Internal Audit Checklist for Audit of Indirect Taxes

Internal Audit Checklist for Audit of Indirect Taxes. This Article contains all the important checks to be done while auditing indirect tax process during internal audit. In this article you can find complete check list for auditing of Excise and Serivce Tax Laws and Auditing of Value Added Tax / Central Sales Tax. Now you can scroll down below n check more details for “Internal Audit Checklist for Audit of Indirect Taxes”

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Internal Audit Checklist for Audit of Indirect Taxes

Internal Audit Checklist for Audit of Indirect Taxes

Sr. No.ParticularsBased On
Excise and Serivce Tax Laws
1Whether there are defined guidelines / SOP for excise procedures covering the following:Discussion and Documentation
A.) Periodic reconciliation of various Cenvat / Excise related accounts with the tax returns
B.) Inputs and Capital purchases which are eligible for claiming input credit , extent of eligibility, documentary needs, accounting policies and treatment, management stand & decision on credit where the clarity on eligibility is not clear etc.
C.) Responsibility for management review of reasons, quantum, approval & action on Input goods / Capital goods / Input services considered ineligible for credit.
D.) Checklist for applicable provisions under Excise laws at plant to monitor its compliance on a periodical basis.
2Whether there is formal process of approval of returns ?Discussion
3Whetehr there is a process of monthly reconciliation of tax returns with the accounts ?Discussion
4Whether reconciliation between Cenvat input credit account and credit availed as per excise register has been carried out ? If yes, any discrepancies ?Discussion and Documentation
5Check – Cenvat credit appearing in Cenvat input account but not availed ?Analysis
6Check – Capital goods considered as inputs and 100% credit availed in the first year instead of 50% on capital goods ?Analysis
7Check – Cenvat credit availed on ineligible purchases like car rental, canteen expenses etc., second hand machine purchased, office equipment etc. ?Analysis
8Cenvat credit on inputs is available from the date of GRN. Check delays in claiming input credit from the date of GRN.Analysis
9Whether excise liability has been paid for all the invoices ?Vouching
10Check whether balances of Cenvat has been correctly carried forward from the previous month to next month ?Analysis
11Whether all credit notes have been considered in excise returns for reversal of excise duty ?Analysis
12Whether all excise invoices were available ?Vouching
13Cenvat credit not cliamed / short claimed because of incorrect bill booking ?Vouching
14Whether rebate claim tracker is maintained showing details of eligible claims, date of filling, yet to be filed, date of claim receipt / and claims yet to be receive, status of bank confirmation receipts and follow up action ?Discussion and Documentation
15Check – A.) Export rebate claims pending to be received
B.) Export rebate claims pending to be filed for invoices ?
Analysis
16Whether there is a process of preparing and circulating formal MIS for Excise / Service tax function on a periodical basis covering the following :Discussion and Documentation
A.) Month Wise Excise liablity paid
B.) Reason wise analysis of Cenvat credit on goods, capital goods & Input services eligible for set off but not adjusted against excise liability
C.) Summary of reconciliation of various Cenvat related accounts
D.) Pending rebate claim status along with action plan.
E.) The current status of Excise / Service tax assessment, appeals, refund for various years.
17Whether they have documented comprehensive guidelines covering all types of services received on which credit can be availed ?Discussion and Documentation
18Whether there are Common Services (Excisable & Exempt Both) ? How they are treating the same ?Discussion and Documentation
19Check whether exempted services are seperately identified and the Tax is not paid for the same ?Analysis
20Check whether the refund applications are timely filed ?Discussion and Analysis
21Check if the service tax liability is duly discharged on time i.e. before 5th of the next month or before 31st of March for payments upto March. The return for the same is filed accurately on half yearly basis as requiredAnalysis
22Check if the input service tax credit is booked only based on proper invoice from the vendor with Service tax number and all other relevant details mentioned on the invoice ?Vouching
23Check the bills – Service tax should be charged on service tax component only ?Vouching
24Whether service tax is correctly classified under the same head of business ?Analysis
25Timelines to pay service tax and its compliance ? Whether any Penalty paid till date due to delayed payment ?Discusssion and Analysis
26Verify Cenvat balance as per books of accounts and ST Returns ?Analysis
27Check item master  – Whetherit is defined that on which items cenvat credit is to be taken and rate of service tax etc. ?Analysis
Value Added Tax / Central Sales Tax  
1Whether the company is purchasing from the registered dealers only ? Check on website ? VAT registration number should be there on Invoices.Analysis
2Whether all the C forms are collected till date ? Ageing of C form not collected till date ? Customer wise and value wise ?Analysis
3Whether full credit of VAT is availed till date ?Analysis
4Whether guidelines / list is prepared defining the eligible and non eligible purchases for VAT credit ?Discussion & Documentation
5Correctness and completeness of vendor master ?Analysis
6Whether there are defined guidelines covering VAT / CST procedures as follows:Discussion
A.) Periodic reconciliation of various VAT related accounts with tax returns.
B.) Inputs and Capital purchases which are eligible for claiming input credit , extent of eligibility, documentary needs, accounting policies and treatment, management stand & decision on credit where the clarity on eligibility is not clear etc.
C.) Responsibility for management review of reasons, quantum, approval & action on Input VAT considered ineligible for credit.
D.) Reconciliations and tracker relating to various sales tax forms i.e. Form C, Form F & Form H.
D.) Checklist for applicable provisions under VAT & CST laws at plant to monitor its compliance on a periodical basis.
7Whetehr reconciliation is done for – VAT shown in VAT receivable account but not appearing in purchase register generated for monthly return to identify any ommisions ?Analysis
8Ineligible purchases considered as eligible or vice-versa ?Analysis
9Whether all branch transfers are shown in VAT returns? ( It is mandatory for the issue of F forms by the receiving unit.)  Analyse intersest and penalty which can be imposed because of this ?Analysis
10Carry forward of VAT credit ? Whether correctly carried forward from previous month to next month ?Analysis
11Whether local sales with no sales tax ( Against Form I ) have been incorprated in the returns? ( This leads to non compliance )Analysis
12Any penalty imposed by sales tax department for want of form C and fom F ? Penalty paid ??Analysis
13Sales made with I forms ?? Whether the details of I forms ( for non chargeable sales ) were available for review ? The non availability of I forms may lead to CST liability along with interest ?Dsicussion & Analysis

About Raju Choudhary

Article by Raju Choudhary Raju has written 810 articles. If you like This post, you can follow CAknowledge on Twitter. Subscribe to CAknowledge feed via RSS or EMAIL to receive instant updates.

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