ASSESSMENT / AUDIT IN GST ERA

M.G. Kodandaram, IRS

Assistant Director, NACIN
[email protected]
 CGST Act 2017-CHAPTER XII
ASSESSMENT – Sn. 59 to 64

CGST Rules Chapter XI – Assessment – Rules 98 to 100

Rule 98 : Provisional Assessment
Rule 99 : Scrutiny of Returns
Rule 100 : Assessment in Certain Cases
Sn.2 (11) “assessment” means-
-determination of tax liability under this Act
and - includes
•self-assessment,
•re-assessment,
•provisional assessment,
•summary assessment and
•best judgment assessment;

Self Assessment – Sec 59

• Every Registered taxable person;
• Himself assesses the tax payable;
• Furnish the return for each tax period.
 Section 2(2)- New Defn of Assessment
• Definition of Assessment – Inclusive to definitive definition
• (2) “assessment” means determination of the dutiability of any
goods and the amount of duty, tax, cess or any other sum so
payable, if any, under this Act or under the Customs Tariff Act, 1975
(hereinafter referred to as the Customs Tariff Act) or under any
other law for the time being in force, with reference to –
a) the tariff classification of such goods as determined in accordance
with the provisions of the Customs Tariff Act;
b) the value of such goods as determined in accordance with the
provisions of this Act and the Customs Tariff Act;
c) exemption or concession of duty, tax, cess or any other sum,
consequent upon any notification issued therefor under this Act or
under the Customs Tariff Act or under any other law for the time
being in force;
4
 Section 2(2) (Contd)

d) the quantity, weight, volume, measurement or other specifics

where such duty, tax, cess or any other sum is leviable on the
basis of the quantity, weight, volume, measurement or other
specifics of such goods;

e) the origin of such goods determined in accordance with the

provisions of the Customs Tariff Act or the rules made
thereunder, if the amount of duty, tax, cess or any other sum is
affected by the origin of such goods;

f) any other specific factor which affects the duty, tax, cess or any
other sum payable on such goods, and includes provisional
assessment, self-assessment, re-assessment and any assessment
in which the duty assessed is nil;
5
 Provisional Assessment – Sec 60
• Ambiguity in Value and rate of tax;
• Execution of security bond as may be prescribed;
• Officer may permit to pay tax provisional basis within 90
days of receipt of request;
• Final assessment to take place within six months;
further extendable by 6 months or 4 years as the case
may be;
• The balance payable or refund due to be settled.
 Scrutiny of Returns – Sec 61
• Scrutinize the return to verify the correctness;
• Discrepancy noticed to be intimated;
• On submission of acceptable explanation within 30
days: No further action required;
• Unsatisfactory explanation within 30 days: Appropriate
action will be initiated.
 Best Judgement Assessment – Sec 62
• Also called Assessment for Non-filers of Returns;
• Registered taxable person:
• fails to file returns and
• fails to respond to notice
• Assessed by Proper Officer based on the information
available to the best of his judgment within 5 years
from due date of annual return;
• On filing of return within 30 days on receipt of
assessment order:
– Best Judgment order deemed to be withdrawn;
interest and late fees payable as applicable
 Assessment of Unregistered Person – Sec 63
• Taxable person fails to take registration;
• Assess to the best of his judgment;
• Serving of show cause notice and opportunity of
personal hearing;
• The assessment to be made with in 5 years from the due
date for filing annual return.

Summary Assessment – Sec 64

• Having evidence, but delay in acting may adversely
effect revenue;
• In the interest of revenue and with due permission;
• Application filed or on his own motion ADC/JC;
• If order is erroneous - ADC/JC; may withdraw such order.
Q1. Who is the person responsible to make assessment of taxes
payable under the Act?
Ans. Every registered person shall selfassess the taxes payable
under this Act and furnish a return for each tax period as specified
under Section 39.
Q2. When is a taxable person permitted to pay tax on a
provisional basis?
Ans. Tax payments can be made on a provisional basis only when
a proper officer passes an order for permitting the same. For this
purpose, the registered person has to make a written request to
the proper officer, giving reasons for payment of tax on a
provisional basis. The reasons for this purpose may be a case
where the registered person is unable to determine the value of
goods and/ or services or determine the applicable tax rate, etc.
Further, the registered person may also be required to execute a
bond in the prescribed form, and with such surety or security as
the proper officer may deem fit.
Q3. What is the latest time by which final assessment is required to
be made?
Ans. It is the responsibility of the proper officer to pass the final
assessment order after taking into account such information as may
be required for finalizing the assessment, within six months from the
date of the communication of the order for provisional assessment.
However, on sufficient cause being shown and for reasons to be
recorded in writing, the timelines may be extended by the Joint/AdC
for a further period not exceeding six months and by the
Commissioner for such further period not exceeding 4 years as he
may deem fit.
Q4. What is the proper officer required to do, if the information
obtained from assessee u/s 61is found satisfactory?
Ans. In case the explanation is found acceptable, the registered
person shall be informed accordingly in Form GST ASMT-12 and no
further action shall be taken in this regard.
 AUDIT IN GST ERA

