GST Audit-  In terms of Section 2(13) of the CGST Act, 2017, ‘audit’ means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder.

In audit examination is done to verify the correctness of

1. Turnover declared

2. Taxes Paid

3. Refund claimed and

4. Input Tax credit availed

There are three types of audit specified under GST Laws;

1. Audit by Chartered Accountant or Cost Accountant u/s 35(5), where turnover exceeds Rs. 2 Crores as the threshold limit specified in Rule 80(3).

2. Audit by the commissioner or any officer authorized by him in terms of Section 65 of the CGST Act, 2017 read with Section 20(xiv) of the IGST Act, 2017 and Section 21(xv) of UTGST Act, 2017.

3. Special Audit and is to be conducted under the mandate of Section 66 of CGST Act, 2017 read with Rule 102 of CGST Rules, 2017.

Here is the glance of the second and third type of audit mentioned above;

GST Audit by Tax Authorities (Section 65)

  • This is a kind of audit which can be conducted by general or specific order by Commissioner or any other officer authorized by him. Auditee will be notified by Form GST ADT -01, more than 15 days prior to the conduct of audit. The audit can be conducted at the business place of the registered person or in their office.It is not mandatory. It will be applicable only in cases where the appropriate Authorities authorize the same by issue of general / specific orders
  • Audit specified u/s 65(1) shall be completed within the period of 3 Months from the commencement. If cannot complete then the auditor may further extend it upto 6 months, for the reasons to be recorded in writing. ( Here, Commencement of Audit refers to; Date on which records and other documents called for by tax authorities are provided by Registered Person OR Actual Institution of audit at the place of business, Whichever is later )
  • On conclusion of audit, within 30 days officer shall inform auditee about his findings, rights and obligations and reasons for such findings as per sub section 6 of section 65 in Form GST ADT – 02. If Audit results in detection of tax shortly paid or not paid or input tax credit is wrongly availed or utilized or erroneously refunded then the officer may initiate action u/s 73 or 74.  GST Audit Compliance Check List for FY 17-18

Special GST Audit ( Section 66 )

  • An officer not below the rank of an Assistant Commissioner, duly approved, may avail the services of a Chartered Accountant or Cost Accountant to conduct a detailed examination of specific areas of operations of a registered person u/s 66 when the officer (considering the nature & complexity of the business and in the interest of revenue) is of the opinion that:

1. Value has not been correctly declared; or

2. Credit availed is not within the normal limits

  • An Assistant Commissioner who conducts the audit after commencement and before completion of any scrutiny, enquiry, investigation or any other proceedings under the Act, may direct a registered person to get his books of accounts audited by an expert in Form GST ADT – 03.
  • Identifying the expert is not left to the registered person whose audit is to be conducted but the expert is to be nominated by the Commissioner. The Chartered Accountant or the Cost Accountant so appointed shall submit the audit report, mentioning the specified particulars therein, within a period of 90 days, to the Assistant Commissioner in Form GST ADT – 04.
  • If Chartered Accountant or the Cost Accountant or the registered person seeking an extension, or for any material or sufficient reason, the due date of submission of audit report may be extended by another 90 days.
  • Section 66(3) states that special audit may be initiated 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. While the report in respect of the special audit under this section is to be submitted directly to the Assistant Commissioner, the registered person is to be provided an opportunity of being heard in respect of any material gathered in the special audit which is proposed to be used in any proceedings under this Act. This provision does not clearly state whether the registered person is entitled to receive a copy of the entire audit report or only extracts or merely inferences from the audit.
  • As in the case of audit under section 65, no demand of tax, even ad interim, is permitted on completion of the special audit under this section. In case any tax liability is identified during the audit, procedure under section 73 or 74 as the case may be is to be followed.

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June 2021