Annexure I - Methodology for Verification and Awarding scores for Part-B & Part -C of QAR - Manual for Quality Assurance Review (QAR) and Audit Performance Index (API), 2021 [CBIC] - GST

ANNEXURE I METHODOLOGY FOR VERIFICATION AND AWARDING SCORES FOR PART-B PART-C OF QAR (para 2.7.2 of Chapter 2 of the Manual) S. No. Audit Standard Methodology for verification Max. Score Methodology for awarding score 1. STANDARDS FOR GENERAL PERFORMNACE OF THE AUDIT COMMISSIONERATE 1 1 [ Maintenance of database of officers profiles ]. GSTAM Ref: Para 3.7 This aspect is to be verified by QAR team on scrutinizing the concerned auditors profile file in Planning Coordination section 1 One mark shall be awarded if database of all the officers is maintained. No mark shall be awarded if no such database is maintained. 2 Formation of audit groups by equally distributing officers of skill and experience amongst the groups. GSTAM Ref: Para 3.7.2 This aspect is to be verified by QAR team on scrutinizing concerned file in Planning Coordination section in which the allotment of officers to groups was done, as to whether their skill and experience were taken into account. 1 One mark shall be awarded if the respective files/records indicate that the groups formation is done as per GSTAM provisions. Otherwise, no mark shall be awarded. 3 2 [ Training of officers posted to the Audit Commissionerate for the first time in GST audit process ]. GSTAM Ref: Para 3.7.3 This aspect is to be verified by scrutinizing the file in which the officers were nominated to the GST Audit trainings. In the first year of GST audit all the officers shall be trained. In subsequent years this aspect may be checked only in respect of officers newly posted. 2 Two marks shall be awarded if 100% of the officers posted for first time are trained in GST audit. Otherwise, no marks shall be awarded. 4 Organizing training programmes/refresher courses on latest techniques for the benefit of officers posted after the annual transfers (other than officers posted for the first time) GSTAM Ref: Para 3.7.3 This aspect is to be verified by scrutinizing the relevant file in which correspondence on conduct of in house trainings was dealt with. 2 Two marks shall be awarded if such training programmes/refresher courses are conducted. Otherwise, no marks shall be awarded. 5 Calibration of annual scheduling of audits based on the available working strength. GSTAM Ref: Para 4.3.1 This aspect is to be verified on scrutinizing the concerned file of the Planning Coordination section in which the annual plan was prepared and examining whether the plan was calibrated based on working strength. 1 One mark shall be awarded if such calibration was done. No mark shall be awarded if no such calibration done. 6 3 [ Maintenance of database of registered persons to be audited ]. GSTAM Ref: Para 3.3 (iv) This aspect is to be verified from the concerned file maintained or data in electronic form maintained by the RMQA (Risk Management and Quality Assurance) Section of the Audit Commissionerate, which contains the list of taxpayers in their jurisdiction. 1 One mark shall be awarded if such database is maintained. Otherwise, no mark shall be awarded. 7 Selection of 70% of taxpayers to be audited based on risk scores communicated by DG (Audit) and uploaded in Audit Module/forwarded to Circles before 15th March. GSTAM Ref: Paras 4.2.1 4.3.1 This aspect is to be verified from the concerned file of the Planning Coordination section. Examine whether the 70% of the taxpayers were selected from the list sent by DG (Audit), and uploaded/ forwarded before 15th March. 1 One mark shall be awarded if the selection and uploading/forwarding of 70% of the taxpayers is completed by 15th March. Otherwise, no mark shall be awarded. 8 Recording of reasons/justification for tweaking the lists received from DGARM/DG (Audit) while carrying out selection of taxpayers (70%) for audit. GSTAM Ref: Para 3.4.2 (viii) This aspect is to be verified from the concerned file of the Planning Coordination section. Examine whether there are any instances of tweaking of taxpayers selected from list received from DG (Audit) and if so whether reasons for such tweaking were recorded. 1 One mark shall be awarded if reasons are recorded in respect of all tweaking cases. Otherwise, no mark shall be awarded. If no such tweaking takes place, the parameter shall be considered as not applicable . 9 Selection of 20% of the taxpayers to be audited based on local risk parameters and uploaded in Audit Module/forwarded to Circles before 15th March. GSTAM Ref: Para 4.3.1 This aspect is to be verified from the concerned file of the Risk Management Quality Assurance section. Examine whether 20% of the taxpayers are selected for audit based on local risk parameters and uploaded/ forwarded before 15th March. 