Audit by tax authorities Special Audit

Annual Audit by CA /
CAG Audit
CWA
CGST Act CHAPTER XIII –AUDIT –Sn. 65 to 66
Section 2(14): “Audit” AUDIT IN GST ERA
65. Audit by tax authorities.
66. Special audit.
CGST Rules - Chapter XI –Audit – Rules 101 to 102
Rule 101 : Audit / Rule 102 : Special Audit
Audit by CA -Annual Audit -35(5) of CGST Act
C &AG
• Considered by Revisional Authority -Sn. 108
• Compensation cess Act
To determine compensation to states –audited and
certified by C&AG is stipulated
 What is Audit?
 Section 2(14): “Audit” means: -
– examination of records, returns and other
documents
– maintained or furnished by RP
– under this Act or under any other law for the time
being in force
– to verify
– correctness of turnover declared, taxes paid,
refund claimed and ITC availed; and
– to assess compliance with GST provisions
 Audit by Tax Authorities
 Commissioner GST or any officer authorized;
 Audit of any RP for a particular period, at particular
frequency and in particular manner;
 At the place of business of RP or in their office;
 Notice to registered person at least 15 working days
prior to audit -Form GST ADT-01
 Audit to be completed within 3 months
 can be extended further by 6 months by Commissioner;
 RP to provide the required information and facility;
 Result of audit to be intimated within 30 days -Form GST
ADT-02 and
 further action will be taken.
 Special Audit -Prior approval of the Commissioner
 Proceedings to be pending before AC or any officer above
 Nature & complexity of the case & interests of revenue to be
considered
 Opinion : Correct value not declared and / or ITC claimed not
within normal limits
 Direct RP to get his records and books of a/c audited
 -Form GST ADT-03
 Audit to be done by CA / CWA nominated by Commissioner
 Audit Report to be submitted within 90 days
 can be extended by further 90 days
 Opportunity of PH to be given to RP and further action taken by
proper officer;
 Expenses of audit including remuneration to be determined and
paid by the Commissioner.
In SKP Securities Ltd. v Deputy Director (RA-IDT) 2013 (1) TMI 549 -
CALCUTTA HIGH COURT , -held that condition precedent to order for
special audit is reason to believe that person liable to Service Tax is
within circumstances stipulated in section 72A (wrong declaration of
value of taxable service, misutilization of credit of tax etc). Such
insinuation of wrongful act affects citizen in his social life, and comes
within scope of civil consequences. Reference in this context be made
to the judgment of the Supreme Court in Sahara India (Firm),
Lucknow v Commissioner of Income Tax, Central-I and Another
reported in 2008 (4) TMI 4 - Supreme Court .In that view, such an
order has to comply with principles of natural justice.

The auditee should be afforded an opportunity of hearing if the

findings of special audit are proposed to be used in any proceeding
against him.
• Annual Audit
• According to Section 35(5) of the CGST Act:
– Every RP whose turnover during a FY exceeds the
prescribed limit (presently one crore rupees) shall
get his accounts audited by CA / CWA
– and shall submit a copy of the audited annual
accounts
– along with a reconciliation statement
– Reconciling value of supplies declared in return with
audited annual financial statements
• Contents of the audit report & other particulars to be
prescribed
• Audited Report & Audited Annual Accounts to be
submitted along with annual return on or before 31st
December following the end of financial year.
C & AG of India shall have the power to inspect the
accounts of such Government or authority by virtue of
powers vested in it by other law.
108. (1)… the Revisional Authority may, on his own
motion, or in consequence of an observation by C & AG
of India, he may, if necessary, stay the operation of such
decision or order for such period as he deems fit and
after giving the person concerned an opportunity of
being heard and after making such further inquiry as may
be necessary, pass such order, as he thinks just and
proper, including enhancing or modifying or annulling the
said decision or order.
Section 58. Utilisation of Fund.
(1) All sums credited to the Fund shall be utilised by the
Government for the welfare of the consumers in such
manner as may be prescribed.
(2) The Government or the authority specified by it shall
maintain proper and separate account and other
relevant records in relation to the Fund and prepare an
annual statement of accounts in such form as may be
prescribed in consultation with the Comptroller and
Auditor-General of India.
•GST (COMPENSATION TO STATES) ACT, 2017
Section 5 (5) The base year revenue shall be calculated ..on the basis
of figures of revenue collected & net of refunds given in that year, as
audited by C &AG

