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Audit under GST

There are three types of audit under GST. They are

  1. Audit by Chartered Accountant
  2. Audit by  Tax Authorities
  3. Special Audit

Audit of Accounts by CA or CWA

Every registered person whose turnover exceeds Rs. 2 crore during a financial year has to get his accounts audited under GST. Accounts is to be audited by a Chartered Accountant or Cost Accountant only under section 35(5) of CGST Act.

Audit is also required by a CA under Income Tax Act if the turnover exceeds Rs. 1 crore (Rs. 2 crore if assessee is a trader and declaring profit of 8% or higher). Therefore this provision will not impose a major burden on the businessmen.

He shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C along with annual return.

Audit by Tax Authorities

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. (Section 65 of CGST Act)

The officers may conduct audit at the place of business of the registered person or in their office. The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in Form GST ADT-01. The audit shall be completed within a period of three months from the date of commencement of the audit:

If 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.

Commencement of audit means 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.

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.

On conclusion of audit, 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 in Form ADT-02.

Where the audit 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.

Rule 101 of CGST Rules

The period of audit to be conducted shall be a financial year or multiples thereof.

The proper officer may inform the registered person of the discrepancies, if any, noticed as observations of 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.

The officer along with his team has to verify

  • 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 there under.
  • Correctness of the turnover
  • Exemptions and deductions claimed
  • Rate of tax applied in respect of the supply of goods or services or both
  • Input tax credit availed and utilised
  • Refund claimed
  • Other relevant issues

Special audit (Audit by CA or CWA on directions of GST officer)

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.

The officer has to issue direction in FORM GST ADT-03 to the registered person in this regard.

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.

Special audit can be conducted even if 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.

The registered person shall be given an opportunity of being heard in respect of any material gathered, which is proposed to be used in any proceedings against him under this Act or the rules made there under.

The expenses of the examination and audit of records, including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final.

On conclusion of the special audit, the registered person shall be informed of the findings of the special audit in FORM GST ADT-04.

Where the special audit 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: Audit Eflier by CBEC

About Prateek Agarwal

Prateek Agarwal is a Practicing Chartered Accountant from Jaipur and been in practice for more than 7 years. He writes mainly about GST and Finance.

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