1 One mark shall be awarded if 20% of the taxpayers were selected based on local risk parameters and uploaded/forwarded before 15th March. Otherwise, no mark shall be awarded. 10 Obtaining the approval of the Chief Commissioner in respect of 20% taxpayers selected based on local risk parameters. GSTAM Ref: Para 3.4.1 (i) This aspect is to be verified from the concerned file of Risk Management Quality Assurance section. Examine whether Chief Commissioner s approval was obtained for the 20% taxpayers selected based on local risk parameters. 1 One mark shall be awarded if the approval of Chief Commissioner was obtained. Otherwise, no mark shall be awarded. 11 Selection of 10% of the remaining taxpayers randomly and uploaded in Audit Module/forwarded to Circles before 15th March. GSTAM Ref: Para 4.2.3 4.3.1 This aspect is to be verified from the concerned file of the Audit Commissionerate. Examine whether 10% of the taxpayers were selected randomly and uploaded/ forwarded before 15 th March. 1 One mark shall be awarded when 10% of the taxpayers were selected at random and uploaded/forwarded before 15th March. Otherwise, no mark shall be awarded. 12 4 [ Issuing of quarterly schedules by Circle AC/DC after release of annual schedule by Audit Commissionerate ]. GSTAM Ref: Para 4.3.1 (i) This aspect is to be verified by scrutinising concerned file of each circle as to whether quarterly schedules were released. 1 One mark shall be awarded if all the circles issued quarterly schedules. No mark shall be awarded if any one of the Circle did not issue quarterly schedule. 13 5 [ Approval of the desk reviews and audit plans of top 5 taxpayers of each audit circle by the Audit Commissioner ] . GSTAM Ref: Paras 3.4.1 (ii) 5.6.6 This aspect is to be verified by scrutinising at least two audit files of each circle selected at random out of the list of top 5 taxpayers furnished under Sl. No. 13 of Part-A QAR Format. 2 Two marks shall be awarded if such randomly selected audit plans of top five taxpayers of each circle are found to be approved by Commissioner. Otherwise, no marks shall be awarded. 14 Review of a few audit plans approved by ADC/JC by Commissioner to ensure quality of audit. GSTAM Ref: Para 3.4.1(ii) This aspect is to be verified by scrutinising files of such reviews taken up by Commissioner selected at random from the information furnished under Sl. No. 14 of Part-A QAR Format. 1 One mark shall be awarded after scrutiny of such files reviewed by Commissioner. If details of such files are furnished as NIL in Part-A, no mark shall be awarded. 15 Review of audit plans of small taxpayers approved by DC/AC by ADC. GSTAM Ref: Paras 3.4.2 , 3.4.4 5.6.7 This aspect is to be verified by randomly scrutinising two or three audit files of small taxpayers from each circle. Examine whether ADC/JC reviewed the audit plans. 1 One mark shall be awarded if all the randomly selected files were reviewed by ADC/JC. Otherwise, no mark shall be awarded. 16 Review of the NIL DARs by concerned ADC/JC. GSTAM Ref: Para 6.1.3 This aspect is to be verified by randomly scrutinising two or three audit files of taxpayers with NIL DARs from each circle as furnished under Sl. No. 16 of Part-A QAR Format. 1 One mark shall be awarded if ADC/JC reviewed the NIL DAR in the randomly selected files. Otherwise, no mark shall be awarded. If there are no NIL DARs during the Audit Year, this parameter shall become not applicable . 17 Communication of DARs to the Executive Commissioners seven days in advance of MCM. GSTAM Ref: Para 3.3 This aspect is to be verified by scrutinising the concerned file in the Planning Coordination section containing the correspondence relating to conduct of MCMs during the period under review. 1 One mark shall be awarded if such communication was made seven days in advance in respect of all MCMs conducted during the Audit Year. Otherwise, no mark shall be awarded. 18 Conduct of MCMs at monthly intervals. GSTAM Ref: Para 6.2.4 This aspect is to be verified by scrutinising the MCM file in the Planning Coordination section. 2 Two marks shall be awarded if MCMs of all Circles were conducted every month. Otherwise, no mark shall be awarded. 19 Communication of the minutes of MCM to the Executive Commissionerates immediately for conveying their agreement/ disagreement within 15 days from the date of receipt of MCM minutes. GSTAM Ref: Para 6.2.2 This aspect is to be verified by scrutinising the MCM file in the Planning Coordination section. 1 One mark shall be awarded if the minutes of MCM were communicated in each case to the jurisdictional Executive Commissionerats immediately after completion of MCM. Otherwise, no mark shall be awarded. 20 Obtaining GSTAM Annexure-X from the taxpayers wherever the issue of SCN was proposed to be waived. GSTAM Ref: Para 6.2.4 This aspect is to be verified on scrutiny of 10 files selected at random, where MCM takes a decision to waive the SCN i.e., on payment of amounts as per Section 73 (5) or 74 (5) of CGST Act , as the case may be. 1 One mark shall be awarded if Annexure- X was obtained in all the cases selected for review, otherwise no mark shall be awarded. 