Audit under Goods & Service Tax Act, 2017- The various provision relating to audit under CGST Act & CGST Rules are as under:
Section 2(13) of CGST Act, 2017 related to Meaning of Audit
Section 35(5) of CGST Act, 2017: AUDIT by a TAXABLE PERSON
Every registered person whose TURNOVER exceeds ₹ 2 Crores during the FY shall get his account audited by either a CHARTERED ACCOUNTANT ( CA ) or COST ACCOUNTANT ( CMA ) & shall submit the copy of audited annual accounts, the reconciliation statement as per section 44(2) & such other documents in such a form & manner as may be prescribed.
Section 44(2) of CGST Act, 2017: Reconciliation Statement
Every Registered Person who is required to conduct audit as per Section 35(5) shall furnish ELECTRONICALLY along with annual return the following documents:
Section 65 of CGST Act, 2017 read with rule 101 of CGST Rules, 2017: AUDIT by a TAX AUTHORITIES
The PO may take recourse to the audit of registered person as per section 65 of CGST Act, 2017 at the stage of scrutiny if:
The COMMISSIONER or ANY AUTHORISED OFFICER (called as Proper Officer) may undertake the audit of any registered person at the place of business of registered person or in their office for the FY. Such authorization is given through issue of General or Special order by the commissioner.
The Proper officer (PO) shall issue a notice in form GST ADT-01 within, not less than 15 WORKING DAYS, prior to conduct of audit.
The audit is required to be completed by proper officer within 3 MONTHS which may be extended by commissioner for further period of 6 MONTHS from the date of commencement of audit. The term COMMENCEMENT OF AUDIT means:
Whichever is later.
The PO shall with the assistance of the team of officers and officials accompanying him shall verify the following while conducting the audit:
The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit and the said person may file his reply and the proper officer shall finalize the findings of the audit after due consideration of the reply furnished. On conclusion of the audit, the proper officer shall inform within 30 days about the findings as well as the reasons of the findings of audit to the registered person in FORM GST ADT-02.
Section 66 of CGST Act, 2017 read with rule 102 of CGST Rules, 2017: SPECIAL AUDIT
If at any stage of scrutiny, inquiry or other proceedings before the Commissioner, ANY OFFCIER NOT BELOW THE RANK OF ASSISSTANT COMMISSIONER, having regard to the nature and complexity of the case and in the interest of revenue is of the opinion that:
he MAY, with the prior approval of the commissioner, issue direction in form GST ADT -03 to such registered person in writing to get his accounts examined and audited by a Chartered Accountant (CA) or Cost Accountant (CMA) as may be nominated by the commissioner.
The CA or CMA shall within 90 days, submit a report of such audit duly certified by him to the Assistant Commissioner mentioning therein such other particulars as may be specified. The period of completion of audit can be further extended by further period of ninety days on an application done by the CA or CMA or the registered person and for any material & sufficient reason.
The expense of conducting audit as well as remuneration of auditor shall be determined & paid by the Commissioner and such a determination shall be final.
The Registered Person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit which is proposed to be used in any proceeding against him. On conclusion of special audit, the registered person shall be informed of the findings of the special audit in form GST ADT-04.
Where the audit conducted under section 65 or section 66 results in detection of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilized, the process of demand and recovery as per the provision of section 73 or 74 of CGST Act, 2017 will be initiated against a registered person.
Where the Registered Person fails to comply with the provision of section 35(5) read with section 44(2) and rule 80 of CGST Rules, 2017, there is no separate penalty mentioned under the provision of CGST Act, 2017. However where no penalty is mentioned and registered person fails to comply with any provision of CGST Act, 2017 a general penalty as per section 125 of the CGST Act, 2017 may be levied which may extend to ₹ 25,000 for each such failure. Hence if a Registered Person fails to comply with provision of section 35(5) i.e fails to get its books of accounts audited by CA or CMA, he shall be liable to penalty up to ₹ 25,000 as per provision of section 125 of CSGT Act, 2017.