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January 23, 2021

Karnataka GST Audit Manual

by CA Shivam Jaiswal in GST

Karnataka GST Audit Manual

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)

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.Contents
Chapter 1Introduction
1.1Preamble
1.2What is audit under GST
1.3Why audit under GST
1.4The purpose of audit manual
1.5Scope of the audit manual
1.6Amendments to the manual
1.7Removal of difficulty
Chapter 2The Legal provisions
2.1Provision
2.2Analysis of Provisions, Rules and relevant forms
2.3Form GST ADT – 01
2.4Endorsement
2.5Notice seeking Additional information/ documents
2.6Notice after audit
2.7Form GST ADT – 02
Chapter 3GST Audit Administration
3.1Introduction
3.2Management at apex level
3.3  Role of Additional Commissioner of Commercial Taxes (Audit)
3.4Role of Joint Commissioners (Administration) DGSTO
3.5Functions of audit officers
3.6Role of audit review committee at DGSTO Level
3.7Staffing norms for Audit offices
3.8Audit officers – Their Profile, Deployment and Capacity Building
3.9Different steps in conducting Audit and Adjudication
3.10Recommendation for wild card cases for audit in DGSTO
3.11Verification Report
Chapter 4Audit Officer’s responsibility and authority
4.1Definition of Audit officer
4.2Role of audit officer
4.3Role of Audit officer in dealing with the Tax payer/assessee/public
4.4Authority for an Audit officer
4.5Summons
4.6Precautions while issuing summons
Chapter 5Principles of audit
5.1Basic principles
5.2Standards for conduct of audit
5.3Period to be covered during audit
5.4Stage wise action for audit
Chapter 6Selection of tax payers for audit
6.1Objective
6.2Method of selection based on risk assessment
6.3Preparation of audit schedule
6.4Theme based audit
Chapter 7Audit preparation and verification
7.1Profiling of assessee / taxpayer
7.2Assessee Master File (AMF)
7.3Audit working papers
7.4Desk Review
7.5Reconciliation of data with third party information
7.6Trend analysis
7.7Gathering of information of the assesses/ taxpayer
7.8Evaluation of the internal control
7.9Techniques for evaluation of the Internal Controls
7.10Audit plan
7.11Audit verification steps
7.12Verification of points mentioned in the audit plan
7.13General steps in audit verification
7.14Apprising the assesses/ taxpayers of irregularities noticed and ascertaining his view point
7.15Suggestion to taxpayer /assesses for future compliance
Chapter 8Preparation of Audit Report and Adjudication
8.1Follow up action and issue of show cause notice
8.2Pre-Notice consultation
8.3Show-cause Notice
8.4Communication and Service of Notice
8.5With this non-service cannot be challenged in appellate proceedings
8.6Speaking Order
Chapter 9Special Provisions in GST
9.1Incorrect Notices
9.2Protective Notices
9.3Call-book cases
9.4Payment ‘under protest’
9.5Collection in ‘name’ of tax
9.6Unjust enrichment
9.7Provisional bank attachment
9.8Demand of output tax
9.9Demand of Re-payment of Input Tax Credit
9.10Show-cause Notice under Section 73 or 74 or 76 of KGST Act
9.11Record of Personal Hearing
9.12Order of Adjudication
Chapter 10Guide to GST Act Audit
Chapter 11 – 17Guide to GST Act Procedures
Web-links
ANNEXURE -1

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