21 Communication of the list containing details of SCNs issued by the Audit Commissionerate to the Executive Commissionerates on monthly basis. GSTAM Ref: Paras 3.4.1 6.4.1 This aspect is to be verified from the concerned file of the Audit Commissionerate. Examine whether the details of SCNs issued were communicated to the Executive Commissionerates on monthly basis. 1 One mark shall be awarded if SCN details are forwarded on monthly basis. Otherwise, no mark shall be awarded. 22 System for obtaining feedback on audit process from the major taxpayers/trade associations. GSTAM Ref: Para 3.4.1(x) This aspect is to be verified on scrutiny of the relevant files pertaining to the data furnished under Sl. No. 17 of Part-A QAR Format. 1 One mark shall be awarded on scrutiny of the relevant information. No mark shall be awarded if such feedback was not obtained. 23 Review of audit performance by Audit Commissioner for taking suitable steps for improvement. GSTAM Ref: Para 3.4.1(vii) This aspect is to be verified by scrutinising the relevant files relating to information furnished under Sl. No. 18 of Part-A QAR Format 1 One mark shall be awarded if any such review(s) were conducted. Otherwise, no mark shall be awarded. 24 Maintenance and updation of audit planning and follow-up registers both at Headquarters and Circle level. GSTAM Ref: Paras 3.3 6.2.5 This aspect is to be verified by scrutinising the audit planning and follow-up registers maintained in Planning and Coordination section and each Circle as to whether the same are maintained and updated. 1 One mark shall be awarded on observing that both Planning follow-up registers at both Headquarters and Circle level are maintained and updated. Otherwise, no mark shall be awarded. 25 Completion of audit of all the taxpayers allocated by 31st March. GSTAM Ref: Para 4.3.1 (i) of GSTAM 2019 This aspect is to be verified by scrutinising the annual plan and the details of audits conducted by the Audit Commissionerate before 31st March. 1 One mark shall be awarded on observing that all the taxpayers scheduled were audited. Otherwise, no mark shall be awarded. 26 Preparation of monthly returns based on the records/registers maintained in MIS section/Circles. GSTAM Ref: Para 6.2.5 3.3 (i) of GSTAM 2019 This aspect is to be verified by comparing/correla ting sample data contained in one of the monthly reports uploaded with the records/registers maintained in the Audit Commissionerate and one of the Circles. For this QAR team has to take up sample check of at least 5 fields furnished in one of the monthly returns. 1 One mark shall be awarded on observing that the data furnished in returns tally with records maintained in Audit Commissionerate/Circle. Otherwise, no mark shall be awarded. 2. STANDARDS FOR INDIVIDUAL AUDIT FILE PRELIMINARY DESK REVIEW 1 Maintenance and updating of Registered Person s Master File (RPMF) (in format Annexure GSTAM-1) along with all other relevant documents. GSTAM Ref: 3.3 ; 5.2.2 , 5.2.3 , 5.5.3 , 6.4.4 GSTAM-I ; Sl. No. III(1)-Part A of Working papers Verify whether RPMF is available (in the format Annexure GSTAM-I) in the file. Also verify whether important documents like Annual Report including Balance Sheet, P L Account and notes to fin. accounts, Income Tax Return Tax Audit Report, Cost audit report, wherever applicable, FARs, CAG Audit report, working papers, MCM copies for audited period are placed in file and whether such documents are updated as mentioned in Sl. No. III (1)-Part A of Working papers 5 I. Three marks shall be awarded if the documents viz., i) Taxpayers profile in GSTAM-I, ii) Annual Report including Balance Sheet, P L Account and notes to financial accounts, iii) Income Tax Return Tax Audit Report, iv) Cost audit report, wherever applicable and v) FARs CAG Audit report are available for Audited period. II. Another two marks shall be awarded if, in addition to the above documents, all the working papers, copies of minutes of MCMs and any other documents relevant for conducting audit are placed in file. In case documents mentioned at point I. above are not available, no marks shall be awarded 2 Review of RPMF by auditor at the time of Desk review. GSTAM Ref: 5.2.1, 5.5.3; Sl. No. III (1)-Part A of Working papers Verify whether observations were recorded under Sl. No. III (1) of Working papers based on review of information available in RPMF. 2 Two marks shall be awarded on scrutiny of relevant remarks made at Sl. No. III (1) of Annexure GSTAM - VIII , i.e., Working papers as to whether information in RPMF was also scrutinized during desk review and the results recorded. Otherwise, no marks shall be awarded. 