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GST Audit Checklist – Why Should Your Business Equip Internal GST Audit Routine?

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GST was introduced to minimize the efforts of the taxpayers and also reduce the cascading effect of taxation.

Although these goals are met, there are certain times when GST structure can be a complicated one.

GST compliance requirements are one of the significant issues faced by the GST taxpayers when it comes to large businesses with multiple GST registrations online.

To cope with the GST compliance requirements and prepare for the GST departmental audit, businesses must have a mechanism in place that allows the ‘in-house scrutiny’ of all our GST transactions and related activities.’

Also Like : GST Audit Checklist – 7 Essential Checkpoints For a Perfect GST Audit Tool

In this article, we will be talking about a super-auditing mechanism that will allow the decision-makers of the business to analyze the GST returns data, identify any previous errors and take corrective actions to nullify the potential threats that may harm their business in future.

GST departmental audit – An uncertain challenge

A survey conducted by GSTHero, Pune, in 2021 found that 79.5% of the large companies tend to ignore the regulatory GST compliance requirements of their smaller units like depots or sub-units.

This ignorance of the large companies towards their smaller business units with individual GST registrations is due to the more extensive expansion of the business.

This exposes the business to an unrealized risk which goes on piling up if not identified within a specified time limit.

Hence, the businesses must identify such risks within their headquarters or most minor of the business units. These risks need to be identified and corrected to keep your business away from revenue losses & prepare for the GST audit checklist.

What are the unrealized threats to your business?


Let us discuss some of the most common risks that the businesses with multiple GST registrations face:

Let us start this argument with some data:

    • Very recently, GST department Delhi has unearthed a major tax fraud measuring as high as Rs.178 Crore. Out of this massive amount, about Rs.13 Crore was accounted for ineligible ITC claimed by the businessmen involved.
    • FY21 has seen about 8,000 cases of ITC frauds. Summing up the amount it gets as high as Rs.35 000 Crore.

From this data, we can understand that claiming ineligible ITC has become a part of deliberate fraud.

To avoid such events, businesses must take care that the Input Tax Credit under GST they are availing of is 100% legit, and there is no ambiguity involved.

Businesses should be able to provide necessary documents on-demand if the GST departmental audit takes place in future.

Hence, if the business has claimed any ineligible ITC, the decision-makers should know about this to take some corrective actions.

This ineligible GST Input Tax Credit claimed can be significant when summed up for all the depots and sub-units.

  • Improper utilization of your Input Tax Credit
    • Claiming ineligible ITC is also a threat to the business, and under-utilization of your available eligible ITC is also a threat to the business.
    • When businesses pay their outward GST liabilities in cash, it means that either they have exhausted their available ITC or are under-utilizing it.
    • The latter one is true most of the time. The majority of eligible ITC gets accumulated in different units of the business setup, which remains unutilized due to proper analysis and scrutiny. Due to this, the business ends up paying outwards liabilities in cash which affects their working capital.
    • Hence, the businesses must keep track of their available ITC in their business units and utilize it wisely to pay all the GST outward liabilities.
    • But do businesses have a proper channel to communicate with the clerical heads of all the business sub-units? Is it feasible to manually reconcile the ITC data for every branch?

Most probably NOT!

This is why upper business management like Tax Managers, CFOs, CAs need a consolidated GST audit report format of all the sub-units so that they do not miss out on any crucial things like available Input Tax Credit and GST liabilities paid in cash in an FY.

  • Late fees and interests keep piling up

Let us take a simple example to understand the severe impact of pending GST liability.

Suppose a business has a liability of Rs.6 00,000 for a given financial year.

This business is now being charged interest in the range of 18% to 24% on this pending liability.

In the best case, this business will be paying an interest of at least 18% on Rs.6 00,000.

Suppose the decision-makers of the business have a comprehensive diagnostic report which will show all these details. In that case, the businesses can save a lot on the revenue that goes into interest and fines for pending GST liabilities.

A consolidated GST compliance report will help businesses to identify these risks and take corrective actions.

How can a GST diagnostic report help businesses?

A GST diagnostic report will give an overview of the GST-related activities in all the GST registered business units.

This will help the decision-makers of the business to gain complete internal financial control of the business and analyze the GST compliance requirements of the business.

Following are some of the direct benefits of having a consolidated GST compliance report of a business:

  • Every compliance check in a single place:

Helps business to manage all their GST compliances in one place as the GST report shall provide complete details like tax liabilities, tax paid, eligible Input Tax Credit under GST, state-wise or unit wise distribution of ITC accumulated or cash accumulated, etc.

  • Granular level reporting

This report will give the decision-makers a picture of every GST transaction. This report will NOT be based on sampling technique; it will draw an accurate picture based on the authentic data fetched from the GSTN server.

  • Identify financial leakages that may happen in future (In the forms of interests and fines).
  • Monitoring your business’s inward & outward monetary flow in a single report will give the decision-makers total internal financial control.
  • This report shall provide an unbiased third-party review of the business that confirms the businesses’ financial health in terms of GST compliance requirements.
  • Identify and resolve potential risks that may invite GST departmental audit, which may cause monetary and reputational loss to the business.

GSTHero’s Third Eye Report does it all!

GSTHero ThirdEye tool is the GST super-auditing tool that allows businesses to take a complete review of all the GST transactions for the entire FY.

  • Comprehensive report generation for the upper management to review
  • Interactive dashboard with infographics to skim through the substantial numbers of the report
  • GSTHero is a Government-authorized GST Suvidha Provider (GSP); hence the report will be based on the accurate data fetched from the GSTN server.
  • An improvement over the traditional MIS systems that show you the red flags on the discrepancies in the GST data and will also run a predictive analysis of the data.

To enjoy your free demo, feel free to get in touch at:

Email: | Phone: +918007700800

In a nutshell

Internal GST audit report format gives the businesses a bird’s eye view of the GST transactions of the current FY and rectifies the errors wherever needed.

This shall reduce the risks of GST departmental audit and help businesses maintain a document trail online for all their GTS related activities.

The businesses must take the necessary steps to mitigate all the open exposures to the company. This GST internal audit mechanism will help companies achieve this goal.

Stay updated; stay ahead!

Until the next time…

GST Hero

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