Time Limit For GST Audit Under Section 65 - ADCA

Introduction to GST Audit

A GST audit is a crucial compliance requirement under India's Goods and Services Tax (GST) regime. It ensures that registered taxpayers adhere to GST laws, accurately file returns, and pay taxes correctly. Under Section 65 of the CGST Act 2017, tax authorities are empowered to conduct audits of any registered taxpayer to verify compliance.

One of the key aspects of this audit is its time limit, which ensures a structured and transparent audit process. This article provides a detailed breakdown of the time limits for GST audits under Section 65, the process involved, and the consequences of non-compliance.

Understanding Section 65 of the CGST Act

Section 65 of the CGST Act, 2017 provides that the Commissioner or an authorized officer can conduct a GST audit of any registered taxpayer. The audit may take place at the taxpayer’s business premises or at the tax department’s office.

Key Features of Section 65 GST Audit:

• Conducting Authority: Commissioner or an authorized tax officer

• Audit Frequency: Once a year or as deemed necessary by tax authorities

• Prior Notice: The taxpayer must receive a notice at least 15 working days in advance (Form GST ADT-01)

• Audit Duration: Must be completed within three months from the initiation date

• Extension Period: An additional six months may be granted by the Commissioner for valid reasons

• Audit Report: Findings must be communicated to the taxpayer in Form GST ADT-04

• Action on Non-Compliance: If discrepancies are found, further action may be initiated under Sections 73 and 74

Time Limit for GST Audit Under Section 65

The time limits for conducting a GST audit under Section 65 are structured as follows:

1. Initiation of Audit

• The Commissioner can initiate an audit at any time within the ongoing financial year.

• The audit can also be conducted within two years from the date of filing the annual return for the financial year concerned.

2. Duration of the Audit

• As per Section 65(4) of the CGST Act, the audit must be completed within three months from the start date.

• The Commissioner can extend this period by six months if required due to complexities in the case.

3. Key Factors Affecting the Time Limit

• Complexity of Transactions: If the case involves high-value transactions, multiple locations, or irregularities, the audit may take longer.

• Taxpayer’s Cooperation: If the taxpayer fails to provide necessary records or respond promptly, the audit could extend beyond the stipulated time.

• Workload of Tax Authorities: The volume of audits being conducted by tax officers in a given jurisdiction may influence the timeline.

4. Assessment in Case of Non-Cooperation

• If the taxpayer fails to comply with the audit process or provide necessary documentation, authorities can initiate a Best Judgment Assessment under Section 62 of the CGST Act. This assessment must be completed within five years from the due date of the annual return for the relevant financial year.

Process of GST Audit Under Section 65

The GST audit process involves a series of well-defined steps to ensure transparency and accuracy:

Step 1: Issuance of Notice (Form GST ADT-01)

The taxpayer receives an audit notice at least 15 working days in advance.

Step 2: Verification of Records

Tax authorities inspect:

• GST returns, invoices, purchase orders

• Input Tax Credit (ITC) claims, tax payments

• Stock registers, financial statements, and ledgers

Step 3: Completion of Audit

The audit must conclude within three months from initiation, extendable by six months under special circumstances.

Step 4: Issuance of Findings (Form GST ADT-04)

• After completing the audit, tax authorities issue their findings via Form GST ADT-04.

• If tax short payments, excess ITC claims, or other discrepancies are found, further action is taken under Sections 73 and 74.

Consequences of Non-Compliance

Failing to comply with GST audit requirements under Section 65 can lead to serious repercussions, including:

• Tax Shortfall Recovery: Authorities will demand repayment of short-paid or unpaid taxes.

• Penalties & Interest: Late payment attracts interest under Section 50 and penalties under Sections 73 & 74.

• Legal Proceedings: Severe non-compliance may lead to prosecution under Section 132 of the CGST Act.

Difference Between Section 65 and Section 66 GST Audit

While Section 65 deals with departmental audits, Section 66 mandates an audit by a chartered accountant or cost accountant appointed by tax authorities.

FAQs 

1. What is the notice period for the Section 65 audit?

The tax department must notify the taxpayer at least 15 working days in advance before conducting the audit (Form GST ADT-01).

2. What is the time limit for GST scrutiny?

GST scrutiny notices are issued under Section 61 and can be conducted within three years from the filing date of the relevant annual return.

3. What is the time limit for auditing?

Under Section 65, a GST audit must be completed within three months from initiation, with a possible extension of six months.

4. What is the primary objective of a GST audit under Section 65?

The main goal of a GST audit is to ensure that taxpayers are correctly filing their GST returns, claiming Input Tax Credit (ITC) legitimately, and paying the correct tax liability as per GST law.

5. Who conducts the GST audit under Section 65?

The audit under Section 65 is conducted by the Commissioner or an officer authorized by him. The audit may be carried out at the taxpayer’s business premises or the tax department’s office.

6. What happens if a business fails to cooperate with the GST audit?

If a business does not cooperate, such as not providing records or obstructing the audit process, the tax department may initiate:

• Best Judgment Assessment under Section 62

• Recovery proceedings under Sections 73 & 74

• Penalties & interest for non-compliance

7. Can a GST audit under Section 65 be conducted multiple times for the same financial year?

No, a regular GST audit under Section 65 is typically conducted only once per financial year. However, if discrepancies are found, the authorities may conduct further investigations under other sections.

8. How does Section 65 differ from Section 66 in terms of GST audits?

Section 65 Audit: Conducted by the GST department for general compliance checks.

Section 66 Audit: Conducted by a Chartered Accountant (CA) or Cost Accountant (CMA) appointed by tax authorities when they suspect significant non-compliance.

7. What is the format of the GST audit notice?

The tax authorities issue a notice in Form GST ADT-01, which is sent at least 15 working days before the audit begins.

8. Can an extension be requested for completing the GST audit?

Yes, if the audit is not completed within three months, the Commissioner can extend the period by six months if there are valid reasons.

Conclusion

GST audits under Section 65 ensure tax compliance, prevent fraudulent claims, and enhance transparency. Understanding the time limits and audit process helps businesses prepare better and avoid penalties.

At Anil D’Souza & Associates (ADCA), we specialize in GST audits, compliance management, and taxation advisory. If your business is facing a GST audit or needs expert assistance in tax compliance, our team of certified chartered accountants is here to help!

Need expert assistance with your GST compliance or audit? Don’t risk penalties—let ADCA handle it for you! Contact us today at ADCA for personalized GST solutions.