3 Reconciliation of information furnished in GSTR-9 returns with financial records and other statutory returns. GSTAM Ref: 5.5.7 and Annexure GSTAM-V Verify whether information furnished in GSTR-9 return is reconciled with the financial records/ documents as in Annexure GSTAM-V and available in file 2 Two marks shall be awarded, if reconciliation is done as per GSTAM-V in respect of all applicable documents and same is available in file. Otherwise, no mark shall be awarded. This parameter will be not applicable in cases of audits of ISD, a person paying tax under Sec. 51 or 52 of CGST Act, a casual taxable person, a non- resident taxable person, and taxpayers under composition scheme 4 6 [ Revenue Risk Analysis and summarization of results ] GSTAM Ref: 5.5.8 and Sl. No. III (7)-Part A of WPs for goods and Sl. No. XII- Part B for services Verify whether the results of Revenue risk analysis were summarized under Sl. No. III (7) of Part-A of Working papers for goods and Sl. No. XII of Part-B for services indicating possible problem areas to be included in the Audit Plan 2 Two marks shall be awarded on observing that the revenue risk analysis was conducted and conclusions were arrived at after analysing the data and same is recorded in Sl. No. III (7) of Part-A of Working papers for goods and Sl. No. XII of Part-B for services. Otherwise, no mark shall be awarded. 5 7 [ Trend Analysis and summarization of results ]. GSTAM Ref: 5.5.9 ; Sl. No. III (8)-Part-A of Working Papers for Goods, Sl. No. III Part- B for services Verify whether the results of Trend Analysis were summarized under Sl. No. III (8)- Part-A of Working papers for goods and Sl. No. III Part-B for services indicating possible problem areas to be included in the Audit Plan 2 Two marks shall be awarded on observing that any conclusions were arrived at after analysing the data and recorded in Sl. No. III (8) of working papers for Goods and Sl. No. III for services. Otherwise, no mark shall be awarded. 6 8 [ Ratio Analysis and summarization of results ] . GSTAM Ref: 5.5.6 ; Annexure GSTAM-IV ; Sl. No. III (3)-Part A of WPs for Goods, Sl. No. II of Part B for services Verify whether the findings of Ratio Analysis were recorded at Sl. No. III (3) for Goods and Sl. No. II for services of Working papers after performing Ratio Analysis as illustrated in Annexure GSTAM IV. 2 Two marks shall be awarded on observing that Ratio Analysis was performed as illustrated in GSTAM - IV and results recorded at Sl. No. III (3) of Part-A for goods and Sl. No. II of Part- B of GSTAM-VIII for services and specific mention was made w.r.t. adverse ratios. Otherwise, no mark shall be awarded. 7 9 [ Scrutiny of documents mentioned in Annexure GSTAM-III, as applicable, for the audit period during desk review and also reconciliation with GST returns ]. GSTAM Ref: 5.5.3 ; GSTAM Annexure-III , Sl. No. III (2) III (9) of Part-A of Working Papers for goods and Sl. No. I, V, VI VII of Part-B for services Verify whether the findings of scrutiny of the documents (mentioned in Annexure GSTAM-III ) are recorded under Sl. No. III (2) (9) - Part-A of working papers for goods and Sl. No. I, V, VI VII of Part-B for services. 2 Two marks shall be awarded if all the applicable documents as mentioned in GSTAM-III have been scrutinized and findings were recorded at Sl. No. III (2) III (9) of Part-A of Working Papers for goods and Sl. No. I, V, VI VII of Part-B for services in GSTAM-VIII. Otherwise, no mark shall be awarded. 8 10 [ The following areas have to be considered during desk review ] : (i) rate of tax applicable (ii) exemption notifications availed, if any (iii) zero-rated/ exempted/non-taxable supplies, if any. GSTAM Ref: Para 5.5.4 Verify whether the areas are analysed in Sl. No. III (4) III (6) Part-A of Working papers ( GSTAM-VIII ) for goods and Sl. No VIII XI of Part-B for services 2 Two marks shall be awarded, if all the applicable areas are considered during desk review and relevant Sl. No. of Working Papers (GSTAM-VIII) (i.e., Sl. No. III (4) III (6) in Part-A for Goods and Sl. No. VIII XI of Part-B for Services) are filled; otherwise, no mark shall be awarded. If a field is not applicable to the taxpayer, the same shall be mentioned in the relevant Sl. No. of Working Papers. 9 ITC availment (including ISD, if any) considered during desk review GSTAM Ref: Sl. No. III (6) Part-A of Working papers ( GSTAM-VIII ) for goods and Sl. No IV of Part-B for services Verify whether the areas are analysed in Sl. No. III (6) Part-A of Working papers for goods and Sl. No IV of Part-B for services 2 Two marks shall be awarded if ITC availment is considered during desk review and corresponding Sl. No. of Working Papers ( GSTAM-VIII ) (i.e., Sl. No. III (6) in Part-A for Goods and Sl. No. IV of Part-B for Services) are filled: otherwise, no marks shall be awarded. The standard is not applicable in case the taxpayer has not availed any ITC. However, the same shall be mentioned in the corresponding Sl. No. of the Working Papers. 