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Assessment and Audit Under GST
Assessment and Audit Under GST
ASSESSMENT AND
AUDIT
LEARNING OUTCOMES
1. INTRODUCTION
What is the need for
assessment & audit?
A supplier will come to know the extent of his tax liability which has to be
discharged on a continuous and regular basis only after assessment.
Assessment means determination of tax liability and includes self-assessment,
re-assessment, provisional assessment, summary assessment and best judgment
assessment.
GST is a trust based taxation regime wherein the assessee is required to self-
assess his returns and determine tax liability without any intervention by the tax
official. Therefore, a tax regime that relies on self-assessment has to put in place
a robust audit mechanism to measure and ensure compliance of the provisions
of law by the taxable person.
“Audit” has been defined in section 2(13) of the CGST Act, 2017 and it means
the examination of records, returns and other documents maintained or
furnished by the registered person under the GST Acts or the rules made there
under 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 the GST Acts or the rules
made thereunder.
Chapter XII – Assessment [Sections 59 to 64] and Chapter XIII-Audit [Section 65
& 66] of the CGST Act stipulates the provisions relating to assessment and audit
respectively. State GST laws also prescribe identical provisions in relation to
assessment and audit.
In GST, Section 59 is for self-assessment by assessee whereas section 60 stands
for provisional assessment with both assessee and departmental officer playing
their respective roles. Sections 61-64 give power to departmental officer for
assessment in different situations. Section 65 and section 66 pertains to audit
by tax authorities and by CA/CWA nominated by Commissioner respectively.
However, before going through the detailed study of Assessment and Audit
provisions, let us first go through few relevant definitions.
Provisions of assessment and audit under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
Assessment means determination of tax liability under this Act and includes
self-assessment, re-assessment, provisional assessment, summary
assessment and best judgment assessment. [Section 2(11)]
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. [Section 2(13)]
Chartered Accountant means a chartered accountant as defined in clause
(b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949;
[Section 2(23)]
Cost Accountant means a cost accountant as defined in clause (b) of sub-section
(1) of section 2 of the Cost and Works Accountants Act, 1959; [Section 2(35]
Prescribed means prescribed by rules made under this Act on the
recommendations of the Council. [Section 2(87)]
Proper Officer in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board; [Section 2(91)]
(b) the amount for which the bond is to be executed and security to
be furnished not exceeding 25% of the amount covered under the bond.
Furnish of Security
The payment of tax on provisional basis may be allowed, if the taxable person
executes a bond in the prescribed form along with a security in the form of
a bank guarantee for an amount as the proper officer may deem fit, binding the
taxable person for payment of the difference between the amount of tax as may
be finally assessed and the amount of tax provisionally assessed.
A bond furnished to the proper officer under the Central/State Goods and
Services Tax Act/Integrated Goods and Services Tax Act shall be deemed to be
a bond furnished under the provisions of this Act and the rules made
thereunder.
The term “amount” shall include the amount of integrated tax, central tax,
State tax or Union territory tax and cess payable in respect of such transaction.
Finalization of Provisional Assessment
The final assessment order has to be passed by the proper officer within 6
months from the date of the communication of the order of provisional
assessment. However, on sufficient cause being shown and for reasons to be
recorded in writing, the above period of 6 months may be extended:
(a) by the Joint/Additional Commissioner for a further period not
exceeding 6 months, and
(b) by the Commissioner for such further period as he may deem fit not
exceeding 4 years
For finalization of assessment, proper officer shall issue a notice in prescribed
form, calling for such information and records, as may be required and shall
issue a final assessment order specifying the amount payable by the registered
person or the amount refundable, if any.
Where the tax liability as per the final assessment is higher than in
provisional assessment i.e. tax becomes due consequent to order of
final assessment, the registered person shall be liable to pay interest on
tax due but not paid, at the rate specified under section 50(1) from the
date the tax was due to be paid originally till the date of actual payment.
In simple words, in case any tax amount becomes payable subsequent
to finalization of the provisional assessment, then interest at the
specified rate will also be payable by the supplier from the first day after
the due date of payment of the tax till the date of actual payment,
whether such amount is paid before or after the issuance of order for
final assessment.
Where the tax liability as per the final assessment is less than in
provisional assessment i.e. tax becomes refundable consequent to the
order of final assessment, the registered person shall be paid interest at
the rate specified under section 56 from the date immediately after the
expiry of 60 days from the date of receipt of application in accordance with
the provisions of Section 54(1) till the date of refund of such tax.
In simple words, in case any tax amount becomes refundable
subsequent to finalization of the provisional assessment, then interest
(subject to the eligibility of refund and absence of unjust enrichment)
at the specified rate will be payable to the supplier.
Release of Security
The applicant may file an application for release of security furnished after
issue of final assessment order.
The proper officer shall release the security after ensuring that applicant has
paid the amount specified in final assessment order and issue an order within
a period of 7 working days from the date of receipt of the application.
