GOVERNMENT OF KARNATAKA
(Department of Commercial Taxes)
KARNATAKA GST AUDIT MANUL
Office of the Commissioner of Commercial Taxes,
“Vanija Therige Karyalaya”
Bengaluru-560009
taxation is a sovereign power exercised by the state to realise revenue to enable it to discharge its obligations.
HON’BLE SUPREME COURT OF INDIA,
(Amrit Banaspati Co. Ltd. and Ors Vs State of Punjab and Ors (AIR 1992 SC 1075)
Version-1 Dated:01.01.2021
FOREWORD
The GST is an integrated scheme of taxation of goods and services and is an efficient and harmonized consumption based tax system replacing a plethora of indirect taxes like VAT, Central Excise, Luxury Tax, Entry Tax, Entertainment Tax, Betting Tax and Cess and surcharges relating to supply of goods and services.
The Goods and Service Tax is a trust-based regime wherein the taxpayer is required to self-assess his tax liability and file the returns. To ensure whether the taxpayer has correctly self-assessed his tax liability, the concept of Audit has been incorporated under the GST Act. This involves examination of records, returns and other documents maintained by a registered taxable person.
The Audit involving scrutiny of financial statements and documents, therefore, forms an integral part of the work of the officers of the tax department. The objective of audit of taxpayers is to measure, improve and sustain the level of compliance in the light of the provisions of the KGST Act 2017 and the rules made there under.
Bringing out a manual on GST Audit is praise worthy initiative by the Commercial Taxes Department. The manual would be a comprehensive guide to conduct Audit under GST and would include the principles and policies of Audit under the Act. This hand book is an effort to equip the officers of the department with requisite skills in audit and scrutiny.
The purpose of this Audit manual is to outline the principles and policies of audit conducted under the KGST Act, 2017 and the rules made thereunder. Guidelines provided in the manual are intended to ensure that the audit of tax payers is carried out in a uniform, efficient and comprehensive manner adhering to the stipulated principles, policies and international practices. In addition there are also a few chapters towards the end which would be helpful to LGSTOs.
I do sincerely hope this effort of the Commercial Taxes Dep rtment is well received and the Officers and Officials of the Department benefit from it.
I.S.N. Prasad
Additional Chief Secretary,
Finance Department
Government of Karnataka
PREFACE
It is gratifying to note that the KGST Audit Manual has been prepared by the Commercial Taxes Department in a comprehensive, holistic manner. I am sure it will serve as a guide to the officers implementing the provisions of the GST law.
The Commercial Taxes Department in association with NIC, Karnataka has also implemented an online audit backed system called E-Shodane. This is keeping in line with the various e-initiatives of the department over the years.
This Manual will be regularly updated based on feedbacks, amendments of rules and processes as well as experience of audit under GST.
Srikar M.S
Commissioner of Commercial Taxes,
(Karnataka), Bangalore
DISCLAIMER
The Manual is just an effort to synchronize the audit/ scrutiny process. It is not a legal document conferring rights and not a source of legal interpretation. The manual does not deal with legal interpretations and rulings on GST matters. Future changes in the KGST Act, 2017 and the rules made thereunder, administrative policies and procedures may require changes to this manual. This is work of collation from different sources and is for educational and training purposes only. This is for internal use by the officers of the Department only.
TABLE OF CONTENTS
| Chapter No. | CONTENT |
| Chapter 1 | Introduction |
| 1.1 | Preamble |
| 1.2 | What is audit under GST |
| 1.3 | Why audit under GST |
| 1.4 | The purpose of audit manual |
| 1.5 | Scope of the audit manual |
| 1.6 | Amendments to the manual |
| 1.7 | Removal of difficulty |
| Chapter 2 | The Legal provisions |
| 2.1 | Provision |
| 2.2 | Analysis of Provisions, Rules and relevant forms |
| 2.3 | Form GST ADT – 01 |
| 2.4 | Endorsement |
| 2.5 | Notice seeking Additional information/ documents |
| 2.6 | Notice after audit |
| 2.7 | Form GST ADT – 02 |
| Chapter 3 | GST Audit Administration |
| 3.1 | Introduction |
| 3.2 | Management at apex level |
| 3.3
|
Role of Additional Commissioner of Commercial Taxes (Audit) |
| 3.4 | Role of Joint Commissioners (Administration) DGSTO |
| 3.5 | Functions of audit officers |
| 3.6 | Role of audit review committee at DGSTO Level |
| 3.7 | Staffing norms for Audit offices |
| 3.8 | Audit officers – Their Profile, Deployment and Capacity Building |
| 3.9 | Different steps in conducting Audit and Adjudication |
| 3.10 | Recommendation for wild card cases for audit in DGSTO |
| 3.11 | Verification Report |
| Chapter 4 | Audit Officer’s responsibility and authority |
| 4.1 | Definition of Audit officer |
| 4.2 | Role of audit officer |
| 4.3 | Role of Audit officer in dealing with the Tax payer/assessee/public |
| 4.4 | Authority for an Audit officer |
| 4.5 | Summons |
| 4.6 | Precautions while issuing summons |
| Chapter 5 | Principles of audit |
| 5.1 | Basic principles |
| 5.2 | Standards for conduct of audit |
| 5.3 | Period to be covered during audit |
| 5.4 | Stage wise action for audit |
| Chapter 6 | Selection of tax payers for audit |
| 6.1 | Objective |
| 6.2 | Method of selection based on risk assessment |
| 6.3 | Preparation of audit schedule |
| 6.4 | Theme based audit |
| Chapter 7 | Audit preparation and verification |
| 7.1 | Profiling of assessee / taxpayer |
| 7.2 | Assessee Master File (AMF) |
| 7.3 | Audit working papers |
| 7.4 | Desk Review |
| 7.5 | Reconciliation of data with third party information |
| 7.6 | Trend analysis |
| 7.7 | Gathering of information of the assesses/ taxpayer |
| 7.8 | Evaluation of the internal control |
| 7.9 | Techniques for evaluation of the Internal Controls |
| 7.10 | Audit plan |
| 7.11 | Audit verification steps |
| 7.12 | Verification of points mentioned in the audit plan |
| 7.13 | General steps in audit verification |
| 7.14 | Apprising the assesses/ taxpayers of irregularities noticed and ascertaining his view point |
| 7.15 | Suggestion to taxpayer /assesses for future compliance |
| Chapter 8 | Preparation of Audit Report and Adjudication |
| 8.1 | Follow up action and issue of show cause notice |
| 8.2 | Pre-Notice consultation |
| 8.3 | Show-cause Notice |
| 8.4 | Communication and Service of Notice |
| 8.5 | With this non-service cannot be challenged in appellate proceedings |
| 8.6 | Speaking Order |
| Chapter 9 | Special Provisions in GST |
| 9.1 | Incorrect Notices |
| 9.2 | Protective Notices |
| 9.3 | Call-book cases |
| 9.4 | Payment ‘under protest’ |
| 9.5 | Collection in ‘name’ of tax |
| 9.6 | Unjust enrichment |
| 9.7 | Provisional bank attachment |
| 9.8 | Demand of output tax |
| 9.9 | Demand of Re-payment of Input Tax Credit |
| 9.10 | Show-cause Notice under Section 73 or 74 or 76 of KGST Act |
| 9.11 | Record of Personal Hearing |
| 9.12 | Order of Adjudication |
| Chapter 10 | Guide to GST Act Audit |
| Chapter 11 – 17 | Guide to GST Act Procedures |
| Web-links | |
| ANNEXURE -1 | |
