AUDIT UNDER MODEL ‘GST’ LAW

[Mr. M. GOVINDARAJAN]

A taxable person is required to furnish proper explanation to the officer in case any discrepancy is detected in the return filed under model GST law (‘law’ for short).  Such information is required to be furnished within 30 days of being informed.   Such date may be extended further by the officer if sufficient cause is shown.  If a taxable person does not furnish the required information within the time specified or does not take corrective action within a reasonable period after accepting the discrepancies, the Proper Officer may take recourse to any of the following provisions-

• To proceed to conduct audit under Section 63 of the law;
• To direct the conduct of a special audit under Section 64 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or
• To undertake procedures of inspection, search and seizure under Section 79 of the law; or
• To initiate proceeding for determination of tax under Section 66 of the Act.

Audit under Section 63

Section 63(1) provides that the Commissioner of CGST/Commissioner of SGST or any officer authorized by his Commission by a general or specific order may conduct audit of the business transactions of any taxable person for such period at such frequency and in such manner as may be prescribed.  The manner of conducting audit will be given in the rules by the Board.  The threshold limit as prevailing in service tax and central excise has not been given in the audit to be conducted under Section 63.

Section 63(2) provides that the audit may be conducted audit at the place of business of the taxable person and/or in their office.

Section 63(3) provides that prior intimation is required and the taxable person should be informed at least 15 working days prior to the conduct of audit.

Section 63(4) provides the time limit of conducting of audit.  This section provides that the audit is required to be completed within three months from the date of commencement of audit.    If the audit cannot be completed within three months from the date of ‘commencement of audit’ the Commissioner may, if he is satisfied, extend the period of audit for a further period not exceeding six months.  The reasons for such extensions shall be reduced in writing.   The term ‘commencement of audit’ is important because audit has to be completed within a given time frame in reference to the date of commencement.  Commencement of audit means the later of the following-

• the date on which the records/accounts called for by the audit authorities are made available to them, or
• the actual institution of audit at the place of business of the taxpayer.

Section 63(5) provides that during the course of audit, the authorized officer may require the taxable person to afford him the necessary facility to verify the books of account or other documents as he may require and which may be available at such place and to furnish such information as he may require and render assistance for timely completion of audit.

Section 63(6) provides that the proper officer must inform the taxable person without delay about his findings in the course of audit, the reasons for such findings and also the rights and obligations for the taxperson.

Section  63 (7) provides that where the audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit erroneously availed, the proper officer may initiation action under Section 66 which deals with the determination of tax not paid or short paid or erroneously refunded.

Special audit under Section 64

Section 64 (1) provides that a special audit can be instituted in limited circumstances where during scrutiny, investigation etc, it comes to the notice that a case is a complex or the revenue stake is high.  If at any state of scrutiny, enquiry, investigation or any other proceedings before hi, any officer not below the rank of Deputy/Assistant Commissioner, having regard to the nature and complexity of the case and the interest of the 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 taxable person by notice in writing to get his records including books of account examined and audited.  The special audit shall be carried out by a Chartered Accountant or the Cost Accountant nominated by the Commissioner.

Section 64 (2) provides that the Chartered Accountant or Cost Accountant shall within the period of 90  days, submit a report of such audit duly signed and certified by him to the Deputy/Assistant Commissioner mentioning therein such other particulars as may be specified.  The proper officer may extend the time limit of special audit by another ninety days on the application of the Chartered Accountant or Cost Accountant on behalf of the taxable person or for any material and sufficient reason.

Section 64 (3) provides that the special audit shall have effect notwithstanding that the accounts of the taxable person have been audited under any other provisions of this law or any other law for the time being in force or otherwise.

Section 64 (4) provides that the taxable person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit which is proposed to be used in any proceedings under this law or rules made there under.

Section 64 (5) provides that the expenses for examination and audit including the remuneration payable to the auditor will be determined and borne by the Commissioner. 

Section 64 (6) provides that where the special audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit erroneously availed, the proper officer may initiate action under Section 66.

Power of CAG

Section 65 provides that the proper officer shall, upon request made in this behalf, make available to the Comptroller and Auditor General of India or an offer authorized by him, information, records and returns furnished under the Act, required for conduct of audit as required under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971.

Conclusion

The provisions for special audit give opportunities for practicing Chartered Accountants and Cost Accountants for conducting special audit.  This opportunity shall be availed properly by professionals.  

Discussions to this article

[KASTURI SETHI]

Very informative article. Enriched my knowledge, Sir. Thanks.