1. Preparation of Draft GST Audit Report and submission to senior officers

1.1 After completion of audit verification, the auditor should prepare the verification report in the prescribed Proforma for each issue of the approved Audit Plan. This document should record the results of verification conducted as per the audit plan. Any additional issue (not mentioned in the original plan) verified/ point noticed should also be mentioned. The auditor would then discuss each of such issues with the registered person pointing out either non-payment or procedural infractions. The initial views of taxpayer must be recorded in the verification document. The auditor should also apprise the registered person of the provisions relating to voluntary compliance and encourage him to take advantage of those provisions in order to avoid disputes and litigation.

1.2 Where the registered person agrees with the short levy, as noticed, the auditor should explain the benefit available under Section 73(6) / 74 (6) as the case may be and use persuasion as a measure of recovery of dues along with interest, if any, promptly. Details of spot recoveries and willingness of the registered person to pay short levy should also be recorded. This document would then become the basis for preparation of the draft audit report.

1.3 The Draft Audit Report shall be prepared in consultation with the Deputy/Assistant Commissioner of Audit Circle. The audit Circles shall bring the NIL DARs to the notice of concerned Addl./ Jt. Commissioner for review, who has to record his findings in audit file based on Desk Review.

1.4 The narrative of the objections in the audit report should be concise, to the point and self-contained and should convey the gist of objection raised. Telegraphic narration should be avoided. Where the objections are based on any circulars or clarifications issued by the Board, they should be quoted. Cases, in which certain specified conditions are not fulfilled, giving rise to objections, should be clearly brought out. Similarly, where objections are backed by interpretations as decided by the court judgments, decisions of Appellate authorities or supported by technical literature, those should be cited.

1.5 The draft audit report should be finalised within the shortest time span possible i.e. within 10 – 15 days of the commencement of the audit in the registered person’s place and placed before the MCM for decision.

2. Monitoring Committee Meetings

2.1 The auditor should submit the draft audit report to the Deputy / Assistant Commissioner of the Audit Circle for approval and after approval of DAR the same is to be considered for placing before Monthly Monitoring Cell Meeting.

2.2 Monitoring Committee Meeting (MCM) should be convened by the Audit Commissionerate, to which the Executive Commissioner or his representative shall be invited to attend. The decision taken by the Audit Commissioner, with regard to settlement of audit objections after recovery of all dues or dropping of the unsustainable audit objections, shall be final. Approved audit objections, including those in which show-cause notices are proposed to be issued, should be conveyed to the Executive Commissioner in the form of Minutes of the MCMs, who shall respond to these objections conveying his agreement/disagreement within 15 days of the receipt of the minutes of the MCM.

2.3 On points of difference, further consultations may be held for a period of 15 days. If the difference persists, the final decision rests with the Audit Commissioner.

2.4 The Planning and Co-ordination section of the Audit Commissionerate should organise, /Executive Commissionerate-wise / Circle-wise Monitoring Committee Meetings (MCM), at least at a monthly interval under the chairmanship of the Audit Commissioner, under intimation to the Executive Commissioner and the ADG (Audit) of the Zone concerned. The DD/AD (Costs) if available may also be invited for the said meeting. During the MCM each of the audit objections/ observations would be examined for its sustainability. The Committee (MCM) should also decide as to whether the extended period of limitation can be invoked or not and also on the applicability of the provisions relating to waiver of show cause notice in respect of each para (refer Section 73(5) & 73(6)/ 74(5) & 74(6) of CGST Act, 2017). To facilitate prompt decision, the Additional/Joint Commissioners and all the DC/ACs of Headquarters and all circles of the Audit Commissionerate should attend these meetings to offer their views on the spot, to ensure that uniformity in raising objections is maintained. The minutes of each such meeting should be drawn, pointing out the decision on each audit objection regarding its sustainability and directions for future action. The objections rejected by the meeting will be treated as closed.

2.5 The Planning and Co-ordination Sections of Audit Commissionerate and the MIS of the Audit Circles should make prompt entries in the Registers of Audit Planning and Audit Follow-up, at every stage, until the closure of the audit point either by issue of a show cause notice or by recovery of amounts due or by closure on merits/reconsideration.

3. Final GST Audit Report

Based on the decision of the MCM, the draft audit report should be finalised within thirty days from the date of the meeting. The Planning and Co-ordination Sections of Audit Commissionerate shall upload the FAR using Audit Report Utility and issue FAR. A copy of the FAR, even if it is a NIL report, should be sent to the registered person, by e-mail through system and necessary records confirming such action should be kept in Registered person’s Master File.

4. Follow up action and issue of show cause notice

6.4.1 An audit objection should be closed after requisite action i.e., either recovery of amounts due or issuance of show cause notice, has been taken on it. After the issuance of Final Audit Report, wherever further action such as issue of Show Cause Notice is required, the Audit Group should prepare the Draft Show Cause Notice. The Show Cause Notice should be issued by the concerned officer of the Audit Commissionerate as per the Competency decided by the Board in its instructions issued from time to time and the same shall be answerable to the adjudicating authority as per the Board’s instructions issued in this regard. It is the responsibility of the Audit Commissionerate to pursue / persuade the taxpayer for payment of tax dues, especially on the paras admitted by the Registered Person. However, for any pending action i.e., recovery, especially on paras admitted in writing by the Registered Person, can be taken up with the jurisdictional Executive Commissionerate, for follow up. The issues relating to paras orally admitted should not be referred to the Executive Commissionerates. In case, new facts, necessitating reconsideration of findings in an audit report, come to the knowledge of officers who are required to take action on an objection, they should send their report along with supporting material to the Planning and Co-ordination Section for reconsideration. But this action must be taken most expeditiously, say within one month of receipt of the Audit Report. In exceptional cases involving cogent grounds, the views taken in the Monitoring Meetings shall be taken up for review/re-consideration by the MCM only. The Audit Commissioner should send a list containing details of Show Cause Notices issued during the month, by the Headquarters and Circles, to each of the Executive Commissionerates, on monthly basis.

4.2 The results of action arising after preparation of final audit report should be filled up in the follow up report utility and uploaded in the system, as per the instructions in the Audit Report Utility Circular.

4.3 Each audit report should be examined by the Planning and Co-ordination Section/MIS Section of the Circle. Any objection with major revenue implication, objection specific to a particular issue or any objection describing a novel modus operandi, should be selected for (i) issue of Modus operandi circular within the Commissionerate, (ii) for communicating the same to the Principal Chief Commissioner/Chief Commissioner’s office for circulation within the Zone, (iii) communication to the Directorate General of Audit for issue of audit circulars and (iv) communication of all important modus operandi to the DGGI.

4.4 On completion of the above procedure the planning section shall place the documents in the registered person’s Master file and also update the electronic file of the registered person.

Source- GST Audit Manual of CBIC

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