Goods and Service tax or GST will be one tax to subsume all taxes. It will bring in the “One nation one tax” regime. To maintain a check and examine whether correct GST is being paid and the refund is claimed, certain taxable persons will be subject to audit under GST.
Audit under GST
Due date for filing GSTR-9, GSTR-9A and GSTR-9C is extended till 31st March 2019 by CBIC for FY 2017-18
Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST.
Threshold for Audit
Every registered taxable person whose turnover during a financial year exceeds the prescribed limit [as per the latest GST Rules, the turnover limit is above Rs 2 crore] shall get his accounts audited by a chartered accountant or a cost accountant. He shall electronically file:
- an annual return using the Form GSTR 9 by 31st December of the next Financial Year*,
- the audited copy of the annual accounts,
- a certified reconciliation statement in the form GSTR-9C, reconciling the value of supplies declared in the return with the audited annual financial statement,
- and other particulars as prescribed.
Rectifications after Return Based on Results of Audit under GST
If any taxable person, after furnishing a return discovers any omission/incorrect details (from results of audit), he can rectify subject to payment of interest. However, no rectification will be allowed after the due date for filing of return for the month of September or second quarter, (as the case may be), following the end of the financial year, or the actual date of filing o the relevant annual return, whichever is earlier.
For example, X found during the audit that he has made a mistake in Oct 2017 return. X submitted an annual return for FY 2017-18 on 31st August 2018 along with audited accounts. He can rectify the Oct 2017 mistake within-
20th Oct 2018 (last date for filing Sep return)
31st August 2018 ( the actual date of filing of relevant annual return)
-earlier, ie., his last date for rectifying is 31st August 2018.
This rectification will not be allowed where results are from scrutiny/audit by the tax authorities.
Audit by Tax Authorities
- The Commissioner of CGST/SGST (or any officer authorized by him) may conduct an audit of a taxpayer. The frequency and manner of an audit will be prescribed later.
- A notice will be sent to the auditee at least 15 days before.
- The audit will be completed within 3 months from the date of commencement of the audit.
- The Commissioner can extend the audit period for a further six months with reasons recorded in writing.
Obligations of the Auditee
The taxable person will be required to:
- provide the necessary facility to verify the books of account/other documents as required
- to give information and assistance for timely completion of the audit.
Findings of Audit
On conclusion of an audit, the officer will inform the taxable person within 30 days of:
- the findings,
- their reasons, and
- the taxable person’s rights and obligations
If the audit results in detection of unpaid/short paid tax or wrong refund or wrong input tax credit availed, then demand and recovery actions will be initiated.
When can a special audit be initiated?
The Assistant Commissioner may initiate the special audit, considering the nature and complexity of the case and interest of revenue. If he is of the opinion during any stage of scrutiny/ inquiry/investigation that the value has not been correctly declared or the wrong credit has been availed then special audit can be initiated.
A special audit can be conducted even if the taxpayer’s books have already been audited before.
Who will order and conduct a special audit?
The Assistant Commissioner (with the prior approval of the Commissioner) can order for special audit (in writing). The special audit will be carried out by a chartered accountant or a cost accountant nominated by the Commissioner.
Time limit for special audit
The auditor will have to submit the report within 90 days. This may be further extended by the tax officer for 90 days on an application made by the taxable person or the auditor.
The expenses for examination and audit including the auditor’s remuneration will be determined and paid by the Commissioner.
Findings of special audit
The taxable person will be given an opportunity of being heard in findings of the special audit.
If the audit results in detection of unpaid/short paid tax or wrong refund or input tax credit wrongly availed then demand and recovery actions will be initiated.
Thus, GST is a completely new tax regime already taking India by storm. Businesses will face challenges in transition and application of GST. To know more about GST, feel free to read more of our articles on our blog.
Section 65 – GST Audit by tax Authority
(1) Authority Commissioner or any officer authorised by him
(2) At place of business of the registered person or at their office
(3) 15 working days prior notice
(4) Audit shall be completed within a period of three months from the date of commencement of the audit (where the Commissioner is satisfied that audit 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 purpose 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 to tax authorities, or the actual date of institution of audit at the place of business, whichever is later.
(5) Powers of authority
(i) Afford necessary facility to verify books of account
(ii) Furnish such information as he may require
(6) On conclusion of Audit 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.
(7) Where the audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or 74.
Section 66 – Special GST Audit
(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 the revenue, is of the opinion that the value has not been correctly declared or the credit is not within normal limits, he may ,with the prior approval of commissioner, direct such registered person by a communication in writing to get his records including books of accounts examined and audited by a chartered accountant or a cost accountant as may be nominated by a commissioner
(2) The chartered accountant or cost accountant to submit report within the period of 90 days duly signed and certified to the said Commissioner.(which may be extended by a commissioner for a further period of ninety days on application made)
(3) Special audit to be conducted even if the accounts are already audited under any other law
(4) The registered person shall be given opportunity of being heard before utilising any material gathered on the base of audit in any proceedings against him under the act.
(5) Expenses of the examination and audit of records to be borne by the Commissioner.
(6) Where the audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or 74.
Section 35(5) Annual GST Audit
Every registered person whose turnover during the financial year exceeds Rs.2 Crore shall get his accounts audited by chartered accountant or cost accountant and shall submit a copy of audited annual accounts ,the reconciliation statement and other documents along with the GST annual return. Last due date for filing GSTR -9 (Annual return) for FY 17-18 is extended by CBIC till 31st March 2019
Late fees for not filing the GSTR 9 within the due date is Rs. 100 per day per act up to a maximum of an amount calculated at a quarter percent (.25%)of the taxpayer turnover in the state or union territory. Thus it is Rs 100 under CGST & 100 under SGST, the total penalty is Rs 200 per day of default. There is no late fee on IGST.