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TMI BlogAnnexure 17 : Recommendations for Model GST Audit Best Practices and Procedure as per the report of the sub-committee on ToR No. 1X X X X Extracts X X X X X X X X Extracts X X X X ..... te to State, in different Zonal levels of a particular State and also for service sector when compared to that for goods. All risk parameters are required to be identified and all probable aspects need to be considered to identify non- compliance and non-payment / short payment of tax, interest, late fee, penalty etc. availment of credit and claims for refund and evasion of tax. The taxpayers may be classified into three segments, Large/Medium/Small based on the total turnover. The States can also be divided into three Categories, viz. I II and III based on the taxpayer's spread across various segments. By and large, the categorization may be uniform across the States subject to the availability of more risky taxpayers in a particular category. Example for categorization is given below. This may vary from State to State and in the Centre. An illustrative scheme of classification is discussed hereinbelow: Large - taxpayers with turnover more than Rs. 40 Crore for category 1 Commissionerates Rs. 30 Crores for category 2 Commissionerates and Rs. 20 crores for category 3 Commissionerates. Medium - taxpayers with turnover Rs.10 Crores to Rs.40 Crores for category 1 Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ratio of total ITC availed in this year vis-à-vis previous year. Ratio of IGST payment at the time of import vis-à-vis Total 4. ITC availed ({Col.2 of table 4(A) (1) & (2) of GSTR-3B} in corresponding period). 5. Ratio of tax paid through ITC to total tax liability 6. Ratio of nil/exempt supplies (Col.2 of Table 3.1(C) of GSTR- 3B) to total turnover (excluding non GST supplies ) (col.2 of Table 3.1(a) + (b) + (c) of GSTR-3B). 7. Ratio of Zero-rated supplies (col.2 of Table 3.1(b) of GSTR-3B) to total turnover (excluding non-GST supplies) (col.2 of Table 3.1 (a)+(b) + (c) of (GSTR-3B). 8. Ratio of Non-GST supplies to total turnover. {(Col.2 of Table 3.1(e) / (col.2 of Table 3.1 (a) + (b) +(c) of GSTR-3B)}. 9. Ratio of inward supplies (liable to reverse charge) to total turnover [col.2 of Table 3.1(d)}/Col.2 of 3.1 (a)+(b)+(c) of GSTR-3B)]. 10. Ratio of ITC shown in Table 4A(5) of GSTR 3B and ITC as per GSTR- 2A. 11. Ratio of tax paid under reverse charge (as per {Col.3+4+5+6 of Table 3.1(d)} to ITC taken on import of services/other reverse charge (other than import of goods) {Col.2+3+4+5 of Table 4A (2+3) of GSTR 3-B}. 12. Ratio of ISD credit {Col.2+3+4+5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r declared in GSTR 3b must be compared with TDS/TCS deducted (it should be more than 100 times than TCS deducted and more than 50 times than TDS deducted). 36. Taxable persons dealing in evasion-prone commodities/services as per HSN/SAC code. 37. High spike by n amount in e-way bill value in n months. 38. Ratio of Output Tax paid in cash to the total turnover in the current year is n percentage higher to the ratio of the same in the previous year. 39. Ratio of Output Tax paid to Net Profit in the current year is "n" percent higher to the ratio of the same in the previous year. 40. Taxable Person whose Turnover is less than "n" percentage of turnover from previous year. 41. Ratio of expenses to turnover in the current year is greater than by "n" percent than the ratio of the same in the previous year. 42. Inward supply from bogus dealers. 43. Zero cash set-off against tax liability. 44. Inward supply received but no outward supply. 45. GSTR-1 submitted but GSTR-3B not submitted. 46. Manufactures whose cash set-off is less than 5 per cent. 47. Three or more cases apprehended by mobile squad. 48. Cancellation of E-way bill is more than 2 per cent. Based on Local Risk par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted primary cases. Norms for such action i.e., whether to have the same audit officer for all cases, approach for coordination among different audit officers, oversight etc. State audit jurisdictions do not have an annual scheduling of Audit for a financial year. Such elasticity in planning Audit of related registered persons in the value chain based on audit findings in selected primary cases is possible. Whereas, in the CGST audit manual, the annual Schedule for audits for a financial year would be drawn at the beginning of the year and there is a need to adhere to such schedule, taking up the audits of other registered persons in the value chain based on audit findings, may not be possible during the same year. Furthermore, taking up audit of other persons in the value chain may not always yield good results unless they are part of a fake credit chain. However, if the risk scores of such registered persons in the value chain are identified to be higher, the same can be taken up for audit during subsequent audit years. Whether to have the same Audit Officer for all such cases including monitoring the same may be left to the discretion of the