Common GST Audits norms For Centers & States From This Financial Year

The finalized Model All India GST Audit Manual 2023 is set to be utilized by both Centre and state tax officials, with the aim of aiding businesses and minimizing legal conflicts.

According to sources, the manual defines standardized principles for selecting audit cases, preparing and executing audits, and conducting post-audit follow-ups. This uniform approach is anticipated to assist both the Central and state GST officials in their processes.

The norms which were introduced in February to the GST Council are expected to be applied to audit cases from the beginning of this fiscal year.

In addition to the mentioned measures, the Model All India GST Audit Manual 2023 proposes the implementation of a shared platform for exchanging crucial audit findings and other pertinent information to enhance the efficiency and quality of audits. 

The manual further emphasizes the necessity of capacity building and periodic training for officials and highlights the importance of targeted training for identified service sectors. 

The service sectors identified for this specialized training include e-commerce, works contract, hospitality, banking & financial services.

Currently, businesses are troubled by the various audit processes employed by both the Centre and different states. Each state has distinct parameters for case selection, as well as different requirements and timelines, causing confusion for businesses. 

In the past few months, the frequency of audits has increased as both the Centre and state GST departments have issued several notices to taxpayers.

Due to the government's emphasis on expanding the GST taxpayer base and reducing tax evasion, audits are projected to be a crucial tool for tax officials in the coming fiscal year.

The Model All India GST Audit Manual 2023 outlines that in cases of follow-up audits if a registered taxpayer is found to have short-paid or not paid the required tax, interest, penalty, or any other amount, they are obligated to deposit the outstanding amount within 30 days of receiving the final audit report. 

Failure to do so will result in the case being referred to the relevant jurisdiction for the initiation of demand and recovery proceedings.

The Model All India GST Audit Manual 2023 recommends a standardized method for selecting audit cases, proposing weightage-based criteria that prioritize taxpayers who file Form GSTR-3B and Form GSTR-1. 

The manual suggests that additional data sources, such as data from other indirect levies or income tax, can be taken into consideration. 

The weightage assigned to each parameter will vary based on its significance in selecting taxpayers for audit and the effectiveness of the risk parameters employed in the previous financial year. 

The final score will be calculated by averaging all the parameters and the taxpayers will be selected for audit based on the descending order of the final score. 

The manual further suggests the formation of a selection committee to identify various risk parameters for audit selection, and some cases can be chosen on a random basis or based on local parameters such as intelligence inputs and past behavior.

According to experts, the audit manual serves as a valuable reference for both taxpayers and the audit team. "It is a comprehensive document that includes various statutory provisions and can assist taxpayers in determining which documents may be necessary during the audit process. 

Such an initiative can save time for both the audit team and the taxpayer, as basic preparation can be completed proactively before the team's arrival," explained Abhishek A Rastogi, the founder of Rastogi Chambers. He assists clients in dealing with technical and constitutional challenges that may arise during audits, searches, and investigations.

As a part of the initiative, an "All-India Coordination Committee" of officers is being established, consisting of officers from both the Centre and states. 

This committee will be responsible for selecting audit themes, creating a committee of officers to choose taxpayers in a state for a thematic audit, coordinating among various audit authorities to develop a common minimum audit plan for a given theme, monitoring field formations' actual audits, disseminating audit outcomes to relevant stakeholders, and performing other duties specified in the Model All India GST Audit Manual.

The Model All India GST Audit Manual aims to assist audit officers in conducting effective and efficient audits in a consistent and comprehensive manner, utilizing the best practices of both the Centre and states, as well as international standards, according to the document. The audit processes will be supported by technological tools created by both the Centre and state governments.

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