pri Audit Provisions Under GST All About Audit Provisions Under GST

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

Audit means:

  • Examination of Records, Returns & Other documents maintained or furnished by the Registered Person;
  • To Verify the correctness of Turnover declared, Taxes paid, Refund Claimed & ITC availed; &
  • To Access registered person compliance with the provision of this Act or the Rules made thereunder.

Types of Audit under GST LAW

  • By Taxable Person
  • By Department-General Audit by Commissioner
  • Special Audit

Audit By A Taxable Person

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:

  • Copy of audited annual accounts;
  • Reconciliation statement i.e. A Statement reconciling the VALUE OF SUPPLIES declared in ANNUAL RETURN with those declared in AUDITED FINANCIAL STATEMENT; &
  • Such other documents as may be prescribed.

Audit by Department

Section 65 of CGST Act, 2017 read with rule 101 of CGST Rules, 2017:  AUDIT by a TAX AUTHORITIES

1. Reasons For Conducting Audit By Department

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:

  • No satisfactory explanation is furnished by the registered person; or
  • After accepting the discrepancy it fails to take corrective action in his return for the month in which discrepancy is accepted.

2. Person Eligible To Undertake Audit

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.

3. Issuance Of Notice Of Audit

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.

4. Time Limit For Completion Of GST Audit by department

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:

  • The date on which the records/accounts are made available for the conduct of the audit ; or
  • The actual institution of audit at the place of business of the taxpayers;

Whichever is later.

5. Manner Of Conduct Of Audit

The PO shall with the assistance of the team of officers and officials accompanying him shall verify the following while conducting the audit:

  • Documents on the basis of which books of accounts are maintained & returns & statement are furnished;
  • Correctness of the turnover , exemption & deduction claimed;
  • Rate of tax applied in respect of each supply of goods or service or both;
  • ITC availed & utilized;
  • Refund claimed & other relevant issues; & record the observation & findings in audit notes.

6. Conclusion & Finalisation Of 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.

Special GST Audit

Section 66 of CGST Act, 2017 read with rule 102 of CGST Rules, 2017:  SPECIAL AUDIT

1. Reason For 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:

  • The value has not been correctly declared; or
  • The input tax credit (ITC) availed is not within the normal limits,

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.

2. Time Limit For Completion Of Audit

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.

3. Expense Of Audit & Auditors Remuneration

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.

4. Conclusion & Finalisation Of Audit

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.

Consequences of Detection of Offence on Conduct of GST Audit

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.

Penalty for Non Compliance of  GST Audit Provision

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.

Author Bio

Qualification: CA in Practice
Location: SURAT, Gujarat, IN
Member Since: 08 Jun 2017 | Total Posts: 10
I, CA Crispee Shah Morakhiya, have completed my CA in 2011 and also completed CS in 2015. Practising as Chartered Accountant only. View Full Profile

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July 2021