Dear Members, Good morning. I feel that we have completed nearly 2 years (July’2017 to June, 2019 ) tax periods under GST Law. Now we are ready to face new chapter in GST Law i.e. Audit notices from the CGST and SGST officers under Sec. 65 of the CGST Act,2017. So, I am trying to share my knowledge in Audit under CGST Law, 2017.

There are 2 types of audits under GST Law, 2017. ” Specific Audit “under Sec.65 and “Special Audit” under Sec.66 of CGST Act, 2017.

As per Sec.65(1) of the CGST Act,2017 The Commissioner or any officer authorized by him , by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed. The period of audit to be conducted under sub-section (1) of section 65 shall be a financial year or multiplies thereof as per Rule 10(1) of CGST Act, 2017.

As per section 2 (13) CGST Act,2017, Audit means the examination of records, returns and other relevant documents maintained or furnished by the registered person under this Act or the rules made there under to verify correctness of turnover declared and taxes paid there on, Input tax claimed by the tax payer and followed compliance with the provisions of the GST Law.

The audit officer once received authorization from his higher authority as per GST Law,2017 , the audit officer shall issued notice in advance not less than 15 working days prior to conduct of audit .

The audit officer shall be completed such audit with 3 months from the date of communication of audit as per section 65(4) of CGST Act, 2017. Commencement of audit means the date on which the records and other documents , called by the audit officer are made available by the registered person or the actual institution of audit at the place of business, whichever is later .

Procedure during department audit: During course of audit the authorized officer may require the following records, data of registered taxable person under GST Law,2017.

(a) Financial Year wise audit: As per Sec.65(1) of CGST Act,2017, The audit officer , the period of audit shall be a financial year or multiples thereof as per Rule 101(1) of CGST & SGST GST Rules,2017.

(b) Powers to order and conduct audit: Who are registered under Central GST authorities, such taxable person’s audits taken up by Superintendent of Central Tax has been designated as “ Proper officer” for the purpose of raising demand under Section 65(7) of CGST Act,2017 , vide circular issued by CBE & C no.3/3/2017-GST dated. 5.7.2017.

(c) Who are registered under State GST Authorities, such taxable person’s audit taken by Assistant Commissioner(State Tax ) Deputy Commissioner ( State Tax ) designated as proper officer for the purpose of raising demand under Section 65(7) of SGST Act,2017.

(d) Verification of records by audit team and audit notes: The proper officer authorized to conduct of the records and books of account of the registered person shall with the assistance of the team of officers and officials accompanying him, verify the documents and statements furnished under the Act and rules made thereunder , to check the correctness of following:-

i. The turnover,

ii. Exemptions and deductions claimed,

iii. The rate of tax applied in respect of supply of goods or services,

iv. The input tax availed and utilized ,

v. Refund claimed, proper officer and his team will examine other relevant issued ad record the observations in is audit notes.

(e) To afford the necessary facility to verify the books of accounts or other documents he may require,

I. The taxable person submit these following records to audit officer:

i) Cash book for the audit period mentioned by the audit officer in said notice,

ii) Ledger of inward supply of goods , services,

iii) Ledger of out ward supply of goods, services,

iv) Returns forms like GST Form 3B, GSTR-1, GSTR-2 and GSTR-3 and GSTR-4 etc., maintained by the taxable person as per GST Act, Maintenance of Records Rules,

v) Payments challans,

vi) Ledger of Bank account,

vii) Details of E way bill for the audit period for inward and out ward supply of goods and services,

viii) GST registration certificate details like principle place of business, branch and other place of details whether incorporate or not,

ix) Ledger of stock maintained at Where house by the taxable person,

x) Trial Balance for the audit period and Profit and Loss Account,

xi) Copy and details of Trans-1, Trans-2 and 2A and Trans-3 etc., for the year 2017-18 along with stock register and copies of original invoice relating to ITC claimed in Trans-1 for the period prior to July’2017 as per Sec.143 of CGST Act,2017.

(f) To furnish such information as he may require and render assistance for timely completion of audit.

(g) On conclusion of audit , the proper officer shall within 30 days inform the registered person that whose records are audited , of findings, his rights and obligations and the reasons for the findings.

(h) Once the audit was taken under Sec.65(1) of CGST Act,2017, results in detection of tax not paid or short payment or erroneously refunded or input tax credit availed erroneously or utilized. The audit officer may initiate action under Sec.73 and 74 of CGST Act,2017.

