GST Audit Manual 2019 - Webtel

1 CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS GOODS AND SERVICES TAX Audit Manual 2019 GSTAM-2019 Directorate General of Audit 1 TABLE OF CONTENTS S. No. Chapter No. Item Pages from to 1 FOREWORD 3 5 2 1 Introduction and Legal Authority 6 10 3 2 Objectives and Principles of Audit 11 15 4 3 Management of GST Audit 16 26 5 4 Selection of registered persons for Audit 27 31 6 5 Audit - Preparation and Verification 32 47 7 6 Preparation of Audit report & follow up 48 52 8 GSTAM - Annexure I Registered Person s Master File 53 58 9 GSTAM - Annexure II GST AD01 - letter of intimation for conduct of Audit 59 59 10 GSTAM - Annexure III Documents required for Desk Review 60 68 11 GSTAM - Annexure IV Ratio Analysis of Database 69 73 12 GSTAM - Annexure V Comparative Chart of items from Financial Statement/Returns 74 77 13 GSTAM - Annexure VI Questionnaire for review of internal control and walkthrough 78 94 14 GSTAM - Annexure VII Audit Plan 95 97 15

2 GSTAM - Annexure VIII Working Papers 98 114 16 GSTAM - Annexure IX Verification of Records/Registers during conduct o Audit 115 127 2 17 GSTAM - Annexure X Format of letter to be written by the Registered Person u/s 73 (6) of CGST Act, 2017 128 128 18 GSTAM Annexure XI GST ADT 02- communicating the Audit report to the registered person 129 129 19 GSTAM - Annexure XII List of Local Risk Parameters 130 131 20 GSTAM - Annexure XIII Check List for Audit of Traders 132 135 21 GSTAM - Annexure XIV Check List for Audit of Composite Dealers 136 137 3 Government of India Department of Revenue Central Board of Indirect Taxes & Customs Directorate General of Audit Foreword It is indeed a great pleasure to provide the GST Audit Manual 2019, after approval by the Board.

3 As you are aware, GST regime commenced 1st July 2017. However, the audits under GST had been put on hold primarily for the reason so that the database of returns including Annual Return is available for one full accounting period. 2. The Board vide its letter F. No. 221/03/2013 - CX 6 dated 30th August 2018 requested this Directorate General to prepare a Manual on Audit in GST for the consideration of the Board. Accordingly, a committee consisting of officers from the zonal units of this Directorate General and other officers from the Headquarters was constituted to get feedback on the proposed Audit Manual from the Audit Commissionerates in their jurisdiction. Inputs were also informally obtained from GSTIN for the Manual .

4 3. I would like to emphasize that the Manual does not deal with legal interpretations and rulings on GST matters. Future changes in the CGST ACT 2017 and the rules made thereunder, administrative policies and procedures may require changes to this Manual . Experience gained during the conduct of Audit would also necessitate periodic updating of the Manual to maintain its utility. Some of the highlights of GSTAM, 2019 are as under:- i. Formation of Audit Commissionerates and Cadre Restructuring has brought new designations and roles of officers. Hence 4 necessary changes have been carried out with regard to the designations like Principal Chief Commissioner and Principal Commissioner and the new roles and responsibilities of the officers of Executive Commissionerate and Audit Commissionerate.

5 These have been suitably incorporated. ii. The norms for selection of units for conducting Audit were revised effecting a paradigm shift in the existing criterion for selection of units based on amount of duty paid to total turnover. The new norms include, selection of units based on risk parameters, days for audits and formation of Audit parties. These have been incorporated in this Manual . Role of DGARM in running the Risk Analysis Programme has been emphasised iii. The Audit process beginning from the Assessee Master File, desk review, revenue risk analysis, trend analysis, gathering of information, evaluation of internal controls, scrutiny of annual financial statement, Audit plan, Audit verification, working papers, apprising the Taxpayer about irregularities noticed and ending with suggestions for future compliance have been streamlined and brought under one chapter.

6 The repetitions in the earlier Audit manuals have been removed. iv. Separate Annexures have been prepared containing detailed verification checks pertaining to GST. The annexures have been developed in consultation with field formations which also include capturing the results of Desk Review. The annexures containing lengthy information to be filled in by taxpayers have been discontinued. 4. Due care has been taken in drafting the GSTAM, 2019 and suggestions and feedbacks received from field formations and Zonal Units of this Directorate General were extensively deliberated and suitably incorporated. 5 6 CHAPTER 1 INTRODUCTION & LEGAL AUTHORITY 1. Purpose: The purpose of this Manual is to outline the principles and policies of audits conducted under the CGST ACT, 2017 and the rules made there under.

7 Guidelines provided herein are intended to ensure that the Audit of taxpayers is carried out in a uniform, efficient and comprehensive manner, adhering to the stipulated principles and policies and as per best international practises. Provisions of CGST Act, 2017 for Audit :- Section 2(13) of the CGST Act, 2017, defines Audit as the examination of records, returns and other documents maintained or furnished by the registered person under this Act or rules made thereunder or under any other law for the time being in force to verify, inter alia, the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or rules made thereunder . Accordingly, Audit implies (a) Detailed examination of i.

8 Records, ii. returns and iii. other documents - maintained / furnished by a registered person, under GST law/any other law or rules ; (b) For verification of correctness of - (i) turnover declared; (ii) taxes paid; (iii) refund claimed; (iv) input tax credit availed; and (v) assessment of compliances with provisions of GST law and rules . 7 Thus, GST Audit is not only for reconciliation of tax liability and payment thereof but, it also encompasses the verification of compliance of the provisions of the GST Acts, laws etc. by a registered person. Relevant Statutory Provisions: A) General Audit : Audit by tax authorities Sec. 65 of CGST Act, 2017: (1) The Commissioner or any officer authorized by him, by way of a general or a specific order, may undertake Audit of any registered person for such period, at such frequency and in such manner as may be prescribed.

9 (2) The officers referred to in sub-section (1) may conduct Audit at the place of business of the registered person or in their office. (3) The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of Audit in such manner as may be prescribed. (4) The Audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the Audit : Provided that where the Commissioner is satisfied that Audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months. Explanation. For the purposes of this sub-section, the expression commencement of Audit shall mean the date on which the records and other documents, called for by the tax authorities, are made available by the registered person or the actual institution of Audit at the place of business, whichever is later.

10 (5) During the course of Audit , the authorised officer may require the registered person, (i) to afford him the necessary facility to verify the books of account or other documents as he may require; (ii) to furnish such information as he may require and render assistance for timely completion of the Audit . 8 (6) On conclusion of Audit , the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings. (7) Where the Audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74.