GST AUDIT U/S 65- PROCEDURE AND PRECAUTIONS

The Goods and Services Tax audit under Section 65 of the CGST Act, 2017, is an essential mechanism that ensures taxpayers comply with GST laws. It is carried out by the tax authorities to verify the correctness of the records, returns, and declarations furnished by a registered person.

Audit by tax authorities- As per sub section (1) of Section 65, 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.

Place of Conduct of Audit- The officers referred to in sub-Section (1) may conduct audit at the Place of business of the registered person and/or in their office.

Here is a detailed analysis of the procedure and precautions to be followed under Section 65.

Procedure of audit by tax authorities is as follows-

• Intimation- As per Section 65(3), 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.

Intimation of audit is to be issued to the Taxable person at least 15 days in advance in Form GST ADT-01.

• Submission of Records- The taxpayer is required to furnish the necessary documents, including Books of account, returns, Invoices, Agreements and contracts and other relevant documents.

• Period of Completion- The audit under sub-Section (1) shall be completed within a period of three months from the date of commencement of 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, ‘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.

Such audit is to be completed within 3 months from the date of commencement of audit, which may be extended by the Commissioner, where required, by a further period not exceeding 6 months. The Commissioner needs to record reasons in writing for grant of any such extension.

• Audit Report- 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 the findings.

On audit completion, information is required to be Provided to the registered person including the findings during the audit in FORM GST ADT-02 within thirty days of conclusion of the audit.

• Consequences- Where the audit conducted under sub-Section (1) results in detection of

• tax not paid or

• such short paid or

• erroneously refunded, or

• Input tax credit wrongly availed or utilized,

the Proper officer may initiate action under Section 73 or 74 or 74A.

Audit cannot conclude automatically resulting in a demand. Independent application of mind is necessary for a valid demand to be raised.

Obligation of Auditee- During the course of audit, the authorized officer may require the registered person,

1. to afford him the necessary facility to verify the books of account or other documents as he may require,

2. to furnish such information as he may require and render assistance for timely completion of audit.

Precautions for Taxpayers-

• Preparation Before the Audit

Ensure proper bookkeeping and record maintenance as required under Section 35.

Reconcile GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C with the books of accounts.

Verify that all ITC claims comply with Section 16 and are not ineligible under Section 17.

• During the Audit

Cooperate with the audit team and provide requested documents on time.

Maintain proper copies of the documents submitted to the audit team.

Provide explanations for any discrepancies identified by the audit team.

• After the Audit

Review the notice in GST ADT-02 carefully and ensure the correctness of findings.

Pay any additional liability, if applicable, and rectify errors in subsequent returns.

If you disagree with the findings, you may file an appeal under Section 107.

Conclusion- GST audits under Section 65 ensure transparency and compliance with GST laws. Taxpayers must maintain proper records, stay updated with GST rules, and be prepared for audits. With due diligence and accurate record-keeping, businesses can navigate GST audits smoothly and avoid penalties.