How to prepare for the annual GST Audit

How to prepare for the annual GST Audit

GST is a system of taxation where taxpayers pay tax based on self-assessment and file the returns on their own with no interference from the tax authorities electronically on the GSTN. There is hence a need for a system of GST Audit in place to make sure that the taxes paid, ITC claimed, sales, and purchases reported to the GSTN are accurate.

What is GST Audit

Let us understand the compliance’s for GST Annual returns and GST Audit. The GST Annual Return due date for FY 2017-18 is June 2019 as of now.

When the turnover during a financial year exceeds the prescribed limit of Rs 2 Crore the taxpayer needs to get his books of accounts audited by a chartered accountant or a cost accountant.

He needs to electronically file:

·         GST annual return in Form GSTR 9 by the prescribed date

·         Audited copy of the annual accounts,

·         Certified reconciliation statement in the form GSTR-9C, which is the reconciliation of value of supplies as declared in the GST returns filed with the audited annual financial statement.

·         Any other particulars as prescribed

The law has prescribed under section 35(5) that when turnover exceeds the specified limit the person needs to get his accounts audited by a chartered accountant or a cost accountant and must furnish the details of audited annual accounts and reconciliation statements in the prescribed format.

This requires a thorough comparison of the records that are filed for the entire year on GSTN and the books of accounts along with the sales and purchase registers.

Taxpayers who need to get the GST Audit done need to be prepared with all records for GST returns filed and the books of accounts. There are various levels at which the matching of the records happens.

·         Matching of the invoices with the sales and purchase registers

·         Matching the General ledger with the GST returns data filed on GSTN

·         Matching General Ledger with the sales and purchase registers

·         Sales and purchase registers data with that of OCR data

The GST law has been undergoing several changes over the past 1.5 years and hence it is even more important for the taxpayers to be prepared fully for the GST Audit and understand the implications of these changes on the reconciliations.

There are several other transactions that need special attention during the GST audit. Especially the intra-company transactions where a company supplies goods or services to its branches in different geographies. Another type of transaction is the ones where HO allocates some expenses to its offices registered in other states. Apart from this, there are GST implications on the provision of various facilities to employees like perquisites, deductions from salaries, welfare schemes, etc. GST Audit will have to be very thorough in identifying and checking all these transactions to avoid any future litigations and notices on these.

What things are needed to be prepared for GST Audit

Ideally one needs to make sure to be prepared with the following before the GST Audit begins by a qualified Chartered or Cost Accountant:

·         That the books of accounts are updated with all the transactions of sales, purchase, and all entries that may have a GST implication

·         That there are no returns that are pending to be filed with the GSTN for the relevant FY

·         That the sales and purchase records or registers are updated with all the transactions that have happened during the year

·         That the financial statements for the relevant financial year are ready and up to date

·         The reconciliation statements are made for every mismatch transaction in between the GSTN records and the books of accounts

·       The errors in these records are corrected and hence the books of accounts and the GSTN records match

How can Cygnet ACE help be prepared for GST Audit?

ACE – Audit Compliance with Ease is an Audit Tool developed to aid in the process of being prepared for the GST Audit. The application has been specially designed to help you match 100% of your records with those filed on the GSTN.

It imports data, reconciles with returns filed on GSTN, and produces a comprehensive reconciliation report which can help you to identify mismatches and prepare explanations for them.

Thus, Cygnet ACE saves time and brings in more transparency to your own data.

Here is what Cygnet ACE can help you with

Data Extraction

·         Data extraction from the customer’s ecosystem.

·         Processing, parsing & validation of extracted data

·         Data connectors to connect with the internal system

Multi Organization & Location Model

·         Manage more than one business

·         Manage multiple locations & process account data


·         Invoices comparison with Sales and Purchase register

·         All different GL comparisons with Sales & Purchase Register

·         Display comparison status for invoices

GSTN Reconciliation

·         Easy & quick download of the GSTN data

·         Purchase/Sales register reconciliation with GSTN data

·         Identify mismatch and take immediate action

Audit Reports & Analytics

·         Display different reports for the set of data

·         Comparison / Reconciliation reports for GL to Register & GL to GSTN

Components of Cygnet ACE

  • Facilitate data analysis and help to determine the accuracy of the information for the Auditors
  • Execute analysis of the company’s Sales, Purchase, Expense, and General Ledger (GL) data
  • Extract Invoice data using OCR (Optical Character Recognition) using batch processing
  • Compare OCR data with Income & Expense Register fetched from the business system to check discrepancies
  • Verify 9C auditing data under the GST Act.
  • 2 / 3-way reconciliation with GSTN Portal
  • Reconciliation for Inward invoices
  • Financial Auditing Reports and Analytics
  • Organization’s master data management (i.e. Vendor Master, Company Master, Location Master, User & Role Master)

Cygnet ACE is a comprehensive application to aid you in GST Audit and help you compare your various records well before the actual GST Audit happens. With the numerous capabilities and report generation capabilities, it has it can be your internal audit software that takes care of all the mismatches in the records.

Cygnet GSP is committed to providing cutting edge technologically driven solutions to file your GST returns easily with speed and accuracy. We strive to make your business a priority by simplifying GST return filing through our IT solutions. We live by our belief of ‘IT is about you’.

Schedule a demo here.

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