Reply to notice
The registered person to whom notice is issued may –
accept the discrepancy as mentioned in the notice and pay the tax,
interest and any other amount arising from such discrepancy and
inform the same or furnish an explanation for the discrepancy to the
proper officer or
submit his explanation regarding non-acceptance of discrepancy within
a period of 30 days of being informed by the proper officer or such
further period as may be permitted by him.
Action by Proper Officer
Where the explanation furnished by the registered person or the information
submitted is found to be acceptable, the proper officer shall inform him
accordingly and no further action shall be taken in this regard.
In case no satisfactory explanation is furnished by registered person or where
the registered person, after accepting the discrepancies, fails to take the
corrective measure in his return for the month in which the discrepancy is
accepted, the proper officer may take recourse to any of the following
provisions, namely:
(a) proceed to conduct audit under section 65 of the Act;
(b) direct the conduct of a special audit under section 66 which is to be
conducted by a Chartered Accountant or a Cost Accountant nominated
for this purpose by the Commissioner; or
(c) undertake procedures of inspection, search and seizure under section
67 of the Act; or
(d) initiate proceeding for determination of tax and other dues under
Section 73 or 74 of the Act.
respect of supply of goods or services or both, the input tax credit availed and
utilized, refund claimed, and other relevant issues and record the observations
in his audit notes.
During the course of audit, the authorised officer may require the registered
person,—
a) to facilitate the verification of accounts/records available or
requisitioned by the authorities,
b) to provide such information as the authorities may require for the
conduct of the audit, and
c) to render assistance for timely completion of the audit.
The proper officer may inform the registered person of the discrepancies
noticed, if any, as observations of 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.
Finalisation of Audit
The proper officer shall finalise the findings of the audit after due
consideration of the reply furnished by registered person to audit observation
brought to his notice during the course of audit.
On conclusion of audit, the proper officer shall within 30 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 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 section 74.
or
the credit availed is not within the normal limits,
he may, with the prior approval of the Commissioner, issue a direction to the
registered person 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 and specified in the said direction.
The provisions of special audit shall have effect even if the accounts of the
registered person have been audited under any other provisions of the GST
Act or any other law for the time being in force.
Time limit within which audit to be completed
The Chartered Accountant or cost accountant as nominated by Commissioner
shall submit a report of such audit duly signed and certified by him within the
period of 90 days to the said Assistant Commissioner mentioning therein such
other particulars as may be specified:
The Assistant Commissioner may extend the said period 90 days by a further
period of 90 days −
on an application made to him in this behalf by the registered person or
the chartered accountant or cost accountant; or
for any material and sufficient reason.
Who will bear the expenses of audit?
The expenses of the examination and audit of records including the remuneration
of such Chartered Accountant or Cost Accountant, shall be determined and
paid by the Commissioner and such determination shall be final.
How Special Audit Report to be dealt with?
The registered person shall be given an opportunity of being heard in respect of
any material gathered on the basis of special audit which is proposed to be used
in any proceedings against him under this Act or the rules made thereunder.
On conclusion of special audit, the registered person shall be informed of the
findings of special audit.
Where the special audit results in detection of tax not paid or short paid or
erroneously refunded, or input tax credit wrongly availed or utilised, the
process of demand and recovery will be initiated against the registered
person under section 73 or section 74.
LET US RECAPITULATE
The provisions relating to assessment and audit have been summarised by way of
diagrams to help students remember and retain the provisions in a better and
effective manner:-
Different ways to assess the tax liability by a registered person
A registered person may assess his tax liability in two different ways
depending upon the circumstances warranting such an assessment.
Self-Assessment
Provisional Assessment
For this –
• Taxable person shall furnish an application along with the
documents in support of his request.
• The proper officer after calling for additional information and
documents, if required, issue an order indicating therein-
o value or the rate or both on the basis of which the assessment is
to be allowed on a provisional basis;
o amount for which the bond is to be executed and security to be
furnished
Assessment
Audit
ANSWERS/HINTS
1. No. In certain cases, like when goods are under transportation or are stored
in a warehouse, and the taxable person in respect of such goods cannot be
ascertained, the person in charge of such goods shall be deemed to be the
taxable person and will be assessed to tax.
2. Yes, principal of natural justice is must to be followed before passing
assessment order against the taxable person seeking to impose any financial
burden on him.
3. Assessment Order passed by proper officer may be withdrawn in the following
cases:-
(i) Assessment of Non-filers of return – The best judgment order passed
by the Proper Officer under section 62 of CGST Act shall automatically
stand withdrawn if the taxable person furnishes a valid return for the
default period (i.e. files the return and pays the tax as assessed by him),
within thirty days of the receipt of the best judgment assessment order
(ii) Summary Assessment – A taxable person against whom a summary
assessment order has been passed can apply for its withdrawal to the
jurisdictional Additional/Joint Commissioner within thirty days of the
date of receipt of the order. If the said officer finds the order erroneous,
he can withdraw it and direct the proper officer to carry out
determination of tax liability in terms of section 73 or 74 of CGST Act.
The Additional/Joint Commissioner can follow a similar course of action