Departmental Auditor would be looking forward to these things while Scrutiny of other documents (Happy GST series – 33) by CA Rajender Arora
Departmental Auditor would be looking forward to these things while Scrutiny of other
documents during audit.
II. Scrutiny of other documents
1) INVOICING PATTERN
i. Whether the invoice issued contains all the information prescribed in Rule 46 of CGST
Rules and is being numbered accordingly
ii. Whether revised invoice or credit note or debit note issued contains all the information
prescribed in Rule 53 of CGST Rules
iii. Whether the export invoice is being endorsed with the words “supply meant for export on
payment of integrated tax” or “supply meant for export under bond or letter of
undertaking without payment of integrated tax”
iv. Whether the payment voucher issued for advance payment has been made as per Rule
52 of the CGST Rules.
v. Whether the receipt voucher issued for advance receipt has been made as per Rule 50
of the CGST Rules.
vi. In case of a composition dealer U/s 10 of the SGST/CGST Act, whether bill of supply
has been issued U/r 49 of CGST Rules.
vii. Whether invoice has been prepared in triplicate in the case of supply of goods as per
Rule 48(1) of CGST Rules. N.B. – Significant omission/commission in the invoice should
only be taken into consideration for taking action U/s 73 or 74 of the CGST Act.
2) STOCK VERIFICATION
i. Check the physical stock of taxable and risk-prone commodities which can be quantified.
ii. Check whether the stock-in-trade found at the time of Audit Visit tallies with the books of
accounts maintained.
iii. Value of Closing Stock vis-à-vis ITC balance.
iv. Monthly stock statement to bank.
v. Stock verification statement should be examined to find out the cases of shortages or
excesses. In case discrepancies are not explained, action may be taken either for
demanding reversal of ITC or demanding GST. This statement may also be available in
the Cost Audit Report.
vi. On the basis of such statement, stock adjustments are made in the financial records by
passing a Journal Voucher. The said JV may also be examined for the adjustments
carried out by the unit.
3) Purchase order/Agreements/MOUs
This document denotes the price and other conditions laid for purchase and sale of goods
and services.
Purchase order placed by Customers, Agreement/MOU with the Customers:
a) To verify the terms and conditions especially with respect to price revision, supply of any
material/component by the customer, erection and commissioning charges. The total
price charged in the Purchase Order may be compared with the GST invoice to ensure
that no extra flow back is received outside the invoice through commercial invoice/debit
note.
b) To verify whether the invoice is raised for full amount as per the Purchase
Order/Agreement/MOU
c) Tax structure agreed upon in the purchase order should be checked with invoices raised
for provision of services. In case the unit raises a separate commercial invoice, such
invoices should be checked for the basic price, taxes, etc. actually collected.
4) Sales / outward supply Book
This is used for recording all services provided.
a) Invoice Numbers mentioned should be sequential and if any number is missing the same
has to be examined.
b) Verify how many series of sales invoices are used for provision of services. Whether
GST invoice series and commercial invoice no. series are different.
c) Whether Debit Notes/Journal Vouchers are also entered in the sales register. If yes,
whether GST is payable on additional considerations received through such Debit
Notes/JVs.
d) Sales register normally show GST separately. Verify the cases where GST has not been
paid and find out the reasons thereof.
5) Stores Ledger
It contains the details about receipt of various input or consumable, its issue for production
and closing balance. It also contains details like results of physical verification, obsolete
items, slow moving items and its write off etc. Now-a-days most of the companies maintain
stock records on computer.
i. Verify coding system for receipt, issue, stock verification, valuation, input cleared as
such, obsolete item and other found in store records.
ii. Compare the purchase as per ITC documents with a receipt in the store records.
iii. Verify whether any item written off due to obsolesce.
6) Sub contract Register/Job Work Register
Verify coding system for receipt, issue, stock verification, valuation, input cleared as such,
obsolete item and other found in store records.
Compare the purchase as per ITC documents with a receipt in the store records.
Verify whether any item written off due to obsolesce.
7) Purchase/Inward supply Book
This shows credit purchase of raw materials and other inputs.
a) To find out major suppliers
b) It may also show GST separately. In that case GST recorded in the purchase register
may be reconciled with credit availed as per Electronic credit Register GSTPMT-01
8) Purchase Return Book
This book gives details of goods returned to suppliers.
