To ensure quality sales tax audit of registered units having low annual turnover, the Central Board of Revenue (CBR) has devised new parameters for carrying out desk audit without causing any inconvenience to the business community.
Sources told Business Recorder here on Sunday that collectors of sales tax would conduct desk audit of retailers, wholesalers, distributors and service providers having low turnover or low risk profiles on the basis of new parameters from February 2004.
The procedure has been devised to create a healthy environment during audit proceedings and only senior auditors with good reputation will be given the assignment.
Moreover, the collectors will not conduct desk audit of those units whose regular audit is already being conducted.
Under desk audit, the collectors will examine tax record, including monthly returns of the registered unit, audited accounts of the unit, previous Sales Tax Audit Report, trend or behaviour of the registered person regarding payment of sales tax and any other information, which is available with the collectorate.
The profile of each registered person, to be desk audited, would be based on the following information;
Taxable sale, export sale, exempt sale, total sale, output, taxable purchase, exempt purchase, zero-rated purchase, total purchase, input, sales credit, carry forward, refund claimed, tax paid and refund received.
Sources said that the present system of sales tax is based on self-assessment and the registered persons under Sales Tax Act, 1990 determine their tax liability on their own.
In such a situation, audit is the only effective tool with the government to ascertain whether or not a registered person has correctly determined his tax liability and deposited due tax in the national kitty.
As per international standards, the minimum requirement of audit in the VAT system is more than 20 per cent audit per year.
The CBR is making efforts to reach the percentage using team of professional auditors.
In this way, the audit coverage ratio could be increased by conducting desk audit of units using selected staff.
According to the parameters, desk audit will only be conducted if the current strength of senior auditors/auditors is not sufficient to cover the required number of audits of the registered persons.
For desk audit, only those units of retailers, wholesalers, distributors, service providers etc should be selected, which have low turnover.
The audit of a particular unit shall be assigned to senior auditors/auditors by the in charge of the Desk Audit Cell.
No audit letter should be issued to the registered person but telephonic information can be obtained by the in charge desk audit or Sr. Auditor / Auditor authorised by the in charge desk audit, so that an impression can be made on the registered person that he is being watched by the Sales Tax Department, which will also act as a deterrent.
The computer section of the Sales Tax Collectorate will arrange monthly sales tax returns of the taxpayers in such a way, which will allow easy access and examination by the auditors without any difficulty.
On the basis of result of desk audit, a snap audit of not more than two days can be conducted with specific instructions of the in charge desk audit.
However if risk area/findings of the desk audit requires further probe then the in charge desk audit may refer the case to the collector for routine/detailed audit and the same should be included in the next month's audit schedule.
A desk audit schedule with reference to above parameters will be issued separately along with computer profile. Parameters of selection should be decided by the in charge desk audit with reference to his information / risk areas.
Each senior auditor/auditor should be assigned at least 15 units per month for audit, along with the computer profile. Desk audit process may not take more than a day to finalise as the record to start ie computer profile is readily available in each collectorate.
On completion of scrutiny of the documents, the auditor concerned shall firm up his views regarding the facts and legal aspects of the case and should point out discrepancies (if any) in Desk Audit Completion Report and submit the same to in charge desk audit.
The in charge desk audit shall check the facts and the grounds on which the discrepancies are raised by the auditor against the registered person and finalise the liability arising against the same under the Sales Tax Act, 1990 and get the audit observation prepared for issuance, as per section 25 of the Sales Tax Act 1990.
If the auditor had found no discrepancy, the in charge desk audit shall satisfy himself to the legality and propriety of the scrutiny by rechecking the documents or cross-questioning as deemed appropriate.
In case it is found out that the unit selected for desk audit is already under audit in the regular schedule, then the desk audit shall be stopped and the specific point under verification shall be communicated to the in charge of the team conducting regular audit, audit parameters added.
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