When we speak to our clients about their internal GST Audit mechanism, the most frequent answer that we receive is, “Why do we need a separate GST audit tool? We already have checkpoints in place into our existing ERP.”
We always have to inform them that your ERP is NOT a specialized Auditing tool.
ERP takes in whatever you feed into it. Therefore, ERP will NOT function as a full-fledged GST audit tool.
Businesses should understand that there has to be a centralized mechanism that shall help them identify gaps in their GST filings and reduce the impact of fines & penalties.
This short article will look at some of the fundamental reasons your business should have a GST auditchecklist to run internal scrutiny for the entire financial year.
Internal GST Audit – Best alternative to manual reconciliations
The government has enabled businesses to run an internal self-assessment of their GST returns and self-certify them before filing them on the portal.
This assessment is manageable for an individual business and has lesser turnover, but is it feasible for a company with multiple GST registered business sub-units?
Most probably NOT!
GST audit checklist does not include only the GST compliance check but also scrutinizes the already filed GST returns, identifying the red flags in the filed returns & minimizing the impact of the penalties on pending liabilities.
How can businesses do this in a single click?
It’s a Herculean task for businesses with multiple GSTregistrations and large annual aggregate turnover to manually check all the filed returns and identify gaps, if any.
However, automating this process is the only option for large businesses to ease this process.
The GST Audit tool will generate a consolidated reportfor all their GST registered units.
Bird’s Eye view of all the GST registered businesses will save time and establish a centralized mechanism between all the business units & the headquarters.
Highlights of a good GST Audit tool
- Unbiased & third-party review of your business
- All units/depots are brought under common review
- Identify Input Tax Credit leakageswithin your business setup
- Calculate the total accumulated ITC in all branches combined
- Internal monitoring of inward & outward monetary flow of your business
- Root-level reporting of your GST return filing activities
- Identify & mitigate risk exposures that may invite GST audit by department
Why shouldn’t you rely entirely on your ERP for GST compliance?
When businesses rely on their ERP and its checkpoints, they try to bypass the step of auditing their GST returns for the month.
The ERP systems do indeed have few checkpoints in place, but an internal GST audit does much more beneficial to your business than the standard checkpoints in your ERP system.
An internal audit under GST will help businesses be compliant with India’s dynamic GST laws.
Following are some of the actions that an Internal GST audit will help the decision-makers with:
- Ineligible ITC will be identified
- An internal GST audit consists of an essential thing of identifying ineligible ITC claimed by your business and its sub-units.
- Claiming ineligible ITC can land your business in trouble and also attract a GST audit by department.
- An internal GST audit tool will help businesses run a flawless reconciliation of your GSTR-2B against your books of accounts or purchase registers. And this action will be done for all the branches, including the business headquarters.
NOTE: Change in way of claiming ITC – w.e.f. 1st January 2022
Businesses should note that CBIC has scrapped the 5% provisional ITC limit enforced from 1stJanuary 2022. Hence, from now on, the businesses can only avail of the GST Input Tax Credit available in their GSTR-2B.
Hence, a flawless reconciliation of your GSTR-2B and identifying your defaulting suppliers has become more essential than ever
- An internal GST audit will help identify potential threats in your GSTR-2B that may block your ITC. Once you identify these threats, you can take corrective actions and claim maximum Input Tax Credit under GST.
Is your ERP capable of identifying ineligible ITC & potential threats for all your sub-branches all at once?
- Predict & calculate penalties on your pending liabilities
- A GST Audit tool uses Artificial Intelligence & Predictive Analysis to help businesses calculate penalties that may pile up in future if they keep their liabilities unpaid.
- An internal GS audit tool analyzes your GST returns filed throughout the year & identifies the red flags & exposure of your business to interest & penalties.
- This feature helps businesses identify their dues and make timely paymentsfor their outstanding liabilities to save on penalties and interest.
Can an ERP system help identify the risk exposure & suggest corrective actions on pending liabilities?
- Get a comprehensive GST audit report
- An internal GST audit will help decision-makers generate a centralized report for the complete business setup. It includes a comprehensive analysis of GST returns of all the sub-branches combined.
- A GST audit tool allows generating a month-wise&yearly summaryof all the GST activities of the business for a financial year.
- This comprehensive report will help to have a ‘Bird’s Eye’ view of the complete GST return filing of all the branches combined.
In a snapshot
GST Audit tools are specialized to perform specific actions that ERP systems cannot achieve.
Hence, businesses should be well equipped with the GST audit software that will save their revenue & business time that goes into manual reconciliations.
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So, businesses should make this a regular routine to run an internal GST audit to be prepared for GST audit by the department.