Now, risk scores will be assigned to determine taxpayers' audit scrutiny

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Ahead of the first audit exercise under the goods and services tax (GST) system two years after its launch, taxpayers will be divided into three categories based on turnover. Risk scores will be assigned to decide the level of audit scrutiny they will face.

The guidelines or the audit plan issued by the director general of audit (indirect taxes) to field formation came even as the annual return filing was deferred by two months to August 31.

Taxpayers, along with their risk scores, have been divided into three categories — large, medium, and small. Of this, 70 per cent will have to be audited in each category on the basis of risk parameters in order of sequence, whereas 10 per cent will be selected randomly. The remaining 20 per cent will be picked by the commissionerate, considering the local risk parameters.

“Such guidelines have been issued for GST audits for the first time. Assigning risk scores to various dealers for selection of audit are needed for authorities to focus on cases where a possibility of tax leak is more,” said Pratik Jain, partner, PwC India. He added it is good that a ‘desk-based audit’ is proposed for small taxpayers without a physical visit to the premises. M S Mani, partner, Deloitte India, said businesses should be very careful in submission of the GST audit data and ensure it is reconciled before submission. This data will also be used for live audits in future, in addition to being used to determine taxpayers who would be subjected to the audit. Vishal Raheja, deputy general manager-GST, Taxmann, said special care should be taken by officers since the GST is a new law and taxpayers are not too familiar with the GST audit. “Officers should take a liberal approach during first GST audit and educate taxpayers about it,” said Raheja.