Section 7 Calculation and release of compensation-

(2) The compensation payable to a State shall be … finally calculated
for every FY after the receipt of final revenue figures, as audited by C
&AG
(b) actual revenue collected by a State in any FY during the
transition period shall be— as certified by C &AG of India;
(5) In case of any difference between final compensation amount
payable to a State… upon receipt of audited revenue figures from C
&AG,..shall be adjusted against release of compensation to State in
the subsequent FY
 Section 10 - Crediting proceeds of cess to fund
(4) The accounts relating to Fund shall be audited by C
&AG or any other person appointed by him.. at such
intervals as may be specified by him and any expenditure in
connection with such audit shall be payable by the Central
Government to C &AG.
(5) The accounts of the Fund, as certified by C &AG or any
other person appointed by him in this behalf together with
the audit report thereon shall be laid before each House of
Parliament.
Forms Title of form
FORM GST ADT-01 Notice for conducting audit

FORM GST ADT-02 Audit Report under section 65(6).

FORM GST ADT-03 Communication to the registered

person for conduct of special audit
under section 66

FORM GST ADT-04 Information of Findings upon Special

Audit
•Q1. Whether audit is mandatory in case of every RP?
•Ans. No, it is not mandatory. It will be applicable only in cases
where the appropriate authorities authorize the same by issue of
general / specific orders.
•Q2. Whether any prior intimation is required before conducting the
audit?
•Ans. Yes, prior intimation is required and the taxable person should
be informed at least 15 days prior to conduct of audit in FORM GST
ADT-01.
•Q3. What is the period within which the audit is to be completed?
•Ans. The audit is required to be completed within 3 months from
the date of commencement of audit or within the extended period
of 6 months in cases where the Commissioner is satisfied for
reasons to be recorded in writing that the audit cannot be
completed in 3 Months.
•Q4. What is meant by commencement of audit?
•Ans. It means the date on which the records and documents
requisitioned 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.
•Q5. What are the obligations of the taxable person when he
receives the notice of audit?
•Ans. The taxable person should afford necessary facility /
information / assistance / documents for smooth conduct of audit
and its timely completion.
•Q6. What would be the action by the proper officer upon
conclusion of the audit?
•Ans. The proper office must within 30 days inform the registered
person (i.e. the auditee) about his findings, reasons for findings
and his rights and obligations in respect of such findings.
•Q1. Who can serve the notice for special audit?
•Ans. An officer not below the rank of an Assistant Commissioner
with prior approval of the Commissioner may serve notice for
special audit, having regard to the nature and complexity of the
case and the interest of revenue.

•Q2. Under what circumstances notice for special audit shall be

issued?
•Ans. If the proper officer (not below the rank of Assistant
Commissioner) is of the opinion that the value has not been
correctly declared or credit availed is not within the normal limits,
a special audit may be ordered.

•Q3. Who will conduct the special audit?

•Ans. A Chartered Accountant or a Cost Accountant so nominated
by the Commissioner may undertake the audit.
•Q4. What is the time limit to submit the audit report?
•Ans. The auditor will have to submit the report within 90 days or
the further extended period of a 90 days.

•Q5. Who will bear the cost of special audit?

•Ans. The expenses for examination and audit including the
remuneration payable to the auditor will be determined and
borne by the Commissioner.

•Q6. What action the tax authorities may take after the special
audit?
•Ans. Based on the findings / observations of the special audit,
action can be initiated under Section 73 or 74 as the case may be
of the CGST Act.
 Case Study

•A notice for audit was served to M/s. ABC Ltd, on

20.02.2020. Required information was given by M/s. ABC
Ltd, on 25.05.2020. The audit officers visited the place of
business on 26.06.2020. What is the last date within
which the audit is to be completed?

•It will be 3 months from 25.05.2020, viz., 24.08.2020 or

within an extended period of 6 months. The extended
period would be 24.02.2021.
 M.G. Kodandaram, IRS
Assistant Director, NACIN
[email protected]
 M.G. Kodandaram, IRS
Assistant Director, NACIN
[email protected]