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The Revenue department has come out with the first audit exercise under the GST System, two years after its launch, a plan to audit accounts of registered business based upon their risk parameters.

The risk parameters of businesses are based upon the history of tax evasion, irregular filing of returns and employing “questionable accountants”. Springing the audit plan, the Directorate General of Audit (Indirect Taxes) said the analytics arm of CBIC would generate a list of GST payers with risk summations and share it with Audit Commissionerates for scrutiny. This would apply to entities which fall in jurisdiction of CGST officers.

To ensure non-intrusive survey inspection of Tax Returns, the DG audit has asked the Chief Commissioner of GST to opt for Desk-based audits for small category of tax payers, as against the current system of premises-based audit.

It is said that “premises-based audit” should be carried out with the approval of the Commissioner in cases where small taxpayers refuse to cooperate or where there are inherent weaknesses in the internal control system of the taxpayer.

The risk parameters would also include taxpayers who have not been audited in the pre-GST era for 4-5 years and also those whose turnovers have substantially increased after GST roll out. In case of non-compliance of law is noticed with respect to erstwhile central excise or service tax during the course of GST audit, the audit commissioner may take suitable action. Thus, special care should be taken regarding the bona-fide mistakes found.

The GST Head at D. Batra & Co. says, “The audits should be conducted with serenity and convenience.”

Based upon the Risk scores, the taxpayers identified as “Risky” would be divided into 3 categories –

  • Small – With a turnover of up to Rs. 10 crores
  • Medium – Rs 10-40 crores
  • Large – Above Rs 40 crores

The audit will be on the basis of Annual return filed for 2017-18 fiscal – the first year of the GST implementation.  It is further said that audit of Large units would be completed within 7 working days, Medium units within 5 working days and Small units within 3 working days.

GST Cell at DBC Chartered Accountants believes that an extensive plan has to be worked out to implement the same even though the Annual Return filings have been postponed by two months to August 31, 2019.