GST Audit: A Brief Analysis

GST Audit is verification of the original records, returns and other documents kept with the taxpayer at the business premises (including all Additional Place of business) and correlating them with the information furnished by the taxpayer on the GST Portal in his/her returns/statements to verify the correctness of reported turnover, exemptions/deductions claimed, rate of tax applied, ITC and Refunds claimed etc. The tax officer can examine the documents of taxpayer’s original records either in the office of the Tax Officer or at the business premises of the taxpayer, as communicated to the Taxpayer through Notice in Form ADT-01.The process may lead to the issuance of notices and audit report to the taxpayer, based on the observations and findings by the tax officers.

Following are the different types of Audit as per CGST Act 2017.

CGST Act Sec 65

Audit by tax authorities

Following are the features of Audit by tax authorities:

(1) The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake audit of at the place of business of the any registered person or in their office for such period, at such frequency and in such manner as may be prescribed.

(2)A notice not less than fifteen working days prior to the conduct of audit is necessary

(3) The audit under sub-section shall be completed within a period of three months from the date of commencement of the audit

Extension: not exceeding six months.

(4) 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.

(5) 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.

(6) 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.

(Source:https://www.gst.gov.in/help/audit)

CGST Act Sec 66. Special audit

(1) 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 account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner.

(2) The chartered accountant or cost accountant so nominated shall, within the period of ninety days, submit a report of such audit duly signed and certified by him to the said Assistant Commissioner mentioning therein such other particulars as may be specified: Provided that the Assistant Commissioner may, on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason, extend the said period by a further period of ninety days.

(3) The provisions of sub-section (1) shall have effect 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.

(4) The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of a 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.

(5) The expenses of the examination and audit of records under sub-section (1), including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final.

(6) Where the special audit conducted under sub-section (1) results in the 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.

Taxpayer can make payment against the following five notices/reports issued to them by the tax officer

1. Notice for Discrepancy under rule 101(4)
2. Additional Notice for Discrepancy under rule 101(4)
3. Audit Report u/s 65(6) (GST ADT-02)
4. Audit Report u/s 66 (GST ADT-04)
5. Show Cause Notice (DRC-01)

POWER OF CAG

GST Act provides power to Comptroller and Auditor General of India (CAG) to call for any information, records and returns furnished under the GST Act, for the conduct of audit under the Comptroller and Auditor General’s Act.

References:

1. https://www.gst.gov.in/help/audit
2. https://www.cbic.gov.in/htdocs-cbec/gst/gstacts