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GST Audit: A Comprehensive Overview

CA Anoop Kumar Sharma , Last updated: 25 May 2024  
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Section 65: Audit by Tax Authorities

Audit of records of Taxpayers is a very important step for the proper functioning of a self-assessment based tax system.  As per section 65 for GST audits, of the business transaction of any registered person. This section empowers tax authorities, led by the Commissioner or authorized officers, to undertake audits of registered persons. Audits important tools in the tax administration to ensure compliance of law and prevent revenue leakage and evasions. GST audit conduct one or more financial years, if requiring a examination of records and compliance aspects. In this article we discuss a comprehensive overview that delves into the initiation, timeline, and methodology of GST audits, shedding light on practical considerations.

GST Audit: A Comprehensive Overview

Who can conduct the Audit?

1.

The Commissioner or

2.

Any officer authorized by him through a general or specific order.

3.

The audit may take place at the registered person's Place of business or in the office of tax authorities, covering a Financial Year or multiple Financial Years or a part thereof.

4.

Intimation of audit is to be issued to the taxable person at least 15 working days in advance.

Commencement of audit

The audit commences whichever is later date:

1.

Either making records available to audit authorities or

2.

The actual institution of the audit at the taxpayer`s business premises

Time limit of Audit

The commencement date is important because the audit has to be completed within a given time frame in reference to this date of commencement.

The audit must conclude within 3 months from the audit`s commencement.

The Commissioner can extend this period by further 6 months if needed.

The commissioner requirements to record reasons in writing for grant of any such addition time.

Conducting the Audit

1.

During course of the audit, the authorized officer, accompanied by a team, examines different aspects of a registered person`s records and books of account

2.

The proper officer while conducting the GST Audit is authorized to verify as per mentioned below:-

1.

Books and Records

2.

Returns and statements

3.

Rate of tax applicable in respect of supply of goods and service

4.

Correctness of the input tax credit claimed/availed/unutilized and refund claimed

5.

Correctness of turnover exemption and deductions.

3.

All their observations are documented in the officer`s audit notes for proper record-keeping and reference.

4.

During the course of the audit, the authorized officer may require to the registered person necessary facility to verify the books of account or other documents as he may require.

5.

Further, the authorized officer may require to the registered person to furnish such information as he may require and render assistance for the timely completion of the audit

Completion of Audit

1.

After identifying discrepancies on audit completion information is required to be provided to the registered person including the findings during the Audit within 30 Days of conclusion of the Audit.

2.

Where the audit results in the detection of tax not paid or short paid or erroneously refunded, or Input tax credit wrongly availed or utilized, the Proper officer may start action under section 73 or section 74.

3.

Audit cannot conclude automatically resulting in demand. It has to follow procedure given in section 73 or 74.

 

Section 66: Special Audit

As per the GST provision of special audits emerges as a crucial mechanism for ensuring compliance and protects the interests of revenue. Now we are discussed and try to attempt regarding special audits, exploring procedures, timeframes, and implications for taxpayers.

Who can give the order of Special Audit and when

1.

When discrepancies in the declared value of goods or services, or the availed credits beyond normal limits, are identified at any stage of scrutiny, inquiry, or investigation by an officer not below the rank of Assistant Commissioner, a special audit may be directed

2.

The special audit may be conducted if the specified officer is of the opinion that -

(1)the value (of goods and/or services) has not been correctly declared; or

(2)the credit availed is not within the normal limits

3.

The Assistant commissioner needs to obtain prior approval of the commissioner to issue such direction to the taxable person.

4.

The CA or CMA is to be nominated by the commissioner.

5.

Special Audit under this section has to be conducted irrespective of the fact that the accounts of the registered person have been audited under any other provision of this Act or any other law for the time being in force.

Time Limit for Completion of Audit & Audit Expenses

1.

The nominated auditor must submit a comprehensive report to the specified officer within 90 days.

2.

Further 90 days, either upon application by the registered person or the auditor, or for substantial and justifiable reasons.

3.

The Commissioner determines and bears the costs, including the remuneration or allocation of expenses of the appointed Chartered Accountant or Cost accountant and such determination shall be final.

Special audit report

1.

The registered person shall be given an OBH in respect of any material gathered on the basis of special audit which is proposed to be used in any proceeding against him under this Act or the rules made thereunder.

2.

Where the special audit results in detection of tax not paid or short-paid taxes, erroneously refunded amounts, or wrongly availed or utilized Input tax credits, the subsequent steps involve initiating demand and recovery processes under Section 73 or Section 74.

 

Conclusion

The audit mechanisms outlined in Sections 65 and 66 of the GST Act are very important for protecting government revenue and compliance among taxpayers. These audits play a key role in detect and correcting discrepancies, thereby ensuring the competence and effectiveness of the self-assessment system. Sections 65 and 66 provide essential tools for tax authorities to conduct general and special audits, respectively, facilitating thorough examination of registered persons' records. This promotes compliance and safeguards revenue interests. The timely completion of audits, the opportunities for businesses to respond, and succeeding actions under Sections 73 or 74 underline the importance of these provisions in maintaining the reliability of the GST system. This article is intended for informational and educational purposes only; it is advisable to consult with a tax professional for specific issues and challenges.

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Published by

CA Anoop Kumar Sharma
(Accounts Manager)
Category GST   Report

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