Audit under GST by CA Mansi Jain

Audit means:

examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder 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 this Act or the rules made thereunder.

[Section 2(13) of the CGST Act, 2017]

B. Types of Audit:

Under GST, there are basically two types of Audit, namely,

      a. The audit by taxable Person from CA or Cost Accountant – where turnover exceeds Rs. 2 crores during a financial year.
      b. Audit by GST Tax Authorities –
           • General Audit on order by Commissioner
           • Special Audit by CA or Cost Accountant nominated by Assistant Commissioner or higher rank officer

C. Provisions relating to Audit under the CGST Act:

1. Applicability of Audit under GST:

Every registered person whose turnover during a financial year exceeds Rs. 2 crores, shall get his accounts audited by a chartered accountant or a cost accountant.

2. Documents to be submitted:

The person referred to in point no. 1, shall along with the Annual Return (GSTR-9) required to be furnished by 31st December succeeding the end of the relevant financial year,

• submit a copy of the audited annual accounts,
• reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement. The reconciliation statement.

(The reconciliation statement shall be duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.)

• such other documents as may be prescribed.

[Section 35(5) and Section 44(2) of the CGST Act, 2017 read with Rule 80 of CGST]

3. Return rectifications upon Audit:

If a registered person upon the conduct of Audit comes to know of any mistake or omission in the return already submitted, he can rectify the same through the next GSTR to be filed by him. However, no correction shall be allowed –

a. after the due date for filing of return for the month of September following the end of the financial year, or the actual date of filing of the relevant annual return, whichever is earlier.

b. where audit has been conducted by GST tax Authorities.

4. Audit by Tax Authorities:

i. Authorisation and Frequency Audit – The authority to conduct audit lies with the commissioner or any officer authorized by him. He can by way of a general or a specific order may undertake the audit of any registered person. The period of the audit to be conducted shall be a financial year or multiples thereof.

ii. Place of Audit – The officers as referred to in above point may conduct the audit at the place of business of the registered person or in their office.

iii. Notice period – The registered person shall be informed by way of a notice in FORM GST ADT-01, not less than 15 working days prior to the conduct of the audit.

iv. The scope of Audit – The proper officer authorized to conduct audit shall, with the assistance of the team of officers and officials accompanying him, verify the following and record the observations in his audit notes –

• documents on the basis of which the books of account are maintained,
• returns and statements furnished under the provisions of the Act and the rules made thereunder,
• 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, and
• other relevant issues.

v. Audit Completion – The audit shall be completed within a period of 3 months from the date of commencement of the audit. If the commissioner is satisfied that the audit cannot be completed within said period of 3 months, he may, for the reasons to be recorded in writing, extend the period by maximum 6 months.

(Commencement of audit means later of the following –
– the date on which the records and other documents are made available by the registered person, or
– the actual institution of audit at the place of business.)

vi. Furnishing of details – The authorized officer may require the registered person –

• to afford him the necessary facility to verify the books of account or other documents as he may require;
• to furnish such information as he may require and render assistance for timely completion of the audit.

vii. Option with the Auditor to obtain reply before concluding Audit – The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit. The registered person may then file his reply to the observation. The proper officer shall finalize the findings of the audit after due consideration of the reply furnished.

viii. Information to Registered Person – On conclusion of Audit, the proper officer, within 30 days, inform the registered person about the findings of the audit, his rights and obligations and the reasons for such findings in FORM GST ADT-02.

ix. Show cause Notice – Whereupon conducting the audit, the proper officer detects, tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under section 73 or section 74,i.e., serve show cause notice to the concerned registered person.

[Section 65 of the CGST Act, 2017 read with Rule 101 of CGST]

5. Special Audit:

i. Condition & Authorisation for Audit – The authority to conduct audit lies with any officer, not below the rank of Assistant Commissioner.

• If at any stage of scrutiny, inquiry, investigation or any other proceedings before the officer, having regard to the nature and complexity of the case and the interest of revenue,
• he 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 in FORM GST ADT-03
• 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

ii. Time limit of Audit – The time limit for such audit with chartered accountant or cost accountant so nominated shall be 90 days. He shall submit the said report duly signed and certified by him to the Assistant Commissioner mentioning therein such
other particulars as may be specified.

iii. Extension for Time limit of Audit – The authority for extension lies with the Assistant Commissioner. He can extend the time limit by a further period of ninety days. The said extension can be made by him when an application is made to him in
this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason.

iv. Validity over other Provisions or Laws – The condition and authority as mentioned in point no. i above shall be valid even if 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.

v. The 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 point no. (i) above which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.

vi. Expense burden of Audit – The expenses of the examination and audit of records under Special Audit including the remuneration of such chartered accountant or cost accountant shall be determined and paid by the Commissioner and such
determination shall be final.

vii. Information to Registered Person – On conclusion of Special Audit, the registered person shall be informed of the findings of the special audit in FORM GST ADT-04.

viii. Show cause Notice – Where the special audit conducted results in tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under section 73 or section 74,i.e., serve show cause notice to the concerned registered person.

[Section 66 of the CGST Act, 2017 read with Rule 102 of CGST]

6. Access to Business Premises for Audit:

i. The authorization of Proper Officer – Any officer under this Act, authorized by the proper officer of the rank of Joint Commissioner or above,

shall have access to any place of business of a registered person

to inspect books of account, documents, computers, computer programs, computer software whether installed in a computer or otherwise and

such other things as he may require and which may be available at such place,

for the purposes of carrying out an audit, scrutiny, verification, and checks

as may be necessary to safeguard the interest of revenue.

ii. The duty of Person-in-charge – It shall be the duty of person-in-charge to make available to the person conducting audit under section 66 for the scrutiny–

• such records as prepared or maintained by the registered person and declared to the proper officer;
• trial balance or its equivalent;
• statements of annual financial accounts, duly audited, wherever required;
• cost audit report, if any, under section 148 of the Companies Act, 2013;
• the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961; and
• any other relevant record.

iii. Time limit for presenting documents – The person-in-charge shall present the documents within a period of 15 days from the day when demand is made or such extended period as may be allowed by the party conducting the audit.

[Section 71 of the CGST Act, 2017]