Getting ready for GST departmental audit – Directorate General of Audit chalks out audit plan for the year 2019-20
The turnover for this purpose will include taxable, exempt, and zero-rated supplies. The final list of taxpayers would include ‘risk flag indicators’ based on which the ‘risk scores’ have been derived.
The Directorate General of Audit - Indirect Taxes (the Directorate General) has chalked out a comprehensive audit plan for audits to be conducted by the departmental officers based on the ‘risk scores’ of taxpayers. The ‘risk scores’ will be generated based on a ‘Risk Assessment Program’ developed by the Directorate General. Key features of the audit plan have been highlighted in this alert.
Annual turnover and risk flag indicators
The taxpayers would be first given ‘risk scores’ based on various parameters. Later, they will be segregated in three categories -
1. Large (Annual turnover above INR 400 million),
2. Medium (Annual turnover between 100/75 million to 400/300 million) and
3. Small (Annual turnover below 100/75 million).
A Large number of taxpayers to be audited
Each audit commissionerate will be provided with a list of 80% taxpayers out of which 70% of the taxpayers have to be audited. Another 10% of taxpayers have to be selected randomly for audit by the audit commissionerates. Another 20% of the taxpayers have to be selected by the audit commissionerates based on local risk factors, after obtaining approval from jurisdictional Chief Commissioners. Examples of local risk parameters that will be considered are as follows:
- Delay in providing documents sought by the audit team
- Quantum of turnover/profits/loss/refunds/exemptions
- Quantum of mistakes detected by the department
- Involvement in legal disputes
- Inconsistency in filing returns
- High-risk sectors (e.g., chemicals, retail, apartment rentals, hotels, spare part for vehicles, etc.)
- The taxpayer involved in the supply of goods on which GST rate has been reduced (examining compliance with anti-profiteering)
- Taxpayer not audited in the pre-GST era for 4-5 years etc.
The number of businesses to be audited by the department in key jurisdictions have been encapsulated in the table below:
||No of audits
The notice of audit is to be issued by the proper officer in FORM GST ADT-01. On conclusion of audit, the proper officer has to inform his findings in FORM GST ADT-02. The said forms would have to be issued manually by the proper officer till they become available on the GST common portal.
The audit of the large and medium taxpayers will be conducted at the premises of such taxpayers. The audit of small taxpayers will also be premise-based if any inherent weakness is identified in the internal control systems.
The procedure for conducting the audit would be based on the GST Audit Manual issued by the Directorate General.