TaxTMI 
TaxTMI 
COMMENCEMENT AND COMPLETION OF GST AUDIT
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....OMMENCEMENT AND COMPLETION OF GST AUDIT<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Goods and Services Tax - GST<br>Dated:- 8-3-2025<br>Audit Section 2(13) of the Central Goods and Services Tax Act, 2017 ('Act' for short) defines the term 'audit' as 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. Types of Audits The Audit under this Act comes under the three types viz., * Audit by Tax....
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.... Authorities; * Special Audit; and * Turnover based audit. Special Audit Section 66(1) of the Act provides that 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. Turnover bas....
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....ed audit Section 35(5) of the Act provides that every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed. Section 35(5) was omitted with effect from 01.08.2021. Audit by Tax Authorities Section 65 of the Act provides for the conduct of Audit by the Tax Authorities on the records of the registered person. Period of audit Section 65(1) provides that the Commissioner or any officer authorised by him, by way of a general or a ....
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....specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed. The period of audit to be conducted under sub-section (1) of section 65 shall be a financial year or part thereof or multiples thereof. Place of audit The Audit may be conducted at the place of business of the registered person or in their office. Notice The registered person shall be informed by way of a notice, in Form GST ADT - 1, not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed. Period of audit The audit shall be completed within a period of 3 months from the date of commencement of the audit. If the Commissioner is satisfied that audit ....
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....in respect of such registered person cannot be completed within 3 months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding 6 months. The Explanation to Section 65(4) defines the expression 'commencement of audit' as- * 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. Obligation of registered person The authorised officer may require the registered person, during the course of audit- * to afford him the necessary facility to verify the books of account or other documents as he may require; * to furnish....
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.... such information as he may require and render assistance for timely completion of the audit. Conduct of audit The proper officer authorised to conduct audit of the records and books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the documents on the basis of which the books of account are maintained and the returns and statements furnished under the provisions of the Act and the rules made thereunder, the correctness of the turnover, exemptions and deductions claimed, the rate of tax applied in respect of supply of goods or services or both, the input tax credit availed and utilised, refund claimed, and other relevant issues and record the observations in his ....
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....audit notes. The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit and the said person may file his reply and the proper officer shall finalise the findings of the audit after due consideration of the reply furnished. Findings of Audit On conclusion of the audit, the proper officer shall inform the findings of audit to the registered person in accordance with the provisions of sub-section (6) of section 65 in FORM GST ADT-02. Action on the basis of audit report Where the audit conducted by the tax authorities 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 actio....
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....n under section 73 or section 74 or section 74A. Case law In M/S. RAJIVE AND COMPANY VERSUS THE DEPUTY COMMISSIONER (AUDIT) , THE STATE TAX OFFICER AND STATE OF KERALA, THIRUVANANTHAPURAM - 2025 (3) TMI 54 - KERALA HIGH COURT, the petitioner is conducting a jewellery business. For the period between 2017-18 to 2021-22, petitioner's establishment was subjected to an audit under Section 65 of the Act. The Audit was conducted. Based on the audit report the proper officer issued show cause notice under section 73 and section 74 of the Act. The petitioner filed the present writ petition before the High Court, challenging the show cause notice issued to it. The petitioner submitted the following before th....
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....e High Court- * The Act prescribes that the audit should be completed within 3 months from the date of its commencement. * Since the audit was not completed within the period prescribed under the Act, there was no legal basis to issue show cause notice. * The audit was proposed to be commenced on 10.01.2024. * Since the records sought for were given on 19.02.2024, the commencement of audit gets extended. * The final audit report dated 08.07.2024 is beyond the period contemplated by the statute even when reckoned from the extended period. The Department submitted the following before the High Court- * The audit was completed within 3 months from the date of its commencement as stipulated in the Explanatio....
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....n to Section 65(4) of the Act. * The Department issued directions to the petitioner to produce certain documents to the Department. * The petitioner submitted the documents on 09.04.2024, which is the date of commencement of the audit. * The audit was completed on 08.07.2024 i.e., within 3 months from the commencement of the audit. The High Court analysed the provisions of Section 65 of the Act. The High Court observed that the explanation to the provision to Section 65 of the Act stipulates that the commencement of the audit shall mean the date on which the records and other documents called for by the Tax Authorities are made available or the actual institution of audit at the place of business whichever is later. ....
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.... The documents called for by the Tax Authorities were made available by the petitioner on 09.04.2024 and the audit ought to have been completed within three months from the aforesaid date. Since the final report was filed within time, the contention raised by the petitioner on the basis of limitation stipulated in Section 65(4) of the GST Act has no application. The High Court found not merit in the writ petition and therefore dismissed the writ petition.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....