Local Risk Parameters
The following are example of local risk parameters criteria that may be considered during selection of units for audit. The planning section, Hqrs of Audit Commissionerate may consider all or some of the below criteria, depending on available data and resources, and may also use additional criteria not listed below.
i. The Taxpayer did not provide or delayed in providing documents sought by the Audit Team
ii. The Taxpayer was not previously audited;
iii. The Taxpayer is newly registered;
iv. Length of time since last audit;
v. The Taxpayer had / did not have substantial assessment during previous audits;
vi. The size of the Taxpayer’s turnover / net profit;
vii. The size of the Taxpayer’s loss, if any;
viii. The size of the Taxpayer’s refund, if any;
ix. The size of change in the Taxpayer’s turnover/net profit from the previous year;
x. The size of the impact detected mistakes had on the Taxpayer’s turnover / net profit;
xi. The ratio of expenses/turnover;
xii. The ratio of turnover/total assets;
xiii. The ratio of loans/total assets;
xiv. The size of income from high risk activities (e.g., real estate income);
xv. The size of exemptions, if any;
xvi. The percent of the net profit in comparison to the activity average;
xvii. The percent of the total profit compared to the activity average;
xviii. The Taxpayer requested waivers or is bankrupt;
xix. The Taxpayers files inconsistently;
xx. The Taxpayer is currently involved in legal disputes;
xxi. The Taxpayer’s return was previously investigated for evasion;
xxii. The Taxpayer received notices from other governmental entities;
xxiii. The quality of the Taxpayer’s books and records (manual / automated; not well-kept);
xxiv. The Taxpayer’s returns is prepared by questionable accountants;
xxv. The specific sector, in which the Taxpayer operates (e.g., typical high-risk activities include restaurants and hotels, apartment rentals, professionals, car rental, spare parts for vehicles, chemicals, telecommunications, retail);
xxvi. The form of the legal entity (e.g., corporation / partnership);
xxvii. The multitude of the Taxpayer’s legal relationships with other entities;
xxviii. The Taxpayer has multiple branches;
xxix. The Taxpayer has multiple activities;
xxx. Audit differences (past audit assessments).
xxxi. The Taxpayer has supplied goods on which there has been reduction in rate of duty, in order to examine the possibility of profiteering under Section 171 of the CGST Act, 2017
xxxii. The Taxpayer has stopped filing GST returns.
xxxiii. The Taxpayer has applied for surrender of its registration.
xxxiv. Where there is increase in ratio of Exempted Supplies / Total supplies of a Taxpayer over time.
xxxv. Where higher incidence of supplies without issuance of e-way Bills have been noticed.
xxxvi. The Taxpayer who does not file periodical return but issues e-way bill regularly.
xxxvii. The Taxpayer who was not audited in the pre-GST era for the last 4 – 5 years.
xxxviii. The Taxpayer whose turnover increased substantially after enactment of GST.
xxxix. The Taxpayer who is not filing GSTR – 3B but in their electronic cash ledger, amount of TDS is reflected