The Karnataka Government issued the Goods and Service Tax (GST) Audit Manual.
In terms of Section 2(13) of the KGST Act, 2017, “audit” means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify 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 the rules made thereunder.
The purpose of this manual is to outline the principles, policies, procedures and practices of audit conducted under the KGST Act, 2017 and the Rules made thereunder. It contains guidelines and operating procedures intended to ensure that the audit of taxpayers is carried out in a uniform, efficient and comprehensive manner, adhering to the stipulated principles, policies and procedures aimed in that direction.
It provides members of the audit team with practical professional guidance, tools and information for conducting and managing the audit activity.
It provides standard procedure for planning, conducting and reporting on audit work carried out. It helps to bring a systematic and disciplined approach to the audit by departmental authorities so as to enhance the quality and effectiveness of audit by putting into practice standard procedures and processes that would help it conform to professional standards and best practices.
The tax liability of a registered person on supply of goods or services or both under GST Law is computed by himself under self-assessment scheme of the Act as provided under section 59 of the KGST Act, 2017. However, the correctness of such self-assessment on the part of the taxpayer needs to be ensured by the Tax Authorities through periodical audit of books of account, returns and other documents maintained and furnished by such person to ensure the correctness of turnovers declared, tax liability, claim of input tax credits in the returns filed and also the payment of taxes.
As per the provisions of the GST Act such audit can be undertaken not only by an officer of the tax department but also by professionals in certain cases.
The major outcomes of Audit envisaged
Firstly, verification of complete and correct recording/accounting of all transactions relating to supply of goods and services, their correct classification and their correct tax liability.
Secondly, verification of the correctness of turnovers declared, taxes paid, refund claimed and input tax credit availed.
Thirdly, verify whether the taxpayers have applied the correct rates of taxes on supply of goods and services.
Fourthly, verification of compliance of relevant notifications, circulars, clarifications, Government Orders.
Fifthly, verification of compliance of the relevant judicial precedents applicable to the registered person.
Sixthly, data compilation relating to nature and patterns of incorrect claims of input tax/ exemptions for taking corrective/preventive administrative/statutory measures,
Seventhly, identification and understanding of any suspected/doubtful tax management practices adopted by the registered persons.
Eighthly, facilitating better and improved tax compliance through taxpayer education and bringing any changes /reforms required to make compliance simpler and easy.
Lastly, audit results in facilitating better and improved tax compliance through taxpayer education and bringing any changes/reforms required to make compliance simpler and easy.
The manual covers subjects that are related to principles, policies and other issues pertaining to conduct audit of taxpayers under KGST Act, 2017 and rules made there under. The manual does not deal with legal interpretations and rulings on GST matters. The guidelines provided in the manual are advisory and educative in nature and are not binding either on authorities or the taxpayers. The relevant judgements of the honourable courts and tribunals applicable to the transactions of the taxpayer should be kept in mind at the time of audit.
The manual does not contain answers to all the problems that may arise in the day-to- day audit work. In such cases, the audit officer/audit team has to apply his/their mind, keeping in view the spirit of the principles and policies outlined in the manual. If needed, he/they may seek guidance from the supervisory officer.