10 Reconciliation of ITC availed in GSTR 3B and GSTR 2A to identify gaps in the ITC availment. GSTAM Ref: 5.5.4 Verify whether the results of such reconciliation were recorded in the file. 1 One mark shall be awarded if reconciliation is done and the details recorded in file/ Working papers; otherwise, no mark shall be awarded. This parameter is not applicable in cases of Composition scheme, casual taxable persons, non-resident taxable persons, Sec. 51 / 52 CGST Act, 2017 3. STANDARDS FOR INDIVIDUAL AUDIT FILE - AUDIT PLAN 11 Preparation of audit plan and submission to AC/DC/JC/ADC/ Commissioner as the case may be, for approval. GSTAM Ref: 5.6.3 , 5.6.4 , 5.6.6 This aspect is to be verified by QAR team on scrutiny of Working papers portion up to desk review stage. And to examine whether audit plan is prepared basing on scrutiny of important documents, viz., Annual reports, ITRs, Trial Balances pertaining to relevant audit period. 3 Three marks shall be awarded if audit plan is prepared basing on scrutiny of such important documents. Otherwise, 1 mark shall be awarded if audit plan contains only routine issues. 12 In case of unit selected for audit on the basis of risk methodology/local risk parameters, the same shall be taken into account while finalizing the audit plan, wherever applicable. GSTAM Ref: 4.2.1 4.2.2 This aspect is to be verified by QAR team on scrutiny of audit file as to whether the important risk indicators/risk parameters were actually considered while preparing the audit plan. 1 One mark shall be awarded if clear notings are made in the file to the effect that risk indicators/ local risk parameters as the case may be are taken into account while preparing/ finalising the audit plan. No mark shall be awarded in the absence of such notings. This parameter is not applicable in case of randomly selected taxpayers. 13 Identification of abnormal trends and unusual occurrences, if any, at the time of desk review and considering for preparation of audit plan. GSTAM Ref: 5.6.2 This aspect is to be examined basing on observations made in Annexure-VIII of GSTAM - i) in case of supply of goods - under III, Part-A - Supply of goods, under S.No.8 - Trend analysis and ii) in case of Services in Part-B: Supply of services under S. No. III- Trend Analysis. In the relevant portions of Working papers, if any specific observations are made based on such abnormal trends, it will be verified whether such issues were included in audit plan. 1 One mark shall be awarded if such issues, so identified, are included in audit plan. Otherwise, no mark shall be awarded. This aspect will be not applicable when there are no such abnormal trends. 14 Approval of audit plan by appropriate authority. GSTAM Ref: 5.6.5 This aspect will be checked on perusing the note sheet portion of the audit file as well as the audit plan. 1 One mark shall be awarded if the audit plan is approved by the proper officer. Otherwise, no mark shall be awarded. 15 11 [ Modifications/ additions by senior officers in the draft audit plan either at the time of approval or during review of audit plan ] . GSTAM Ref: 3.4.1(ii) or 3.4.2 (iii) , 5.6.6 This aspect will be checked on perusing the note sheet portion of the audit file. 2 Two marks shall be awarded if audit plan is considered for any modification or addition by any of the senior officers. Otherwise, no mark shall be awarded. 4. STANDARDS FOR INDIVIDUAL AUDIT FILE - AUDIT VERIFICATION 16 Conduct of tour of the premises for Large/Medium taxpayers. GSTAM Ref: Para 5.7.5 . This aspect will be verified by the QAR team on going through the relevant entries made in Working papers (Annexure -GSTAM-VIII). 1 In case of Large and Medium taxpayers, one mark shall be awarded if the tour of the premises was carried out. Otherwise, no mark shall be awarded. In case the audit file selected relates to small taxpayer, this parameter will be not applicable . 17 Interview of the registered person or his authorised representative. GSTAM Ref: Annexure-VIII This aspect will be verified by the QAR team on examining whether the relevant portions of Working papers (Annexure GSTAM-VIII) were properly filled (against S.No. i) to vi) under gathering of information) 1 One mark shall be awarded if the results of interviews carried out are properly filled in Annexure GSTAM - VIII. No mark shall be awarded if such information/data was not filled. 18 Filling of the questionnaire in Annexure GSTAM - VI meant for evaluation of internal controls. GSTAM Ref: Para 5.7.4 This aspect will be verified by the QAR team on examining whether relevant portions of Annexure GSTAM-VI and Working papers ( Annexure GSTAM-VIII ) relating to internal controls are properly filled. 