LEGAL PROVISIONS ASSOCIATED WITH AUDIT BY TAX AUTHORITIES AND THE PROCEDURE TO CONDUCT AUDIT THEREOF- Section 65 of the CGST Act, 2017 and Rule 101 of the CGST Rules, 2017 - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

3. LEGAL PROVISIONS ASSOCIATED WITH AUDIT BY TAX AUTHORITIES AND THE PROCEDURE TO CONDUCT AUDIT THEREOF- Section 65 of the CGST Act, 2017 and Rule 101 of the CGST Rules, 2017 3.1 (i) The Commissioner or any officer authorised by him is empowered to conduct audit. The audit may be conducted at the place of business of the registered person or in the office of the auditor. However, as a measure of taxpayer facilitation, in the case of small taxpayers, the audit may be conducted in the office of the auditor. A visit to the premises of the small taxpayer should only be considered in case of non-cooperation. The audit shall be conducted for a financial year or any part thereof or multiples thereof Section 65(1) 65(2) of CGST Act, 2017 and Rule 101(1) of CGST Rules, 2017. (ii) A prior notice shall be issued to the auditee at least fifteen working days in advance, notifying him of the audit and to obtain documents required for conduct of audit as per Section 65(3) of the CGST Act, 2017. The notice is issued as per Form GST ADT- 01, as prescribed under Rule 101(2) of the CGST Act, 2017. (iii) The audit should be completed normally within a period of three months from the date of commencement of the audit, except in cases where approval of the Commissioner has been obtained for completing audit in a period beyond three months, which can be extended by a further period of six months, for the reasons to be recorded in writing. The expression commencement of audit is as defined under Explanation to Section 65(4) of the CGST Act, 2017. (iv) During the audit, the Proper Officer, along with his team of officers shall conduct audit and verify auditee s books of accounts and other documents and returns maintained and/or furnished during the course of business to ascertain the accuracy of turnover, exemptions, deductions claimed, applicable tax rates for goods and/or services supplied, availment and utilization of input tax credit, refunds claimed and other relevant matters. The auditee may afford necessary facilities to the auditor/s to verify the required books of account or other documents, including any other required information and assistance for timely completion of the audit. Section 35 of the CGST Act, 2017 prescribes these books of accounts and other records, which are required to be kept and maintained by the registered person at his principal place of business, as mentioned in the certificate of registration. The auditors record the audit observations in the audit notes Section 65(5) of the CGST Act, 2017, Section 35 of the CGST Act, 2017 and Rule 101(3) of the CGST Rules, 2017. (v) If any discrepancies are noticed during the audit, the proper officer shall notify the registered person, who then shall have the opportunity to respond. After considering the reply provided by the registered person, the proper officer shall finalise the audit findings Rule 101(4) of CGST Rules, 2017. (vi) The audit is deemed to be concluded once the audit findings are approved by the Commissioner in the Monitoring Committee Meeting. The audit findings in the form of Final Audit Report (FAR) should be communicated to the auditee within 30 days. The FAR is issued in FORM GST ADT-02. The FAR should include the reasons for the audit findings and inform the auditee of his rights and obligations Section 65(6) of CGST Act, 2017 read with Rule 101(5) of CGST Rules, 2017. (vii) The detections made during the audit may either be recovered from the auditee or notice for recovery may be issued to him by the proper Officer Section 73 /or Section 74 of CGST Act, 2017. 3.2 Access to the business premises for audit: Besides desk-based audit prescribed for audit of small taxpayers, the audit may be conducted by visiting the business premises of the auditee, for which access is authorised to the auditors Section 71 of CGST Act, 2017. (1) An officer holding the rank of Joint Commissioner or above is authorised to delegate officers to inspect the business premises of a registered person. This inspection includes examining books of account, documents, computers, computer programmes, software and any other things necessary for conducting an audit Section 71(1) of CGST Act, 2017 (2) The auditee is obligated to make available the documents and information required for conduct of audit to the auditor, which may include Section 71(2) of CGST Act, 2017. (i) Records prepared or maintained by the registered person and declared to the proper officer as prescribed. (ii) Trial balance or its equivalent. (iii) Annual financial account statements, duly audited, when necessary. (iv) Cost audit report under section 148 of the Companies Act, 2013, if applicable. (v) Income tax audit report under section 44AB of the Income Tax Act, 1961, if applicable; and (vi) Any other relevant records. These documents must be made available by the registered person for scrutiny within fifteen working days from the date of demand made by the officer or the audit party. Access to business premises also includes online access to the taxpayer s books and accounts and records, in addition to physical access. 