Chapter 16 accounts, records & audit
Audit under CGST Act
“Audit” has been defined in section 2(13) of the CGST Act, 2017 and it means the examination of records, returns and other documents maintained or
furnished by the registered person under the GST Acts or the rules made there under 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 the GST Acts or the rules made there under.
Features of audit
1. It is related with the audit of registered person 2. The foll. Are to be examined under audit:
a. Records b. Returns
c. Other documents
As may be maintained or furnished by the registered person.
3. The audit is done with the objective of verification of various aspects and also to assess the
compliances fulfilled.
Objective of audit
1. Prevention of revenue leakage:- it implies the collection of correct amount of taxes and also to allow appropriate
refund and input tax credit. The objective of audit can be served by the verification of correctness of foll:
i. Turnover declared ii. Taxes paid
iii. Refund claimed iv. ITC availed
2. To ensure compliance law:- there are plenty of provisions under GST, which are to be complied with by the registered person. Since, GST is a self-assessment based tax system, there is need to assess whether the tax payer has complied with the provision of this act and rules. Audit is the
backbone to achieve this objective.
Types of audit:- three types of Audit.
1. Audit when turnover exceeds prescribed limit:- Every registered person whose aggregate turnover during a financial year exceeds two crore rupees has to get his accounts audited by a chartered
accountant or a cost accountant and furnish a copy of audited annual accounts and a reconciliation
statement, duly certified, in FORM GSTR-9C.
2. Audit by tax authorities:- the Commissioner or any officer authorised by him, can undertake audit of any registered person for such period, at such
frequency and in such manner as may be prescribed.
1. Period of audit:- The Commissioner or any officer authorised 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. Issue of notice of audit:- 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.
3. Time limit for completion of the audit:- The audit shall be completed within a period of three months from the date of commencement of the audit. However, the
period of completion of audit can be further extended by a period not exceeding 6 months by the Commissioner for reasons.
Conduct of audit
While conducting the audit, the proper officer, with the assistance of the team of officers and officials accompanying him, is authorized to:
i. Verify books and records.
ii. Returns and statements.
iii. Correctness of turnover, exemptions &
deductions.
iv. Rate of tax applicable in respect of supply of goods and / or services.
v. The input tax credit claimed/ availed / unutilized and refund claimed.
Duty of registered person
During the course of audit, the authorized officer may require the registered person.
a) To facilitate the verification of accounts / records available or requisitioned by the authorities.
b) To provide such information as the authorities may require for the conduct of the audit, and
c) To render assistance for timely completion of the audit.
These provisions cast an obligation on the registered person to afford necessary facility to the proper officer and his team in the conduction of audit.
Reply on discrepancies noticed
The proper officer may inform the registered person of the discrepancies noticed, if any, as
observations of the audit and the said person may files his reply and the proper officer shall finalize the findings of the audit after due consideration of reply furnished.
Report to be sent registered person
The proper officer shall within 30 days inform the
registered person whose records are audited, about the findings, his rights and obligations and the
reasons for such findings. This information is to be given in form GST ADT – 02 by proper officer.
Action by proper officer
Where the audit results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper
officer may initiate action. These sections are
related with demands and recovery from defaulted taxable persons.
Special audit
The third type of audit is called the Special Audit. In Special Audit the registered person can be directed to get his
records including books of account examined and audited by a chartered accountant or a cost accountant during any stage of scrutiny, inquiry, investigation or any other
proceedings; depending upon the complexity of the case.
The foll. Are the various aspects of special audit:-
1. Opinion inviting special audit:- the special audit is
permitted only when the officer, considering the nature and complexity of the business and in the interest of
revenue is of the opinion that-
a. the value has not been correctly declared or b. Credit availed is not within the normal limits.
2. When can a special audit be initiated?
The Assistant Commissioner may initiate special audit, considering the nature and complexity of the case and
interest of revenue. If he is of the opinion during any stage of scrutiny/enquiry/investigation that the value has not
been correctly declared or the wrong credit has been availed then special audit can be initiated.
Special audit can be conducted even if the tax payers books have already been audited before.
3. Who will order and conduct special audit?
The Assistant Commissioner (with the prior approval of the Commissioner) can order for special audit (in writing). The special audit will be carried out by a chartered accountant or a cost accountant nominated by the Commissioner.
4. Time limit for special audit
The auditor will have to submit the report within 90 days. This may be further extended by the tax
officer for 90 days on an application made by the taxable person or the auditor.
5. Cost
The expenses for examination and audit including the auditor’s remuneration will be determined and
paid by the Commissioner.
6. Findings of special audit
The taxable person will be given an opportunity of being heard in findings of the special audit.
7. Opportunity of being heard:- 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 there under.
8. Necessary action:- Where the special 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.
9. Over-riding of special audit:- 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.
10. Who can do special audit:-
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.