Audit by tax authorities Section 65 (Happy GST series – 27) by CA Rajender Arora
GST Audit by tax authorities u/s 65 of the CGST Act, 2017 - Meaning, Definition, Purpose,
Scope, Legal authority, Powers of Officers, Timelines and process after completion of audit.
1. What is the meaning of Audit?
Audit’ implies – Detailed examination of
i. Records,
ii. Returns and
iii. Other documents - maintained/furnished by a registered person, under GST law/any
other law or rules; and
iv. Reconciliation of Books of accounts of the taxpayer with the Returns filed by them.
2. What is the definition of audit?
As per section 2(13) of CGST Act 2017, “audit” means the examination of records, returns and
other documents maintained or furnished by the registered person under this Act or the rules
made thereunder or under any other law for the time being in force to verify the correctness of
turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his
compliance with the provisions of this Act or the rules made thereunder.
3. What is the purpose of Audit?
The purpose of audit is to-
a. Verify the correctness of: -
i. Turnover declared
ii. Taxes paid;
iii. Refund claimed;
iv. Input tax credit availed;
b. Assessment of tax compliance by the taxpayer,
c. Detection of revenue leakage, recovery and
d. Facilitating the taxpayer in ease of doing business by making him aware of
rules/regulations and its application.
e. Maintenance of adequate standards of accounting for trade and industries.
4. What is the Scope of Audit?
1. Evaluation of Correct Application of Tax Rate.
2. Evaluation of Admissibility of input tax credit.
2.1. Evaluation of correct utilization of ITC in terms of IGST /CGST/ SGST
3. Evaluation of Correct Classification of supply: -
3.1. HSN code/SAC code
3.2. Composite Supply
3.3. Mixed Supply
4. Evaluation of Correct value of Supply.
5. Evaluation of Correct time of supply.
6. Evaluation of Correct Place of Supply.
7. Evaluation of transitional credit if any availed by the unit.
5. Who has the power to conduct Audit u/s 65 of the CGST Act 2017?
Section 65 read with rule 101 states that The Commissioner or any officer authorized by him, by
way of a general or a specific order, may undertake audit of any registered person for such
period, at such frequency and in such manner as may be prescribed.
6. What are the rights of authorized officer while conducting Audit by tax authorities?
During the course of audit, the authorized officer may require the registered person,—
(i) To afford him the necessary facility to verify the books of account or other documents as he
may require;
(ii) To furnish such information as he may require and render assistance for timely completion of
the audit.
7. Under Section 65 of the CGST Act 2017, officer can conduct an audit at which place?
The officers may conduct an audit at the place of business of the registered person or in their
office.
8. What is the manner to start an Audit by tax authorities?
The registered person shall be informed by way of a notice not less than fifteen working
days prior to the conduct of audit in such manner as may be prescribed. The officers may
conduct an audit at the place of business of the registered person or in their office.
9. What is the time limit for completion of Audit by tax authorities?
The audit shall be completed within a period of three months from the date of
commencement of the audit.
Provided that 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 this sub-section, 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.
On conclusion of audit, the proper officer shall, within thirty days, inform the registered
person, whose records are audited, about the findings, his rights and obligations and the
reasons for such findings.
10. What happens after completion of Audit by tax authorities?
On conclusion of audit, the proper officer shall, within thirty days, inform the registered
person, whose records are audited, about the findings, his rights and obligations and the
reasons for such findings.
Where the audit conducted under results in detection of tax not paid or short paid or erroneously
refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action
under section 73 or section 74.
Source: Handbook for Departmental Officers Audit/Scrutiny in GST Era by Radhe Krishna IRS
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