Assessment and Audit – CA Final IDT Study Material is designed strictly as per the latest syllabus and exam pattern.
Assessment and Audit – CA Final IDT Study Material
Question 1.
Kulbhushan & Sons has entered into a contract to supply two consignments of certain taxable goods. However, since it is unable to determine the value of the goods to be supplied by it, it applies for payment of tax on such goods on a provisional basis along with the required doc-uments in support of its request.
On 12.01.20XX, the Assistant Commissioner of Central Tax issues an order allowing payment of tax on provisional basis indicating the value on the basis of which the assessment is allowed on provisional basis and the amount for which the bond is to be executed and security is to be furnished.
Kulbhushan & Sons complies with the same and supplies both the consignments of goods on 25.01.20XX thereafter paying the tax on provisional basis in respect of both the consignments on 19.02.20XX.
Consequent to the final assessment order passed by the Assistant Commissioner of Central Tax on 21.03.20XX, a tax of ₹ 1,80,000 becomes due on 1st consignment whereas a tax of ₹ 4,20,000 becomes refundable on 2nd consignment.
Kulbhushan & Sons pays the tax due on 1st consignment on 09.04.20XX and applies for the refund of the tax on 2nd consignment same day. Tax was actually refunded to it on 05.06.20XX.
Determine the interest payable and receivable, if any, by Kulbhushan & Sons in the above case. [RTP, Nov. 18]
Answer:
In respect of 1st consignment
Statutory Provision
Section 60(4) of the CGST Act, 2017 :
- Where the tax liability as per the final assessment is higher than under provisional assessment i.e. tax becomes due consequent to order of final assessment
- the registered person shall be liable to pay
- interest on tax payable on supply of goods but not paid on the due date
- at the rate specified under section 50(1) [18% p.a.], from the first day after the due date of payment of tax in respect of the goods supplied under provisional assessment till the date of actual payment
- whether such amount is paid before/after the issuance of order for final assessment.
In the given Case
- The due date for payment of tax on goods cleared on 25.01.20XX under provisional assessment is 20.02.20XX.
- Kulbhushan & Sons is liable to pay following interest in respect of 1st consignment:
= ₹ 1,80,000 × 18% × 48/365 = ₹ 4,261 (rounded off)
In respect of 2nd consignment
Statutory Provision
Section 60(5) of the CGST Act, 2017 :
- 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 [6% p.a.]
- from the date immediately after the expiry of 60 days from the date of receipt of application under section 54(1) till the date of refund of such tax.
In the given Case
- The refund has been made (05.06.20XX) within 60 days from the date of receipt of application of refund (09.04.20XX)
- interest is not payable to Kulbhushan & Sons on tax refunded in respect of 2nd consignment.
Question 2.
What are the provisions for “Provisional Assessment”?
Answer:
Section 60 of CGST Act, 2017 provides for “Provisional Assessment” under GST regime. The provisions are summarized as follows:
Section | Brief Description | Provision | ||||
1. 60(1) | Conditions for Provisional Assessment | Subject to the provisions of section 60(2) where the taxable person is unable to determine the value of goods or services or both or determine the rate of tax applicable thereto
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2. 60(2) | Execution of Bond |
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. |
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3. 60(3) | Order under Provisional Assessment |
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60(3) | Proviso |
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4. 60(4) | Interest on Provisional Assessment |
on the supply of goods or services or both under provisional assessment but not paid on the due date specified under section 39(7) or the rules made thereunder at the rate specified under section 50(1) from the first day after the due date of payment of tax in respect of the said supply of goods or services or both till the date of actual payment |
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5. 60(5) | Refund under Personal Assessment |
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Question 3.
What recourse may be taken by the officer in case proper explanation is not furnished for the discrepancy detected in the return filed, while conducting scrutiny under section 61 of CGST Act?
Answer:
If the taxable person does not provide a satisfactory explanation within 30 days of being informed (extendable by the officer concerned) or after accepting discrepancies, fails to take corrective action in the return for the month in which the discrepancy is accepted, the Proper Officer may take recourse to any of the following provisions:
(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.
Question 4.
Explain the assessment of Unregistered Person as per Section 63 of CGST Act, 2017?
Answer:
Not withstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under section 29(2) but who was liable to pay tax,
The proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods,
The proper officer Issue an assessment order within a period of 5 years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the person an opportunity of being heard.
Question 5.
Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST Act, 2017? [MTP, May 2018/Nov. 19, 5 Marks]
Answer:
I. Assessment of Non-Filers of Returns [Section 62]
SECTION 62(1)
Best Judgment Assessment
- If the taxpayer does not respond to the notice issued u/s 46 (Notice to defaulters)
- the proper officer shall make
- the best judgment assessment within 5 years
- from the date specified u/s 44 (Annual Return).
The proper officer shall take into account all relevant material available/gathered.
SECTION 62(2)
Withdrawal of Assessment Order
- If the taxpayer furnished a valid return within 30 days
- from the date of service of assessment order
- no best judgment assessment to be done.
If order already passed, it shall be deemed to be withdrawn but liability will have to be paid along with interest and penalty.
