SECTION 49- AUDIT BY TAX AUTHORITIES

GST Update 06.09.2016

GST DAILY DOSE OF UPDATION:-

SECTION 49- AUDIT BY TAX AUTHORITIES:-

(1)                 The [Commissioner of CGST/Commissioner of SGST] or any officer authorised by him, by way of a general or a specific order, may undertake audit of the business transactions of any taxable person for such period, at such frequency and in such manner as may be prescribed.

(2)                   The tax authorities referred to in sub-section (1) may conduct audit at the place of business of the taxable person and/or in their office.

(3)                   The taxable person shall be informed, by way of a notice, sufficiently in advance, not less than fifteen working days, prior to the conduct of audit in the manner prescribed.

(4)                   The audit shall be carried out in a transparent manner and 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 taxable person cannot be completed within three months from the date of commencement of audit, 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 taxable person or the actual institution of audit at the place of business, whichever is later.

(5)                   During the course of audit, the authorised officer may require the taxable person, to afford him the necessary facility to verify the books of account or other documents as he may require and which may be available at such place, to furnish such information as he may require and render assistance for timely completion of the audit.

(6)                   On conclusion of audit, the proper officer shall without delay inform the taxable person, whose records are audited, of the findings, the taxable person’s rights and obligations and the reasons for the findings.

(7)                   Where the audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit erroneously availed, the proper officer may initiate action under section 51.

It is pertinent to note that presently, under Service Tax Laws, there is a big question mark on whether audit can be conducted by service tax officers as the Delhi High Court has struck down Rule 5A(2) of Service Tax Rules, 1994 in case of TRAVELITE (INDIA) VS UNION OF INDIA [2014 (35) S.T.R. 653 (DEL)]. Moreover, recently, even the new Rule 5A(2) of Service Tax Rules, 1994 has been declared as ultra vires by the same Delhi High Court in the case of MEGA CABS PVT. LTD. VS UNION OF INDIA [2016 (43) S.T.R. 67 (DEL)] on the ground that revenue authorities are not empowered to conduct audit of records of assessee and the audit may be conducted only by Chartered Accountant or Cost Accountant. In light of the present context, the incorporation of provision regarding conduct of audit by revenue officers in GST should be re-looked. Furthermore, at present, there is no statutory provision for audit under Central Excise/Service Tax Laws but in the GST regime, it is proposed in section 42(4) that every registered taxable person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a Chartered Accountant or a Cost Accountant. It is pointed that when there is provision of statutory audit under the proposed GST regime and there is also provision of special audit being conducted by revenue department, then what is the need for incorporating provisions for conduct of audit by tax authorities.

On studying the above provisions, it is also worth noting that the audit by tax authorities shall be completed within a period of three months from the date of commencement of audit and this period may be further extended to six months by the Commissioner. Presently, there is no time period prescribed for audit conducted by departmental officers under Excise/Service Tax Laws and the audit is completed in maximum 15 days. However, the proposed GST regime provides that audit may be completed within 3 months and maximum within 6 months time period which is substantially high. With increased compliance by filing of 37 returns by an assessee on different dates in a month, if the revenue officers will conduct audit that may proceed upto 3 months, the assessee would hardly have time to conduct its business operations. Hence, the time limit for conducting audits should be revised on downward side.

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GST Update 06.09.2016

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