divisional heads or any officer autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Small amongst the audit teams. Allot to the Audit teams 70% of the taxpayers out of the 80% list of Taxpayers provided by DGARM. Allot 10 % of taxpayers out of the Random list of Taxpayers amongst the Audit Teams. The remaining 20% of the taxpayers to be audited should be selected by the Audit Commissionerate based on local risk factors, after obtaining approval from the jurisdictional Chief Commissioner. Recommendation - 06 -Basis/criteria for allocation of cases for audit- cadre, turnover Taxable turnover-wise allocation of cases or pecuniary jurisdiction for audit may be considered based on the corresponding State's GST department's administrative architecture. Audit officers in many States are in the cadres of Deputy Commissioner, Assistant Commissioner and Commercial/State Tax Officer, while it may not be so in others. In keeping with the hierarchical structure in a State, taxpayers for audit may be assigned to the officers. Allocation of cases for audit may be based on the turnover as may be decided by the appropriate authority. Recommendation - 07 Numerical targets for Audit Fixing numerical targets, both upper and lower limits, on the number of cases that are to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of targeting practises, increasing audit quality and performance, and to identify areas in which audit capacity can be augmented. Recommendation - 10: Audit Monitoring Committee Post-audit process - (i) Committee for review of the audit report (ii) recommendation for adjudication and the adjudicating authority. Audit is treated to be completed, when an audit report which may contain objections detected during the audit is finalised by the Department. But before finalising the objections, the initial objections being raised by the audit officer may be taken up for discussion by a Committee of officers in a monthly/periodical meeting (which could be called "Audit Monitoring Committee") with regard to the sustainability/correctness or otherwise in respect of each objection. This system of AMC that may be instituted in each State department will probably reduce unproductive disputes and also standardise practices. The Audit Monitoring Committee may consist of the Joint Commissioner (Divisional Head), Deputy Commissioner, Assistant Commissioner and GST Officer (Commercial Tax Officer, Sales Tax Officer as the case may be). However, the constitution of such a committee may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same may be considered for circulation amongst the audit officers of all the States too. The State of Karnataka maintains a compilation of interesting audit paras that are discussed in the 'IDEA-i Meet' platform (Inter Divisional Exchange of Audit insights) held once in a fortnight. Similarly, each State may have its own mechanism of maintaining and circulating Audit outcomes. gst administrations may consider creation of a joint knowledge sharing platform that would enable exchange of knowledge, audit findings and other relevant information. such a repository would go a long way in driving convergence of taxpayer experience of audit under different GST administrations. Recommendation - 13: Coordination between State an Central audit officers Coordination between State and Central audit officers - in similar cases, similar businesses, exchange of approaches, findings, outcome in appeals etc. A coordination cell may be established by the GST Council consisting of senior officers from the Centre and the State in order to have collaborative and cohesive strategies for audit and also to share various initiatives developed by the Centre and the State and this will certainly usher i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayers for auditing and assigning the same to various Audit Teams to serving the Final Audit report and/or SCN to the Taxpayer, every Audit proceeding is seamlessly connected electronically. Some of the Model-II States are found to have adopted the GSTN Audit Module. GST Audit Modules developed by GSTN and the State of Karnataka broadly have the same features with minor tweaks as the GST Audit process is partly dictated by the GST Act itself. Therefore, E-audit Modules that may be developed by States may have these common audit tools with tweaks that conform to their administrative structure. AUDIT MIS APP MIS APP is a tool which focuses on the need for sound information for decision making and which aims to find the relationship between an audit officer and their audit practice. MIS and Audit processes are targeted at satisfying the information required for appraisal of performance of Audit Divisions on a real time basis. MIS is a system that enables the Audit Divisional head and the Head Office or Audit Commissionerate to have access to dependable information for planning and decision making. This information could be either qualitative or quantitative or both depending on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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