GST Audit u/s 65 and GST Inspection u/s 67

This query is : Resolved

CA Arun A (Querist)
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20 January 2024 Can an audit under section 65 be initiated by the CGST Authorities on the assessee for the same years for whom inspection under section 67 was done and orders issued by the SGST Authorities? Pls enlighten.

Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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07 July 2024 Under GST law in India, audits and inspections are conducted by different authorities for different purposes, and they can overlap or occur sequentially depending on the circumstances. Here’s a clarification on audits under section 65 and inspections under section 67:

### Section 67 Inspection

- **Purpose**: Section 67 of the CGST Act pertains to inspection, search, and seizure by authorized GST officers. This is typically done to verify compliance, gather evidence, or prevent tax evasion.
- **Authority**: State GST (SGST) authorities are empowered to conduct inspections under their jurisdiction.

### Section 65 Audit

- **Purpose**: Section 65 of the CGST Act deals with audit of taxpayers. Audit is conducted to verify the correctness of turnover declared, taxes paid, and to assess compliance with the provisions of GST law.
- **Authority**: Central GST (CGST) authorities or officers authorized by the Commissioner are responsible for conducting audits.

### Understanding the Scenario

In your case:
- **SGST Inspection and Orders**: The State GST authorities have conducted an inspection under section 67 and issued orders based on their findings.
- **CGST Audit Initiation**: The Central GST authorities are now considering initiating an audit under section 65 for the same assessment years.

### Can CGST Authorities Initiate Audit?

Yes, the CGST authorities can initiate an audit under section 65 even if an inspection under section 67 has already been conducted by SGST authorities. Here’s why:

1. **Different Purposes**: Section 67 inspection is primarily for verification, investigation, and enforcement actions such as seizure if necessary. On the other hand, section 65 audit is for a comprehensive review of compliance and tax liabilities over a period.

2. **Jurisdictional Authority**: SGST authorities have jurisdiction for inspection within their state, while CGST authorities can conduct audits under their purview, which may cover aspects beyond what was inspected by SGST authorities.

3. **Comprehensive Review**: Audit under section 65 involves a thorough examination of all aspects of GST compliance, including turnover, tax payments, input tax credits, and adherence to GST laws and rules. This provides a more holistic view compared to an inspection.

### Conclusion

The initiation of a section 65 audit by CGST authorities after a section 67 inspection and orders issued by SGST authorities is permissible under GST law. The audits serve different purposes and are conducted by different authorities to ensure comprehensive compliance and enforcement of GST provisions. Therefore, if the CGST authorities have decided to conduct an audit, it would be to ensure thorough compliance assessment and not necessarily duplicative of the SGST inspection.