CGST Act, 2017 amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher.