Article explains Provisions of CGST Act, 2017 for Audit, General Audit by tax authorities, Provision for access to business premises and records of taxpayer for GST Audit, Prescribed Rules for GST Audit, Maintenance of Accounts and Records for GST Audit and Rules for Calling documents from the Registered Taxpayer for GST Audit.
Section 2(13) of the CGST Act, 2017, defines ‘Audit’ as “the examination of records, returns and other documents maintained or furnished by the registered person under this Act or Rules made thereunder or under any other law for the time being in force to verify, inter alia, 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 rules made thereunder”.
Accordingly, ‘Audit’ implies –
(a) Detailed examination of
ii. returns and
iii. other documents –
maintained / furnished by a registered person, under GST law/any other law or rules;
(b) For verification of correctness of –
(i) turnover declared;
(ii) taxes paid;
(iii) refund claimed;
(iv) input tax credit availed; and
(v) assessment of compliances with provisions of GST law and rules.
Thus, GST audit is not only for reconciliation of tax liability and payment thereof but, it also encompasses the verification of compliance of the provisions of the GST Acts, laws etc. by a registered person.
Relevant Statutory Provisions:
Sec. 65 of CGST Act, 2017:
(1) 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.
(2) The officers referred to in sub-section (1) may conduct audit at the place of business of the registered person or in their office.
(3) The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed.
(4) The audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the audit:
Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months.
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.
(5) During the course of audit, the authorised officer may require the registered person,—
(i) to afford him the necessary facility to verify the books of account or other documents as he may require;
(ii) to furnish such information as he may require and render assistance for timely completion of the audit.
(6) On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings.
(7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74.
Sec. 71 of CGST Act, 2017
(1) Any officer under this Act, authorized by the proper officer not below the rank of Joint Commissioner, shall have access to any place of business of a registered person to inspect books of account, documents, computers, computer programs, computer software whether reinstalled in a computer or otherwise and such other things as he may require and which may be available at such place, for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.
(2) Every person in charge of place referred to in sub-section(1) shall, on demand, make available to the officer authorized under sub-section(1) or the audit party deputed by the proper officer or a cost accountant or chartered accountant nominated under section 66—
i. such records as prepared or maintained by the registered person and declared to the proper officer in such manner as may be prescribed;
ii. trial balance or its equivalent;
iii. statements of annual financial accounts, duly audited, wherever required;
iv. cost audit report, if any, under section 148 of the Companies Act, 2013;
v. the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961; and
vi. any other relevant record.
for the scrutiny by the officer or audit party or the chartered accountant or cost accountant within a period not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by the said officer or the audit party or the chartered accountant or cost accountant.
Rule 101 of The Central Goods And Service Tax Rules, 2017:
(1) The period of audit to be conducted under sub-section (1) of section 65 shall be a taxguru.in financial year or part thereof or multiples thereof.
(2) Where it is decided to undertake the audit of a registered person in accordance with the provisions of section 65, the proper officer shall issue a notice in FORM GST ADT-01 in accordance with the provisions of sub-section (3) of the said section.
(3) The proper officer authorised to conduct audit of the records and the books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the documents on the basis of which the books of account are maintained and the returns and statements furnished under the provisions of the Act and the rules made thereunder, the correctness of the turnover, exemptions and deductions claimed, the rate of tax applied in respect of the supply of goods or services or both, the input tax credit availed and utilised, refund claimed, and other relevant issues and record the observations in his audit notes.
(4) 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 finalise the findings of the audit after due consideration of the reply furnished.
(5) On conclusion of the audit, the proper officer shall inform the findings of audit to the registered person in accordance with the provisions of sub-section (6) of section 65 in FORM GST ADT-02.
Section 35 of CGST Act, 2017 read with Rule 56 of CGST Rules 2017 provides for maintenance of accounts and records by registered person. Further Section 36 of CGST Act and Rules 57 and 58 of CGST Rules may also be referred in this regard.
The auditor shall intimate the date of conduct of audit by writing a letter in form GST AD01 (Annexure II) atleast fifteen days prior to the conduct of audit and also request for providing records / documents which are necessary for conducting audit. In case the Registered Person does not respond to the letter, a reminder should be issued within reasonable time. In case the registered person is not volunteering to submit the same on the basis of letters issued by the auditor, another letter should be issued giving details of penal provisions contained in Section 122, 123 and 125 of the CGST Act, of not complying with the request of the department to facilitate conduct of Audit. However, in case the Registered Person fails to comply then action under above sections of CGST Act may be taken and a self-contained note may be sent to the Executive Commissionerate for taking appropriate/necessary action against the Registered Person. Further the details of such registered persons should be forwarded to the respective zonal units of Directorate General of Audit for inclusion in the Risk Parameters, so that in future the said person may be identified for audit on priority. Details of said person may also be provided to the concerned authorities to downgrade his GST compliance ratings.