Audit by tax authorities Section 65 - GST Ready Reckoner - GST

Audit by tax authorities GST is designed for a better and efficient collection of taxes, simple compliance, reduction of corruption, easy countrywide movement of goods and a lot more. The provisions contained under the GST Law facilitate easy compliance for self-assessment and payment of taxes. It also provides a detail explanation in relation to the notices, the demand and recovery provisions (cases where a registered taxable person has not paid/short paid the taxes and/or has failed to file required returns). Types of Audit under GST There are three types of audit prescribed under CGST Act, 2017 In the First type of audit (as per section 35 of CGST Act ) is by a Chartered accountant or Cost accountant . every registered person whose aggregate turnover during the financial year exceeds ₹ 2 crore shall get his account audited by Chartered Accountant or Cost Accountant and furnish a copy of audit annual accounts and reconciliation statement in Form GSTR-9C under section 35 of CGST Act . In the Second type of audit (as per section 65 of CGST Act ), which is the normal audit , 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 the Third type of audit (as per section 66 of CGST Act ) is called the Special Audit . In the special audit, the registered person may be directed to get his records including the books of account examined and audited by a chartered accountant or cost accountant during any stage of scrutiny, inquiry, investigation or any other proceeding, depending upon the complexity of the case. Who may conduct Audit [ section 65 of CGST Act Rule 101 of CGST Rules ] Audit of any registered person may be under taken by The Commissioner or any officer authorised by him, by way of a general or a specific order Audit may be carried out by the place of business of the registered person, or the Department's office. Where decided to undertake audit of registered person; notice for undertaking of audit will be issued to the taxable person at least 15 working day to prior to the conduct audit in Form ADT-01. Period covered under audit The period of audit to be conducted under section 65(1) of CGST Act shall be a financial year or part thereof or multiples thereof. Time limit for completion of audit [ Section 65(4) ] The audit is required to be completed within a period of three months from the date of commencement of the audit . Extension of time period:- where the 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. Explanation . For the purposes of section 65(5) , the expression commencement of audit shall mean 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. How to conduct audit [ Section 65(5) read with rule 101(3) of CGST Rules ] The proper officer authorised to conduct audit of the records and the books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the 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 thereunder, the correctness of the turnover, exemptions and deductions claimed, the rate of tax applied in respect of the supply of goods or services or both, the input tax credit availed and utilised, refund claimed, and other relevant issues and record the observations in his audit notes. During the course of audit, the authorised 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. Finalization of audit Inform the discrepancies noticed during the audit :- The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in 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. Communication of finding of audit :- Conclusion of the audit communicate by the proper officer shall, within thirty days, inform the registered person discrepancies noticed, whose records are audited, about the findings, his rights and obligations and the reasons for such findings in FORM GST ADT-02. Initiate Proceeding u/s 73 or 74 or Section 74A :- The proper officer may initiate proceeding for determination of tax under section 73 or section 74 [or Section 74A ( w.e.f. 01.11.2024 vide N.No. 17/2024 dated 27.09.2024 ) Inserted vide Finance (No. 2) Act, 2024 ] of CGST Act levy of interest and/or penalty, if audit conducted reveals any evidence of detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised,