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”
| Sr. No. | Particulars | Based On |
| Excise and Serivce Tax Laws | ||
| 1 | Whether 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. | ||
| 2 | Whether there is formal process of approval of returns ? | Discussion |
| 3 | Whetehr there is a process of monthly reconciliation of tax returns with the accounts ? | Discussion |
| 4 | Whether reconciliation between Cenvat input credit account and credit availed as per excise register has been carried out ? If yes, any discrepancies ? | Discussion and Documentation |
| 5 | Check – Cenvat credit appearing in Cenvat input account but not availed ? | Analysis |
| 6 | Check – Capital goods considered as inputs and 100% credit availed in the first year instead of 50% on capital goods ? | Analysis |
| 7 | Check – Cenvat credit availed on ineligible purchases like car rental, canteen expenses etc., second hand machine purchased, office equipment etc. ? | Analysis |
| 8 | Cenvat credit on inputs is available from the date of GRN. Check delays in claiming input credit from the date of GRN. | Analysis |
| 9 | Whether excise liability has been paid for all the invoices ? | Vouching |
| 10 | Check whether balances of Cenvat has been correctly carried forward from the previous month to next month ? | Analysis |
| 11 | Whether all credit notes have been considered in excise returns for reversal of excise duty ? | Analysis |
| 12 | Whether all excise invoices were available ? | Vouching |
| 13 | Cenvat credit not cliamed / short claimed because of incorrect bill booking ? | Vouching |
| 14 | Whether 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 |
| 15 | Check – A.) Export rebate claims pending to be received B.) Export rebate claims pending to be filed for invoices ? |
Analysis |
| 16 | Whether 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. | ||
| 17 | Whether they have documented comprehensive guidelines covering all types of services received on which credit can be availed ? | Discussion and Documentation |
| 18 | Whether there are Common Services (Excisable & Exempt Both) ? How they are treating the same ? | Discussion and Documentation |
| 19 | Check whether exempted services are seperately identified and the Tax is not paid for the same ? | Analysis |
| 20 | Check whether the refund applications are timely filed ? | Discussion and Analysis |
| 21 | Check 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 required | Analysis |
| 22 | Check 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 |
| 23 | Check the bills – Service tax should be charged on service tax component only ? | Vouching |
| 24 | Whether service tax is correctly classified under the same head of business ? | Analysis |
| 25 | Timelines to pay service tax and its compliance ? Whether any Penalty paid till date due to delayed payment ? | Discusssion and Analysis |
| 26 | Verify Cenvat balance as per books of accounts and ST Returns ? | Analysis |
| 27 | Check 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 | ||
| 1 | Whether the company is purchasing from the registered dealers only ? Check on website ? VAT registration number should be there on Invoices. | Analysis |
| 2 | Whether all the C forms are collected till date ? Ageing of C form not collected till date ? Customer wise and value wise ? | Analysis |
| 3 | Whether full credit of VAT is availed till date ? | Analysis |
| 4 | Whether guidelines / list is prepared defining the eligible and non eligible purchases for VAT credit ? | Discussion & Documentation |
| 5 | Correctness and completeness of vendor master ? | Analysis |
| 6 | Whether 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. | ||
| 7 | Whetehr 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 |
| 8 | Ineligible purchases considered as eligible or vice-versa ? | Analysis |
| 9 | Whether 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 |
| 10 | Carry forward of VAT credit ? Whether correctly carried forward from previous month to next month ? | Analysis |
| 11 | Whether local sales with no sales tax ( Against Form I ) have been incorprated in the returns? ( This leads to non compliance ) | Analysis |
| 12 | Any penalty imposed by sales tax department for want of form C and fom F ? Penalty paid ?? | Analysis |
| 13 | Sales 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 |
