In a detailed letter on how to conduct audits, the department said premise-based audit still has to be conducted for medium and large category of taxpayers.
The audit department of the Central Board of Indirect Taxes and Customs (CBIC) has developed risk parameters for selecting taxpayers to be audited on the basis of annual returns. However, the department has instructed officials to move to desk-based filing for small taxpayers, instead of the traditional method of premise-based audits.
In a detailed letter on how to conduct audits, the department said premise-based audit still has to be conducted for medium and large category of taxpayers. Further, such audits should be undertaken in a time-bound manner to ensure completion within the stipulated time period of three months from the commencement of audit, it said.
Pratik Jain, partner and leader – indirect tax, PwC India, said: “Such guidelines have been issued for GST audits for the first time. One will have to see whether state governments would come out with similar guidelines for conducting audits of taxpayers under their (SGST) administration. Assigning of risk scores to various dealers for selection of audit is needed for the authorities to focus on cases where possibility of tax leakage is more.”
GST audits were earlier scheduled to commence from July 1 for those taxpayers who have filed their GST annual return. However, the GST Council in its last meeting extended from the last date for filing audit forms to August 31. The audit plans shared with zonal heads of indirect tax said in case of insufficient number of taxpayers who file annual audit returns, central excise and service tax audits should continue.
The risk assessment plan has for conducting audit has divided taxpayers into three categories based on turnover. The audit list contains only those taxpayers who are under Centre (CGST) administration and have filed more than 3 GSTR-3B returns for FY 2017-18. However, for some audit commissionerates, the categories have been tweaked to ensure adequate representation of risky taxpayers in each category.
Further, it has been proposed that 40% of available manpower should be deployed on larger taxpayers. While the list of taxpayers shared with each audit commissionerate contains about 80% of the total taxpayers, many others falling in the balance 20% might get picked up based on local risk factors.
“The government has framed a detailed plan for departmental audits in the current financial year in a bid to step up the efforts to identify tax leakages in the GST regime. Risk areas on every auditee would be shared with auditors, enabling them to identify and focus on specific areas,” Rajat Mohan, partner at AMRG, said.
Officials conducting audits have been asked to ensure that inconvenience is not caused to taxpayers. Further, audit teams have been instructed to minimise litigation in case of bonafide mistakes made by taxpayers.