(i) Notice of audit to registered person:- Where it is decided to undertake the audit of a registered person in accordance with the provisions of section 65(3) of CGST & SGST ct, the proper officer shall issue a notice in Form GST ADT-1 within 15 working days’ time specified in section 65(3) of CGST & SGST Act.

(j) Inform discrepancies to registered person:- As per Rule 101(4) of CGST & SGST Act,2017, After verification of records the proper officer may inform the registered person of the discrepancies , if any, noticed as observations of 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 .

(k) Inform audit findings to registered person on conclusion of audit: As per Rule 101(5) of CGST & SGST Act,2017 on conclusion of the audit, the proper officer shall inform the findings of audit to the registered person in accordance with provisions of section 65(6) in Form GST ADT-02.

(l) Special Audit: As per Sec.66 of CGST/SGST and UTGS Act,2017 If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of accounts examined and audited by a charted accountant or a cost accountant as may be nominated by the Commissioner. Where special audit is required to be conducted in accordance with the provisions of section 66, the officer referred to in the said section shall issue a direction in FORM FST ADT-3 to the registered person to get his records audited by a charted accountant or a cost accountant specified in the said direction as per Rule 102(1) of CGST ,SGST and UTGST Act,2017.

(m) Time limit for completion of Special Audit:- As per Sec.66(2) of CGST,SGST and UTGST Act,2017 , The charted Accountant or cost accountant so nominated shall, within in 90 days , submit a report of such audit duly signed an certified by him to the said Assistant Commissioner mentioning therein such particulars as may be prescribed.

(n) Provided that the Assistant Commissioner may, on an application made to him in this behalf of the registered person or the charted accountant or cost accountant or for any material and sufficient reason, extend the said period by a further period of 90 days. ( Total 90+90 days).

Special audit can be conducted even if audit is being conducted under any other law:

(a) As per Section.66(3) of CGST,SGST and UTGST Acts,2017, The provisions of sub-section (1) shall have notwithstanding that the accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force.

(b) Proper officer opportunity of being heard shall be given to registered person : As person 66(4) of CGST,SGST and UTGST Acts, 2017,The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit under sub-section (1) which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.

(c) Expenses of Audit shall be paid by the Commissioner: As per section 66(5) of CGST,SGST and UTGST Acts, 2017, The expenses of the examination and audit of records under sub-section (1) , including the remuneration of such charted accountant or cost accountant , shall be determined and paid by the Commissioner and such determination shall be final.

(d) Procedure of ordering special Audit an submission of special audit report: As per Rule 102(1) of CGST SGST and UTGST Rules,2017, Where special audit is required to be conducted under section 66 of CGST,SGST and UTGST Acts,2017 , the proper officer referred to in the said section shall issue a direction in form GST ADT-03 to the registered person to get his records audited by the charted accountant or cost accountant specified in the direction.

(e) Findings of Special Audit to be informed to Registered Person : As per Rule 102(2)of CGST,SGST and UTGST Rules,2017 , on conclusion of special audit , the registered person shall be informed of the findings of special audit in FORM GST ADT-04.

Author – B.S.Seethapathi Rao, Chairman, AIFTP(Southern Zone), BSR Associates, Tax Consultants, Kakinada

Kindly send your suggestions and comments on my notes to my mail i.d. [email protected] or mobile no.9848099490.

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  1. Onkarappa says:

    Audit proceedings u/sec 65, audit officer issues notice for production of books of accounts and visit the tax persons place of business. The TP for some valid reason could not produce all books of accounts/documents. TP further furnishes the document at a later date. In the scenario which is the date of commencement of audit, Visit date or the last date on which the documents are produced to the Audit officer?
    Please clarify

    1. B.S.Seethapathi Rao says:

      Explanation. ––For the purposes of this sub-section, the expression “commencement of audit” shall mean the date on which the records and other documents, called for by the tax authorities, are made available by the registered person or the actual institution of audit at the place of business, whichever is later.

  2. Onkarappa says:

    Audit u/sec 65 is initiated by the department and the proper officer who has informed the Taxable person 15 days in advance. visit audit is undertaken by the audit authority to the place of business. The taxable person for some valid reason was not able to produce all books/documents for verification and produces the same on a later date. What ill be the date of commencement of audit. Visit date or the date of production of books/documents to the audit officer?
    Please clarify

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October 2021