Audit Under GST: GST Audit u/s 35(5) | Special GST audit (All Details)

Audit Under GST: Audit by Tax Authorities under GST (Section 65)  The GST regime continues to promote the scheme of selfassessment like erstwhile indirect tax laws and Audit o records of tax payers is the basis for the proper functioning of self-assessment based tax system. As per section 2(13) of CGST Act, 2017. GST Audit means examination of records, returns and documents maintained and furnished by registered person to check the following:-

Audit Under GST

a) Verify the correctness of turnover declared. b) Input tax credit availed and utilized. c) Exemptions and deductions claimed. d) Rate of tax applied in respect of supply of goods or services etc.

The following three types of GST audit are envisaged under the GST Law:-

  • 1. GST Audit u/s 35(5) of Act, if turnover exceeds the prescribed limit (i.e Rs. 2 Crore)
  • 2. GST Audit by tax authorities u/s 65.
  • 3. Special GST audit direction from department u/s 66.

1. GST Audit u/s 35(5)

Every registered person, whose turnover during the financial year exceeds the prescribed “GST audit turnover limit” i.e., 2 crore rupees, shall get the accounts audited by a Chartered Accountant (CA) or a Cost and Management Accountant (CMA). Registered person who is required to get his accounts audited in accordance with section 35(5) shall submit electronically the Annual Return as per section 44 along with a copy of the audited statement of accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year. He shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in Form GSTR-9C along with annual return. Here the term used is aggregate turnover and not turnover in state. Aggregate turnover is computed on all India basis having same PAN. Therefore, if a registered person is liable to gets his accounts audited under section 35, then all the registration obtained under same PAN will also be liable to GST audit.

2. GST Audit by tax authorities u/s 65.

The Commissioner or any officer authorised by him, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed in a general or a specific order (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 of not less than fifteen working days before the conduct of audit in Form GST ADT-01. As per Section 65(4) , audit of registered person shall be completed within three months from the date of commencement of audit. Further , if the Commissioner is satisfied that audit of the registered person can’t be completed within three months , he may extend the time period for a further period not exceeding six months after recording the reasons for doing so in writing. The proper officer will inform the final findings of his audit to the registered person in form ADT-02.The finding under GST audit may be used by proper officer to initiate action u/s 73 or 74.

3. Special GST audit direction from department u/s 66

During if at any stage of scrutiny, inquiry, investigation or any other proceedings, any officer not below the rank of Assistant Commissioner, is of the opinion that

  • the value has not been correctly declared or
  • the credit availed is not within the normal limits,

The Assessing Authority may, with the prior approval of the Commissioner, direct such registered person 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 will issue direction in Form GST ADT-03 to the registered person in this regard. The Chartered Accountant or Cost Accountant so nominated shall submit a report of such audit duly signed and certified by him to the said Assistant Commissioner, within the period of ninety days, which can be further extended by ninety days. As per Section 66(3) of the act the special Audit may be directed even if accounts and record of the registered persons are audited under any other law in force such such as The Company Act 2013 on the Income Tax Act 1961.

The registered person shall be given an opportunity of being heard where any material gathered on the basis of special audit under this act is proposed to be used against him in any proceeding under the act. All expenses spent in connection with Special Audit including remuneration of Auditors to be determined and paid by commissioner as per Section 66(5) of the Act. All registered person shall be informed about the audit finding in Form GST ADT-04 after the audit is concluded. As per Section 66( 6) of the Act, if any discrepancy in terms of tax not paid, tax short paid or input tax credit wrongly availed, the officer, may proceed to initiate action under section 73 and 74 of the act.