GST Audit Checklist – Benefits of Internal GST Audit To Mid-sized Businesses

GST regulations are frequently under improvements and are sometimes difficult to comply with.

For businesses with multiple registrations, it is essential that all the business units comply with all the GST regulations to avoid the GST audit by department.

However, many businesses tend to ignore the internal scrutiny of their GST return filing behaviour and land themselves into trouble.

In this short article, we will be discussing the benefits of running an internal GST audit by businesses with multiple GST registrations.

Problems of large businesses with GST Compliance

Let us take an illustration:

Consider a Spare part businessSam Traders’ with eight subunits in different states:

Headquarters – Mumbai, Maharashtra;

Three sub-units – Indore, Madhya Pradesh;

Three sub-units– Pune, Maharashtra;

One sub-unit– Bhopal, Madhya Pradesh;

All the seven sub-units (& the head-quarter office in Mumbai Maharashtra) are registered under GST.

Every GST registered sub-unit is responsible for filing its GST return individually.

Now, the decision makers of this business located in the headquarters need a complete ‘Bird’s Eye view’ of their GST return filing.

Do they have a centralized mechanism that allows them to check the financial health of all their subunits?

Is there any way by which the business units can identify any risks that their business is facing due to non-compliance?

Manual solution to this problem:

The CFOs, tax managers, CAs can go through each return filed by all the sub-units.

Reconcile every GST return with their books of accounts & identify the errors.

But, is this an efficient way to perform a scrutiny on a very large data set?

Most probably, NOT!

Smart solution to the problem:

A smart GST Audit tool will help businesses to get all these actions done in few minutes!

An automated tool will generate a diagnostic report of your complete GST filing pattern and also identify the red flags in your filings that may harmyour business in future.

How can an internal GST Audit help to nullify possible threats?

An internal GST audit will prepare the business for any special audit under GST.

Businesses will have a consolidated view of all their sub-units and depots and the Input Tax Credit accumulated in them.

In this section, we will mention few promising benefits that an internal GST audit can have on your business:

  1. Monthly & annual data analysis

  • An internal GST audit tool will help businesses generate a monthly or an annual GST audit report for all its branches and depots.
  • This data can be further analyzed by the key decision makers of the business to a very minute level.
  • This shall help in identifying any flaws in their previous GST return filing, underutilization of Input Tax Credit under GST etc.
  • The business can take corrective actions to avoid those errors in the future.
  • Businesses will have a complete summary (month-wise, quarter-wise & year-wise) of all their sub-units clubbed together.
  1. Idle lying ITC can be effectively used

GST Input Tax Credit is dear to all the businesses and they try their best to avail maximum ITC for a given month.

However, many times for a business with multiple GST registrations it becomes difficult to manage the ITC details of every sub-unit or a depot.

Hence, while filing the outward GST liability businesses miss out on the ITC lying idle in the accounts of the smaller units of their business.

This hampers the working capital of the business as they end up paying their outward liabilities in cash.

This miscommunication between the headquarters and the smaller sub-units can be improved with an automated GST audit tool.

This idle lying ITC can be utilized to pay the outward liabilities if there is a proper report of information about such ITC available in the sub-units of the business.

  1. Businesses end up claiming ineligible ITC

Claiming of fake ITC is a serious issue and the government is taking all the necessary steps to curb it.

However, many businesses do not spare attention to details when it comes to claiming the eligible ITC.

This is especially true for the businesses with multiple GST registrations.

Businesses end up claiming ineligible ITC due to negligence of their suppliers or their own accounting errors.

Claiming ineligible ITC is inviting the GST audit by department which is a big reputational loss for the company.

Hence, an internal GST audit tool will help identify the eligible & the ineligible ITC under GST. So that the business will avail only the eligible ITC and there will be no risk of any GST audit by department.

  1. Prepare your business for GST audit by department

A GST audit by department is a serious issue and may lead to suspension or even cancellation of your GST registration if you are found at fault.

However, it is always recommended that the businesses keep their books of accounts and their GST return documents up-to-date and without any faults.

This preparation may seem easy for a smaller business or an individual but this is a Herculean task for the businesses with multiple GST registrations.

Hence, large businesses with multiple GST registrations may prefer using an automated GST audit tool like GSTHero Third Eye that helps in a smooth report generation of all your GST returns.

This tool shall prepare your business for any audit by the GST department and help you maintain a proper documentation & also mitigate all the potential risks before time.

In a nutshell

Businesses with multiple GST registrations should follow the GST Audit checklist in order to stay away from the GST departmental audit.

It is essential that the businesses establish a routine internal scrutiny for their GST transactions. This will help them identify the potential threats beforehand so that they can take corrective actions.

This will not only save the business from the monetary losses but will also have a positive impact on the profits & working capital of your business.

A small change in the routine can do wonders!

Stay updated; stay ahead!

Until the next time…