Various Types Of Audits Under Goods And Service Tax

Introductory

Implementation of ‘Goods and Service Tax’ has resulted in vast procedural and provisional changes. One of such new provisional change is the introduction of the GST audit. Present article highlights the different types of audit under Goods and Service Tax.

Types of GST Audit

Bifurcating into simple terms, the GST audit can be said to be of following two types –

1. Mandatory audit based on the turnover of the registered person; and
2. Ordinary and / or special audit undertaken by the tax authorities.

Let us understand in brief the above referred two different types of GST audits –

1. Mandatory Audit Based on the Turnover of the Registered Person

Basic provisions of applicability of turnover based audit of the registered person are contained under section 35 (5) of the Central Goods and Service Tax Act,2017. In simple terms, section 35 (5) provisions can be summed up as follows –

• In case the turnover of the registered person exceeds the prescribed limit, he is liable to get his accounts audited;
• Audit of such registered person is required to be undertaken by the Chartered Accountant or a Cost Accountant;
• Such registered person is required to submit the following list of documents –
  • Copy of audited annual accounts; and
  • Reconciliation statement as prescribed under section 44 (2); and
  • Such other documents, if prescribed.

Section 35 (5), as referred above, only provides that if the registered person exceeds the prescribed limit, then, he is required to get his accounts audited. However, the effective prescribed limit above which the GST audit is applicable to a respective registered person is provided under rule 80 (3) of the Central Goods and Service Tax Rules, 2017.

As per rule 80 (3) of the Central Goods and Service Tax Rules, 2017, it is necessary for the registered person to get his accounts audited, if the aggregate turnover of the registered person exceeds INR 2 Crores.

Concluding thereby that GST audit is mandatory only in case the aggregate turnover of the registered person exceeds INR 2 Crores, however, below that the GST audit provisions are not applicable.

2. General and / or Special Audit Undertaken by the Tax Authorities

     General audit undertaken by the tax authorities –

• The commissioner or any of the officer as appointed by him, if prescribed, can conduct the general audit of any registered person;
• Such general audit can be conducted by the officer either at the place of business of the registered person or at his own office;
• It is mandatory to intimate the registered person, whose books of accounts are to be audited, by way of notice of not less than 15 working days prior to the starting of the audit;
• The officer is required to complete the audit within a period of 3 months from the date of commencement of the audit;
• In case of any findings, the officer is required to inform the registered person regarding the same within a period of 30 days;
• In case there is any allegation of detention of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized, show cause notice can be issued to the registered person under section 73 or section 74 of the Central Goods and Service Tax Act.

    Special audit undertaken by the tax authorities –

• At the time of inquiry, investigation, scrutiny or any other proceeding before the registered person, the officer is of the view that the value has not been correctly declared or the credit availed is not within the normal limit, in such case the officer may conduct special audit;
• In order to direct the registered person to undergo a special audit, prior approval of the Commissioner is mandatory;
• Special audit would be conducted by the Chartered Accountant or the Cost Accountant as appointed by the Commissioner;
• The appointed auditor is required to submit its report to the Assistant Commissioner within a period of 90 days;
• The expenses of the special audit, including the remuneration of the auditor, would be borne by the Commissioner;
• In case there is any allegation of detention of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized, show cause notice can be issued to the registered person under section 73 or section 74 of the Central Goods and Service Tax Act.