GSTV70P4 November 27 December 3 (PG 144) Samplechapter
GSTV70P4 November 27 December 3 (PG 144) Samplechapter
Introduction
1. As per section 2(13) of the CGST Act, 2017 GST audit means an examination
of records, returns and other documents maintained or furnished by the
registered person under the GST Acts or the rules made thereunder or under
any other law for the time being in force to verify the correctness of turnover
declared, taxes paid, refund claimed and input tax credit availed, and to assess
his compliance with the provisions of the GST Acts or the rules made thereun-
der. Section 35(5) of the CGST Act, inter alia, requires every registered person
whose turnover exceeds the prescribed threshold of Rs. 2 crores, to get his
accounts audited, submit a copy of the audited annual accounts along with a
reconciliation statement (reconciling the value of supplies declared in return
with audited annual financial statements).
Therefore, the reconciliation of the value of supplies declared in return with
audited annual financial statements is one of key aspects of GST audit. The GST
auditor has to submit, amongst others, a reconciliation statement, reconciling
the value of supplies declared in the return furnished for the year with the
audited annual financial statement in Form GSTR-9C.
There could be differences in the manner of accounting treatment of certain
transactions as per Accounting Standard in the financial statements vis-à-vis
the treatment under GST. In this article, we shall take a closer look at the key
differences between GST regulations and accounting standards that need
careful consideration during the course of GST audit.
Valuation of Inventory
2. As per AS-2 Valuation of Inventories and Ind AS 2 Inventories the costs of
purchase of inventories comprise of the purchase price, import duties and other
taxes (other than those subsequently recoverable by the entity from the taxing
authorities), and transport, handling and other costs directly attributable to the
acquisition of finished goods, materials and services. Trade discounts, rebates
and other similar items are deducted in determining the costs of purchase.
However, the CGST Act and the corresponding SGST/UTGST Act provides for
availment of input tax credit or refund of input tax credit in specified situations.
Thus, to the extent credit is availed or refund is claimed, it will not form part of
cost of inventory. Input tax credit is not available. For example, when:
*CA
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