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Shaaransh Sharma

September 27, 2024

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Basics of GST

‍GST Audit Time Limit under Section 65 of CGST Act

The introduction of the Goods and Services Tax (GST) has dramatically transformed the Indian tax system. One such provision relevant to audits is Section 65 of CGST Act. These can enable tax authorities to carry out audits, confirm the accuracy of GST filings and detect opportunities for non-compliance or evasion. There are a few important criteria for this which need to be kept intact otherwise it will hamper the functionality and efficiency of the GST system, one among them is The time limit for GST audit i.e. the period within which the audits need to be conducted on the GST network.

This blog discusses the GST audit time limit under Section 65 of the CGST Act as well as important provisions and procedures on assessment and audit under GST.

What is a GST Audit?

To talk about Section 65 there is a process that you have to remember before doing so, which revolves around what a GST Audit Is. GST Audit is the scrutiny of records, returns and other documents maintained by a taxpayer. The main role of this parser is to check if:

Turnover declared
Taxes paid
Refunds claimed
Input Tax Credit (ITC) availed
Compliance with the provisions of the CGST Act and other related laws.

They help tax authorities to establish whether or not businesses are complying with the rules, and paying their taxes.

The Input tax credit System is better explained in our blog on Input Tax Credit Under GST Eligibility and Claim Process

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Section 65 of CGST Act: Overview

As per section 65 of the CGST Act, the Commissioner or any officer authorized by him will have a right to carry out scrutiny/ audit of registered taxpayers. The taxpayer upon whom this audit is done can present themselves at the office of the tax authorities or their premises and so forth.

This section deals with an audit that is conducted to verify the books of accounts, returns and other records maintained by the taxpayer to check whether they comply with relevant provisions of GST.

The CGST act is better explained in our other blog on What is CGST: Central Goods and Service Tax

Key Provisions of Section 65:

Initiation of Audit: The audit may be initiated by order of the Commissioner or an officer authorized by him through a notice to appraise the taxpayer not less than 15 days in advance, specifying the requested data and places where they need to be presented.
Timeline for Audit: The audit should be finalized within three months from the date of initiation of an audit. But it can be extended up to six months more by the Commissioner if required.
Availability of Books and Records: The taxpayer must provide all relevant books, records and returns maintained by him to support the audit process.
Results of an audit: the tax authority shall notify, within 30 days, the taxpayer on the results of an audit conducted. He or she must also correct any discrepancies or tax obligations if identified.

GST Audit Time Limit under Section 65

Section 65 of the CGST Act indicates the GST audit time limit so that audits are completed within defined deadlines. The audit shall be final within —

Three months after the onset date of the audit.
The Commissioner can, depending on the complexity of the case or for other justified reasons, extend that period by a maximum of six months.

Likewise, the period for the completion of the GST audit cannot be more than nine months from the commencement of April 65. However, this limitation is to prevent businesses from staying under the uncertainty of their tax assessment for an extended period.

Audit Process and Timeline Breakdown:

Audit Initiation:

The tax authorities will issue an audit notice at least 15 days before the scheduled audit date.

The audit commencement date is when the actual audit process begins (usually when the tax authorities start reviewing the records).

Audit Period:

The GST audit is required to be finished within 3 months from the review start date.

If it is not even enough, there could be another six months available, taking it up to nine.

Communication of Audit Findings:

Upon completion of the audit, tax authorities are required to reveal their findings on what they discovered during an audit within not later than 30 days which might indicate discrepancies.

The taxpayer is also required to act upon the findings, pay any owed taxes or mend things that are not in line with the rules.

Why Does the GST Audit Time Limit Matter?

The GST audit time limit under Section 65 serves multiple purposes.

Time bar: The law has brought an overarching timeline that keeps the audit regime within the band, and also it does not give time to auditors to delay their audits unnecessarily.
Resolution for Taxpayers: A Taxpayer is not forced to wait as they are promised that the audit process will be concluded in the given time.
Efficient Tax Administration: Audits within a specific period are helpful to ensure that the tax authorities are doing a good job and non-compliance is spotted in time for better administration of the refund.

Assessment and Audit under GST

Section 65 is focused on the audit process under GST, which is part of a holistic assessment and audit under Goods and Services Tax. Please note that GST audits are not limited to Section 65 audits initiated by the tax authorities. Self-assessment audits and special audits are also provided by the CGST Act.

Self-assessment: Taxpayers have to self-assess their GST liabilities and file returns. The reliability of these Returns can be scrutinized and if any variations are observed then those might pay a way to audits under Section 65.
Special Audit: The Commissioner may direct for a special audit to be conducted under Section 66 of the CGST Act if he deems that

(i) by the nature and complexity relating to the proper declaration or incorrect claim towards Taxable supplies.

(ii) ITC claimed in GST return is not valid.

Comparison of Different GST Audits:

Self-Assessment: Conducted by the taxpayer.
Audit under Section 65: Conducted by tax authorities, with a time limit of up to nine months.
Special Audit under Section 66: Conducted by a chartered accountant or cost accountant appointed by tax authorities.

Conclusion

Section 65 of the CGST Act is critical to ensuring that audits are conducted efficiently and without unnecessary delay. This will allow taxpayers a favourable situation in terms of the audit, as an audit can take no longer than nine months.

Section 65 Audit: — It is necessary to ensure compliance with the GST law and to avoid the evasion of taxes & correct its payment, section 65 audits are an important tool. The following pointers will delve more into the assessment and audit provisions of GST that business organizations need to be aware of in order to ensure they are not non-compliant.

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FAQs

What is the GST audit time limit under Section 65 of the CGST Act?

The period to complete the GST audit has been prescribed in the law and it must be completed within three months, which can further be extended by six more months, it means total audit period cannot exceed nine months.

Who conducts the audit under Section 65 of the CGST Act?

Audit is made by Commissioner himself or any other person who has been authorized him.

When is the taxpayer notified about the audit under Section 65?

The taxpayer must be notified 15 days before an audit is to begin.

What happens if discrepancies are found during the audit?

You will be notified within 30 days regarding the audit findings and if differences are found you will have to pay any tax due.

Can the audit time be extended beyond the initial three months?

Yes. In fact, the Commissioner can add six months on to an audit where appropriate based on case complexity.

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