2 Two marks shall be awarded if the relevant portions are properly filled. Otherwise, no mark shall be awarded. Performance of Walkthrough for the following areas GSTAM Ref: Para 5.7.5 and Questionnaire at Annexure-VI Annexure-VIII . 19 Account adjustment system This aspect will be verified by the QAR team on examining whether relevant portion of Annexures GSTAM-VI and GSTAM-VIII was properly filled. 1 One mark shall be awarded for each area where walkthrough has been carried out as per entries made in Annexure GSTAM-VI and Annexure GSTAM-VIII . Otherwise, no mark shall be awarded. 20 Outward Supplies This aspect will be verified by the QAR team on examining whether relevant portion of Annexures GSTAM-VI and GSTAM-VIII was properly filled. 1 One mark shall be awarded for each area where walkthrough has been carried out as per entries made in Annexure GSTAM-VI and Annexure GSTAM-VIII. Otherwise, no mark shall be awarded. 21 Purchases /Stores This aspect will be verified by the QAR team on examining whether relevant portion of Annexures GSTAM-VI and GSTAM-VIII was properly filled. 1 One mark shall be awarded for each area where walkthrough has been carried out as per entries made in Annexure GSTAM-VI and Annexure GSTAM-VIII . Otherwise, no mark shall be awarded. 22 Classification of Goods/ Services This aspect will be verified by the QAR team on examining whether relevant portion of Annexure GSTAM-VI was properly followed and documented. 1 One mark shall be awarded where walkthrough has been carried out as per procedure laid out in Annexure GSTAM-VI and documented. Otherwise, no mark shall be awarded. 23 Price determination (Transaction Value) This aspect will be verified by the QAR team on examining whether relevant portion of Annexure GSTAM-VI was properly followed and documented. 1 One mark shall be awarded where walkthrough has been carried out as per procedure laid out in Annexure GSTAM-VI and documented. Otherwise, no mark shall be awarded. 24 Process of compiling GST returns This aspect will be verified by the QAR team on examining whether relevant portion of Annexures GSTAM-VI and GSTAM-VIII was properly filled. 1 One mark shall be awarded for each area where walkthrough has been carried out as per entries made in Annexure GSTAM-VI and Annexure GSTAM-VIII. Otherwise, no mark shall be awarded. 25 ITC This aspect will be verified by the QAR team on examining whether relevant portion of Annexures GSTAM-VI and GSTAM-VIII was properly filled. 1 One mark shall be awarded where walkthrough has been carried out as per entries made in Annexure GSTAM-VI and Annexure GSTAM-VIII . Otherwise, no mark shall be awarded. Not applicable in cases of taxpayers not availing ITC. 26 Non-Taxable Item/Service This aspect will be verified by the QAR team on examining whether relevant portion of Annexure GSTAM-VI was properly followed. 1 One mark shall be awarded where walkthrough has been carried out as per procedure laid out in Annexure GSTAM-VI . Otherwise, no mark shall be awarded. Not applicable in case no non-taxable items/services were produced/supplied in the period of audit. 27 Grading of soundness of internal control levels as good/ acceptable/poor (application of ABC analysis in case of quantum of data to be analysed is voluminous) and placement of relevant documents in the file. GSTAM Ref: Para 5.7.5 . (b). Table in Point No.9 of GSTAM Annexure-VIII The file will be examined to see whether the auditor graded the internal controls in the relevant table along with supporting documents (Table in Point No.9 of GSTAM Annexure-VIII ). 1 If all the areas in the Table are graded along with backup documents one mark will be awarded (i.e., Table in Point No.9 of GSTAM Annexure- VIII), otherwise no mark shall be awarded. 28 Identification of any fresh issue which was not included in audit plan by the auditor and obtaining approval of DC/AC s for verification, wherever applicable. GSTAM Ref: 5.7.9 This will be verified by the QAR team on examining the Audit file as to whether any fresh issues i.e., other than those mentioned in Audit plan, were identified during the actual verification and also as to whether AC/DC s approval was obtained to verify such issue. 2 One mark shall be awarded for identifying a new issue and verifying it after obtaining approval of AC/DC. Another mark shall be awarded for recovery from the said point. If no such issues are identified, no mark shall be awarded. 29 Verification of all points mentioned in the audit plan. GSTAM Ref: 5.7.7 The QAR team will check the file for availability of verification reports for all the issues mentioned in the audit plan. 2 Two marks shall be awarded if all issues were verified. If any issue was left without any reason/further course of action, no mark shall be awarded. 30 Recording of the findings /observations in Working papers after verification of issues by the auditor. GSTAM Ref: Para 2.7- vii ; Para V of Working Papers GSTAM-VIII This will be examined by the QAR team as to whether the auditor s observations/ findings in all the verification reports are properly and clearly filled. 