II. Summary Assessment [Section 64]
To apply for withdrawal
- As per section 64(2) of the CGST Act, 2017
- a taxable person against whom a summary assessment order has been passed
- can apply for its withdrawal
- to the jurisdictional Additional/Joint Commissioner
- within 30 days of the date of receipt of the order.
If order is erroneous
- 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 the CGST Act.
The Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds the summary assessment order to be erroneous.
Examiner’s Comment
The requirement of the question is to explain the cases where assessment order passed by proper officer may be withdrawn under CGST Act, 2017. Most of the examinees got confused and ended up in writing lengthy vague answers on the basis of Income-tax Act, 1961.
Question 6.
Write a brief note on Summary Assessment In certain special cases as per section 64 of the CGST Act, 2017. [May 2018, Old, 4 Marks]
Answer:
I. Assessment of Non-Filers of Returns [Section 62]
SECTION 62(1)
Best Judgment Assessment
- If the taxpayer does not respond to the notice issued u/s 46 (Notice to defaulters)
- the proper officer shall make
- the best judgment assessment within 5 years
- from the date specified u/s 44 (Annual Return).
The proper officer shall take into account all relevant material available/gathered.
SECTION 62(2)
Withdrawal of Assessment Order
- If the taxpayer furnished a valid return within 30 days
- from the date of service of assessment order
- no best judgment assessment to be done.
If order already passed, it shall be deemed to be withdrawn but liability will have to be paid along with interest and penalty.
II. Summary Assessment [Section 64]
To apply for withdrawal
- As per section 64(2) of the CGST Act, 2017
- a taxable person against whom a summary assessment order has been passed
- can apply for its withdrawal
- to the jurisdictional Additional/Joint Commissioner
- within 30 days of the date of receipt of the order.
If order is erroneous
- 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 the CGST Act.
The Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds the summary assessment order to be erroneous.
Question 7.
Explain the difference between Audit by Tax Authorities under section 65 and Special Audit under section 66 of the CGST Act, 2017. [Nov. 2018, 5 Marks]
Answer:
BASIS | SECTION 65 | SECTION 66 |
Nature of Audit | It is a departmental audit | It is a Special Audit |
Conducted by | Audit under this section is conducted by officers of the department authorised by the Commissioner | In this section, the audit is undertaken by a CA (Chartered Accountant) or a CMA (Cost & Management Accountant) nominated by the Commissioner |
Prior Notice | 15 days notice is required | No such requirement of notice/intimation under Special Audit |
Time for conclusion of the audit | Audit under this section is to be concluded within 3 months, further extension of a period of 6 months is allowed | The Special Audit is to be concluded
within 90 days, further extension of 90 days is allowed |
Question 8.
How many types of audit are prescribed under GST Act. Briefly explain each one of them. [Nov. 2018, Old 5 Marks]
Answer:
There are three types of audit prescribed under CGST Act, 2017 as explained below:
Section | ||
35(5) | Audit by Chartered Accountant or a Cost Accountant | Every registered person whose turnover exceeds the prescribed limit, shall get his accounts audited by a Chartered Accountant or a Cost Accountant. |
65 | Audit by Department | The Commissioner or any officer of CGST/SGST/UTGST authorized by him by a general or specific order, may conduct audit of any registered person in the prescribed manner and frequency. |
66 | Special Audit | If at any stage of scrutiny, inquiry, investigations or any other proceedings, Department is of the opinion that the value has not been correctly declared or credit availed is not within the normal limits, it may order special audit by Chartered Accountant or Cost Accountant as nominated by it. |
Examiner’s Comment
Some examinees got confused between departmental audit and special audit and interchanged the two concepts.
Question 9.
What are the provisions for “Special Audit”?
Answer:
Section 66 of CGST Act, 2017 provides for provisions and related matters about special audit. These are as follows:
Section | Brief Description | Provision |
66(1) | Special Audit if Value not Correctly Declared/ Excess ITC Availed |
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66(2) | Time Period of Audit |
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Proviso to section 66(2) | The Assistant Commissioner may on an application made to him in this behalf by the
for any material and sufficient reason extend the said period by a further period of 90 days. |
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66(3) | Accounts to be Audited even already Audited |
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66(4) | Opportunity of Being Heard |
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66(5) | Expenses to be Borne by the Department |
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66(5) | Initiation of action against Taxable Person if Tax Liability Identified |
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Question 10.
Discuss Audit under GST by Tax Authorities.
Answer:
Audit Tax Authorities (Section 65 of the CGST Act, 2017):
Section | Brief Description | Provision |
65(1) | Commissioner or Authorised Officer to conduct Audit of Registered Person |
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65(2) | Place of Audit |
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65(3) | 15 Days Prior Notice for Conduct of Audit |
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65(4) | Time Period for Concluding Audit – 3 Months | The audit under section 65(1) shall be completed within a period of 3 months from the date of commencement of the audit.
Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within 3 months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding 6 months. Explanation. For the purposes of this sub-section, the expression “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 registered person or the actual institution of audit at the place of business, whichever is later. |
65(5) | Providing necessary facilities for Verification and Furnishing of Information |
(i) to afford him the necessary facility to verify the books of account or other documents as he may require; |
65(6) | Findings of Audit to be informed to Taxable Person within 30 days if Audit |
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65(7) | Tax Liability Identified – Initiation of Action against Taxable Person |
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