Verify whether ITC has been expunged/such goods cleared on payment of duty.
9) Fixed Assets Register
This register contains the details of purchase invoice, date of installation, place of
installation, addition/deletion to the asset and depreciation charged
a) Deletion of Assets – Payment of GST on clearance needs to be verified.
b) For physical verification, the location may be found out from this register
10) Waste Register
Where the raw material or components are not in useful condition, they are transferred to
Bad Bins. The Auditor should verify the concerned records seeking reversal of credit on
such unusable inputs. These goods are also known as obsolete items.
11) Price Circular
Most companies issues price circular periodically explaining various conditions of
sales/outward supplies like various types of discounts, conditions for providing the discount,
recovery of freight, packing charges, interest and other charges.
i. Study the various elements to be recovered from the customers and whether these are
required to be added to the transaction value or not like packing charges, freight
charges, handling charges.
ii. If any discount is given to a class of buyer, the exact nature of such discount may be
studied in detail to find out whether the discount is admissible or not.
iii. Verify whether any item or benefit if supplied free of cost by the buyer.
iv. In case of cum duty prices, the various component forming part of value needs to be
studied from price circular.
12) Delivery Challan
Delivery Challan indicates the description of goods, quantity cleared and receiver of goods.
D.Cs may be of two varieties viz. returnable D.C. & Non-Returnable D.C.
a) Check how many series of
DCs are issued and which sections are preparing these.
b) Returnable D.Cs is used for movement of job-work materials. D.C. Register should be
verified to ascertain whether materials sent for job work has been received back within
the stipulated time, if not, whether appropriate duty has been paid or not.
c) Non-Returnable D.Cs are used for clearance of goods, which are not to be received
back. Normally it is the practice in the industry to raise D.Cs for outward supplies made
and it accompanies the Outward supply Invoices. Inter unit movement of goods are
sometime done through non-returnable D.Cs without any invoices resulting in clearance
without payment of duty.
d) Verify whether GST has been paid on scrap cleared under N.R.D.C.
e) Replacements/Samples may also be cleared under the cover of NRDC’s without
invoices.
13) Material Transfer Note
This document is used for inter unit transfer of materials & for inter branches transfers within
a unit.
Valuation adopted for such inter unit transfers need to be checked and whether duty has
been paid on such transfers be ascertained.
14) Materials Receipt Note/Goods Receipt Note (GRN)/Inspection cum Receipt Report
(ICRR)
The MRN/GRN is prepared for all goods received in the factory. It shows the details like
actual quantity received, quantity as per challan/invoice, quantity short received. It is
prepared by the Stores Department. The ICRR is prepared by the quality control department
and it shows the quantity accepted, quantity rejected and the reasons for rejection. A
number of times these reports may not be physically available as these are maintained in
computer systems. But statements may be generated on the request of Auditors for cases
where goods have been short received or rejected.
i. Check the cases of short receipt and rejected goods and verify whether ITC has been
reversed.
ii. Verify in random cases, whether for ITC availed invoices, corresponding GRNs are
available or not.
15) Material Return Note
This document is raised by various departments to return the material to stores or to
suppliers.
i. In case ITC availed materials are returned to supplier whether appropriate GST has
been discharged.
ii. In case MRN is raised by shop floor for rejection of raw material, the ITC treatment may
be examined.
iii. In case MRN is raised by shop floor for rejection of partially processed material, such
material should be cleared on payment of GST.
16) Material Requisition Note (MRN) and Material Issue Note (MIN)
MRN is used by various sections in the factory for requisition of material from stores
department. In turn, stores department issue the material on MIN. The MRN & MIN contain
code no. of receiving sections, description of material and code no. of material issued, and
quantity of material.
i. MIN may also be used for adjustment of shortages, stock verification discrepancies,
stock issued as scrap, obsolete items etc. There may be separate code no. for such
adjustments. ITC treatment on such goods may be verified.
ii. For inputs cleared as such for outward supply, inter unit transfer, warranty period supply,
MIN may be prepared showing different codes. All such clearances may be examined to
verify payment of taxable value GST.