2 Two marks shall be awarded if all the verification reports are properly filled. Otherwise, no mark shall be awarded. 31 Taking on the record of the explanation furnished by the registered person (if party furnished reply) GSTAM Ref: Para 5.14 The QAR team will examine whether the file contains the taxpayer s reply (replies), if any, in response to the spot memos issued. 1 One mark shall be awarded if such taxpayer s reply (replies) is taken on record and considered while finalising the audit para. Otherwise, no mark shall be awarded. If no reply is received from the taxpayer it is treated as accepted and one mark shall be given. Not applicable in case of Nil detection. 32 Verification of Sales information as prescribed at Point IV of GSTAM VIII GSTAM Ref: Point IV of GSTAM VIII The file will be checked to see whether the auditor mentioned his observations in the proformas A, B and C of Point IV- GSTAM Annexure-VIII of GSTAM. 1 One mark shall be awarded if A, B and C proformas of Point IV-GSTAM Annexure VIII are properly filled. Otherwise, no mark shall be awarded. 33 Intimation of extension of time granted for conduct of audit by Commissioner to the taxpayer GSTAM Ref: 5.12 The file will be verified whether communication to the taxpayer in this regard was sent to the taxpayer or not. be awarded; otherwise, no mark shall be awarded. 1 If such communication exists, one mark shall This parameter is not applicable in case no such extension was required. 34 Obtaining of Approval of circle DC/AC for revising preliminary findings in spot memo/ Audit Enquiry, which ultimately culminates in to DAR (wherever applicable) and intimation to the taxpayer. GSTAM Ref: 5.14 The file will be examined to see whether approval of DC/AC for revision of preliminary findings is available. 1 If approval of DC/AC is available in the file one mark shall be awarded. Otherwise, no mark shall be awarded. This parameter is not applicable if no such revision was made 35 Citing of the details like relevant acts, rules, circulars, case laws etc. in all the audit paras raised. GSTAM Ref: 6.1.4 QAR team will examine whether relevant provisions of Act, rules are quoted in each objection. 3 If the audit objections raised contain relevant Acts rules three marks shall be awarded. Otherwise, no mark shall be awarded. This parameter is not applicable in case of Nil detection. 36 Scrutiny finalisation of Draft Audit Reports by the Monitoring Committee GSTAM Ref: Para 6.2.4 File will be checked for the availability of MCM minutes for all the Paras in DAR and whether all the objections raised were discussed and finalised in MCM 1 One mark shall be awarded if all the paras were discussed. Otherwise, no mark shall be awarded. This parameter is not applicable in case of Nil detection. 37 Disclosure of all material and relevant information in the Audit report. GSTAM Ref: Para 5.10 FAR is to be checked whether it contains i. taxpayer s information, i.e., business, location and type of business; ii. outcome of the audit, compliance problems, i.e., short/non- payments identified; iii. Indications on whether the taxpayer is in agreement with the objections or not and spot recoveries if any. If the taxpayer disagrees, whether the taxpayer has provided any reasons for disagreement. 2 Two marks shall be awarded if the audit report contains the entire information as detailed in methodology for verification. Otherwise, no mark shall be awarded. 38 Carrying out of follow up action for the audit objections wherever applicable GSTAM Ref: Para 6.4 The file will be verified whether any follow-up action for recovery/issue of SCN was initiated in respect of all paras. 1 One mark shall be awarded if follow up action was taken by way of recovery or issue of notice. Otherwise, no mark shall be awarded. In case of NIL reports this parameter will be not applicable . 39 Indexing Cross- referencing of Working papers with relevant entries in audit plan. GSTAM Ref: Para 5.9 5.10 It will be verified as to whether working papers are indexed cross- referenced with each point of audit plan and whether any objections are identified during verification. 1 One mark shall be awarded if such cross- referencing and indexing done. Otherwise, no mark shall be awarded. 6. STANDARDS FOR INDIVIDUAL AUDIT FILE - PROFESSIONAL CONDUCT 40 Information to taxpayer about the audit process. GSTAM Ref: 6.1.1 , 6.1.2 , 5.13 , 5.14 , 5.16.1 This parameter can be verified on scrutiny of the following in the relevant audit file: (I) ADT -01 (intimation letter to the taxpayer). (II) Spot memos explaining about the short levies identified if any. iii) Whether the auditor explained the benefit available under Section 73(6) / 74(6) of CGST Act, 2017 as a measure of recovery of dues to the registered person as per para 6.1.2 of GSTAM. 