3.3 Accounts and other records: The accounts and other records which a registered person is required to keep and maintain at his registered principal place of business are prescribed under Section 35 of the CGST Act, 2017 and the same may be required for conduct of audit. However, following documents may not be asked for from taxpayers due to their online availability in the GST Systems: LIST OF DOCUMENTS AVAILABLE ONLINE : S. No. Documents/Returns Description of document Source 1. Form GST REG-06 GST Registration Certificate provides the details such as Legal Name, Trade Name, Constitution of business, Principal place of business, date of issue of GST Registration All-in-One(pdf)(GSTN) 2. GSTR 9 Annual Return All-in-One: Visible and downloadable (GSTN) 3. GSTR 1 Monthly/quarterly return that summarizes all sales (outward supplies) of a taxpayer All-in-One: in Excel. Invoice level details can also be accessed by downloading the uploaded return JSON Zip file. (GSTN) 4. GSTR 3B Self-declared summary GST return filed every month (quarterly for the QRMP scheme). Taxpayers need to report the summary figures of sales, ITC claimed, and net tax payable in GSTR-3B. All-in-One(pdf)(GSTN) 5. GSTR 4 Return for financial year of registered person who has opted for composition levy or availing benefit of Notification no. 02/2019-Central Tax (Rate) All-in-One(pdf)(GSTN) 6. GSTR 5 Monthly return for Non-resident taxable All-in-One(pdf)(GSTN) 7. GSTR 6 Monthly return for Input Service Distributor All-in-One(pdf)(GSTN) 8. GSTR 7 Monthly return to be furnished by the person liable to deduct TDS All-in-One(pdf)(GSTN) 9. GSTR 8 Monthly return to be filed by e-commerce operators required to collect TDS All-in-One(pdf)(GSTN) 10. GSTR 2A Purchase related dynamic tax return that is automatically generated for each business by the GST portal. GSTR 2A is auto-populated from the returns of sellers viz. GSTR 1(filed by regular registered seller), GSTR-5 (filed by Non-resident), GSTR 6 (filed by Input Service Distributor), GSTR 7 (filed by person liable to deduct TDS), GSTR 8 (field by e- Commerce operator All-in-One (Excel) Month-wise after individual request (GSTN) 11. Tax Liability vs ITC Comparison (GSTR-1 vs GSTR-3B and GSTR-2A vs GSTR-3B) Comparison of Tax Liability vs ITC All-in-One (GSTN) 12. Summary of GSTR 3B Summary of GSTR 3B return All-in-One return dashboard (view only) 13. Summary of GSTR 1 Summary of GSTR 1 return All-in-One return dashboard (view only) 14. FORM GST PMT-05 (Electronic Cash Ledger) Every deposit made by a person by internet banking or by using credit or debit cards or NEFT or RTGS or by over-the-counter deposit on account of tax, interest, penalty, fee or any other amount is credited to the respective electronic cash ledger. The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable All-in-One (GSTN) 15. FORM GST PMT-02 (Electronic Credit Ledger Input Tax Credit as self-assessed in the return by a registered person is credited to his electronic credit ledger All-in-One (GSTN) 16. Analytical reports Various analytical reports ADVAIT 17. Form GST DRC-03 Voluntary tax payment form in which a taxpayer can pay the tax by raising its liability voluntarily or in response to the show-cause notice (SCN) raised by the department All-in-One (GSTN) 18. Refund application along with annexure Application for refund All-in-One (GSTN) 19. TRAN-01 Transition form to claim the Input Tax Credit of the old (pre-GST) regime in the GST regime All-in-One (GSTN) 20. TRAN-02 Transition form to claim the Input Tax Credit of the old (pre-GST) regime in the GST regime by a person who was unregistered in old regime All-in-One (Excel) (GSTN) 21. E-way bills A document to be carried by the person in charge of conveyance, on commencement of movement of goods exceeding the value of Rs.50,000/- in relation to supply or for reasons other than supply or due to inward supply from an unregistered person. E-way bill portal 22. Annexure-GSTAM-1 Registered person s master file All the information except HSN-wise detail in Part 3 of Annexure GSTAM-1 is already available with the Department and the same can be filled by auditors. 23. Form GST CMP-08 Quarterly return to be filed by taxpayer opting for composition scheme. This return replaces the erstwhile quarterly GSTR-4 filled by composition dealers. All-in-One (GSTN) 24. Form GST ITC-04 Half-yearly (for turnover more than Rs.5 cr.) and yearly (for turnover upto Rs. 5 cr.) return showing the details for goods/capital goods sent to job workers and received back. All-in-One (GSTN) 3.4 Special Audit Section 66 of CGST Act, 2017 (1) If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of 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 registered person by a communication in writing 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 Section 66 of the CGST Act, 2017. (2) The chartered accountant or cost accountant so nominates shall, within the period of ninety days, submit a report of such audit duly signed and certified by him to the said Assistant Commissioner mentioning therein such other particulars as may be specified: Provided that the Assistant Commissioner may, on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason, extend the said period by a further period of ninety days.