What are the Provisions of Audit Under GST

Ashish M. Shaji

04 Nov, 2020

In this article let us discuss the provisions relating to Audit under GST laws. But let’s try and understand what the audit is, and what is its significance?

Meaning of Audit

The audit is basically a systematic and independent examination of financial records and accounts of an organization to verify its correctness. If the proper audit is conducted at specified regular intervals, it increases the value and credibility of the organization and builds up investor confidence. The audit can be internal or external.

Internal audit is when the organization keeps a regular track or their functions through analysis, monitoring, and examination of their activities and an external audit is when an outside party like a chartered accountant or any government appointed an officer to conduct this analysis of the financial records of the organization.

Audit under GST

Like other laws, GST laws also provide for Auditing provisions. As we have discussed the purpose of the audit is to check the authenticity of the documents and records of the taxpayer registered under GST. A few of the details checked under GST audit are GST invoices declared turnover, taxes paid, refunds and ITC claimed, etc.

Audit under GST can be of the following types:

1. The audit is done by the taxable person themselves.
2. An audit ordered by the Commissioner of Goods and Services Tax. (Tax Authorities)
3. Special GST audit

Audit under GST: Self-Audit Done by Taxable Person

This audit is not ordered by any tax authority, it is a threshold-based audit requirement. Sub-section 2 of Section 44 under the Chapter of Returns under the CGST Act,2017^[1] states the provisions relating to audit by a taxable person. This section requires any registered taxpayer whose aggregate turnover during a financial year exceeds the threshold limit of Two Crores Rupees are required to get their accounts audited by a chartered accountant or a cost accountant.

They are required to furnish a return in FORM GSTR-9C, which shall include a certified copy of the following:

• Audited annual accounts and
• A reconciliation statement.

Audit under GST: An Audit ordered by GST Authorities

Chapter XIII of Central Goods and Service Tax Act, 2017^[2] covers the provisions relating to Audit by tax authorities under GST. An audit ordered by tax authorities is of two types;

• Audit by general order
• Audit by special order

GENERAL AUDIT

In an audit conducted by the order of the commissioner, the proper officer along with the team of officers assigned to him verify the correctness of the:

• Documents,
• Books of accounts
• Returns and statements furnished under the Act and rules made under it.

If any discrepancies are found by the proper officer then they are required to communicate the same to the registered taxpayer, who shall furnish his reply in the prescribed manner.

Conditions relating to General Audit

• This type of audit is either conducted by Commissioner or any other officer authorized by him either be specific or general order.
• This audit is conducted at the office or specified place of business of the registered taxpayer.
• Notice: Information relating to such an order of audit is to be given through notice in FORM GST ADT-01 at least 15 working days before initiating such audit.
• Duration of Audit: Such an audit must be completed within a period of 3 months from the date of commencement of such audit. Here, the date of commencement is the date when any records or documents called for by the authorities are duly supplied to them.
• Extension: This period of 3 months can be further extended for a period not exceeding 6 months by the commissioner. However, the reasons for such an extension must be recorded in writing.

Responsibilities of the Auditee

It is the responsibility of the auditee –

• To provide proper assistance in the verification of books of account or other documents
• Furnish the documents demanded by the proper officer.
• Render assistance for timely completion of the audit.

Conclusion of General Audit

On the conclusion of Audit under this section, it is the responsibility of the officer to communicate the result and findings along with the rights and obligations of the taxable person to him within 30 days of the conclusion of audit.

Audit under GST: Special Audit

Special Audit provisions are mentioned in Section 66 of the CGST Act, 2017. It can be initiated by any officer not below the rank of Assistant Commissioner only when they are not satisfied with the scrutiny, inquiry, investigation or any other proceedings conducted before him. However, it can only be initiated with the proper approval of the Commissioner and the registered taxpayer is required to get their accounts audited through a chartered accountant or a cost accountant nominated by the Commissioner.

Conditions relating to Special Audit

• A registered person is communicated about this special audit in FORM GST ADT-03.
• Duration of Audit: Such an audit must be completed within a period of 90 days.
• Extension: This period of 90 days can be further extended for a period of 90 days based on an application made by the taxpayer, Chartered Accountant or Cost accountant as the case may be.
• If any material found in such special audit is proposed to be used in any proceedings under the Act, then the taxpayer must be given an opportunity of being heard.
• The remuneration of such appointed CA and expenses incurred are to be paid by Commissioner.

Conclusion of Special Audit

On the conclusion of Audit under this section, the findings are communicated in the Form GST ADT 04.

Conclusion

If after the conclusion of the audit under GST, the proper officer is of the opinion that;

• Tax was not paid
• Tax was short paid
• Tax was erroneously refunded
• Or Input Tax Credit wrongly availed or utilized,

The action must be initiated under section 73 or section 74 of the ACT.

For any other GST related query, contact Enterslice.

Read our article: Problems of Fake GST Invoice and measures to address them