1 One mark shall be awarded only if all of the points mentioned in the methodology for verification are available in the file. Otherwise, no mark shall be awarded. In case of a NIL Audit report only ADT-01 to be checked since other two parameters are not relevant. 41 Intimation to Registered person about actual audit dates well in advance as stipulated in para 5.4 of GSTAM. GSTAM Ref: 5.4 This parameter is to be examined from the date of issue of ADT-01 and actual date(s) of conduct of audit. 2 Two marks shall be awarded if the time gap between ADT-01 issued date and actual date(s) of audit is more than 20 days. This is to incentivize the audit group for providing sufficient time to the taxpayer over and above the minimum time (15 days). If ADT-01 issued date is between 15-20 days, one mark shall be awarded. If the time gap is less than 15 days, no mark shall be awarded. 42 Informing the discrepancies/non- payment and procedural infractions noticed during Audit to the registered person in writing, as applicable. GSTAM Ref: 5.14 , 6.1.1 This parameter will be verified on examining whether the spot memos issued contain all the details of discrepancies relating to non- payments and procedural infractions noticed and the same are clearly explained. 1 One mark shall be awarded if the spot memos are issued as explained in the methodology for verification. Otherwise, no mark shall be awarded. This parameter will be not applicable in case of Nil detection. 7. STANDARDS FOR INDIVIDUAL AUDIT FILE TIMELINESS 43 The time taken for the audit is commensurate with the complexity of the audit GSTAM Ref: 2.6.1 Para 2.6.1 of GSTAM-2019 prescribes duration/number of working days based on the size of the unit (Large/ Medium/Small) for proper conduct of audit. Depending on the type of taxpayer i.e., L/M/S, check the number of days taken to complete audit. 1 One mark shall be awarded if prescribed time stipulation is followed based on the size and complexity of the taxpayer; otherwise, no mark shall be awarded. 44 Finalization of the draft audit report within 10-15 days of commencement of audit GSTAM Ref: 6.1.5 Verify the date of issue of DAR 1 One mark shall be awarded if DAR is finalised within stipulated time; otherwise, no mark shall be awarded. 45 Issuance of the final audit report and sending a copy to registered person within 30 days from the date of MCM. Ref: Para 6.3 of GSTAM, 2019 read with Sec 65(6) of CGST Act and Rule 101(5) of CGST Rules Verify the date of MCM and the date on which FAR was sent to the registered person. 1 One mark shall be awarded if FAR sent to registered person within 30 days of MCM. Otherwise, no mark shall be awarded. 46 Uploading FAR using Audit Report Utility. GSTAM Ref: 6.3 This aspect is to be verified from the audit file. 1 One mark shall be awarded if the FAR was uploaded. Otherwise, no mark shall be awarded. 47 Completion of audit within 3 months from the date of commencement or within such period as extended by Commissioner. Ref: Sec 65 (4) of CGST Act, 2017 Audit team to examine the difference between commencement completion dates (Audit report finalization in MCM) and whether it is within the stipulated time. 1 One mark shall be awarded if the audit is completed within stipulated time of three months or such extended period. Otherwise, no mark shall be awarded. ******************** NOTES:- 1 Availability of the database of profiles of auditors facilitates allotment of taxpayers to auditors based on their skill levels, training, educational background etc. 2 This is essential to familiarize the auditors with the audit process and to impart basic skills to handle audit work. 3 This is essential for the selection of taxpayers for audit on local risk parameters. 4 This is useful for constant monitoring of audits conducted and for ensuring completion of audits of all taxpayers allotted to the Circle by the end of the year. 5 This will ensure the quality of the audit plan in identifying issues for detailed verification during the conduct of the audit. 6 Revenue risk analysis is a method of identifying potential revenue risk areas by carrying out reconciliation of various specific financial data, comparing with different business accounts/documents. 7 Trend analysis reveals abnormal trends/patterns/relations, if any, that may have bearing on the tax paid 8 Ratio analysis helps in identifying significant variations, if any, in any areas for detailed audit verification by inclusion in the audit plan. 9 This will throw up certain issues for detailed verification by inclusion in the audit plan. 10 This analysis helps in identifying certain specific vulnerable areas for inclusion in the audit plan. 11 Suggestions for modifications to the audit plan by senior officers, while approving the draft audit plan or while reviewing the audit plans approved by officers of lower rank improves the quality of audit.