In today’s cutting edge era where everything is linked and connected through your aadhar, PAN etc much of your business and other information is available with the Government database. In this article we will be going through the process of Audit to Appeal in brief. The entire process in practical life will turn out to be a cakewalk for some and a cumbersome process for the others.
DEPARTMENTAL AUDIT U/S 65
A business who is maintaining the records diligently also can get a Standard Departmental notice for conducting audit U/s 65 based on the track records maintained by the Government or for any other reliable reason. Such audit is basically a scrutiny assessment which is entirely focused on indirect tax compliance. Notice can be issued for multiple reasons like Input tax credit availed and utilised, rate of tax of supply, exemptions claimed or any other issues related to compliance as they may deem fit.
It can be issued by the Commissioner or any officer authorized by him, by way of a general or specific order (Section 65(1) of the CGST Act 2017). The officers so referred to may conduct audit at the place of business of the registered person or may call for the documents and data at their office physically or through mail.
The step by step GST Audit process is as below:-
- Notice in ADT-01- The officer will serve the notice through form ADT-01 atleast 15 working days before commencement of audit wherein it will state the number of years for which the audit is taking place and the list of documents to be provided/kept ready by the tax payer. In these 15 days the tax payer has to ensure that all the books/GST Returns are cross tallying with the audit reports, documentation such as sales, purchase ,expenses etc. , ITC’s are getting reconciled, any compliance for section 17(5) is to be cross checked etc.
As per the law the audit under subsection (1) has to be completed within 3 months from the date of commencement of the audit. It may get extended for a maximum further period of 6 months wherein Commissioner is satisfied that there are sufficient reasons in writing to extend the period. As per the explanation ,the expression “commencement of audit” shall mean the date on which the records and other documents are made available or the actual institution of audit at the business premises whichever is later.
- Audit procedure and Document Verification:- The tax payer has to provide access to all its systems, books, records etc as and when called for by the said officers. The officer cross-checks returns filed on the GST portal with original invoices, purchase registers, bank statements, and ITC claims.
The Tax payer may receive queries during the audit. He should ensure that response should be provided within the timeframe to ensure timely compliance and fastrack the procedure.
At times it has been noticed that even after providing the data under ADT-01 on time the officers wait till the end of the second month or mid of the third month to cross check the data provided by the tax payer and then put undue burden and pressure to complete the audit on time. This in turn becomes a mental harassment for the tax payer as they don’t get the proper opportunity of being heard.
It is suggested to follow up with the officers to ensure that the audit gets conducted smoothly within the said time line without undue mental pressure on the tax payer.
- Consultative cum demand Memo- The department at times may issue consultative cum demand memo before issuing the FAR/ADT-02. In this department may further point out the issues on which the tax payer has not agreed to or not provided documents for. Here he has an opportunity of paying off the demand on which he agreed on with less of interest and penalty.
Also at times it is noticed that multiple demands are raised for overlapping issues. It is suggested to the consultant and the tax payer to ensure that all the points are read through properly and objection be raised and explained for such issues raised.
- ADT-02 or the Final Audit Report- The officer will communicate through ADT-02 all the findings, rights, obligations and the conclusions reached upon. It also mentions the various sections under which further SCN’s would be issued ie. 73,74 or 74A (from FY 2024-25 onwards).
SHOW CAUSE NOTICES U/S 73, 74 OR 74A
If there is no discrepancy found after the audit which in itself would be a rare scenario the ADT-02 will mention “No discrepancy found” and thereby close the audit procedures. But if at all discrepancies are there then at their own whims and fancies will issue SCN’s U/s 73 where there is no fraud or suppression of facts and U/s 74 where there is fraud wilful misstatement and suppression of facts.
Under both the Sections 73(5) and 74(5), if you pay the tax with interest voluntarily before the SCN is issued, the officer shall not serve any notice for the amount so paid. This is the best exit path if audit observations are legitimate.
If your business was operating in FY 2024-25 and beyond, the old dual-track system of Section 73 and 74 is gone. Under the new Section 74A, all GST demand notices are consolidated into a single provision. While the penalty still depends on the underlying facts (whether fraud is established or not), both scenarios are now initiated under this single section.
The window to pay demanded tax and interest at a reduced penalty rate has been extended from 30 days to 60 days offering businesses more breathing room to resolve.
APPELLATE REMEDIES
In Bolin Chetia v Jagadish Bhuyan, the Apex Court observed that “in its natural and ordinary meaning an appeal is a remedy by which a cause determined by an inferior forum is subjected before a superior forum for the purpose of testing the correctness of the decision given by the inferior forum. The right of appeal is a substantive and valuable right of any appellant who is normally a person aggrieved by the impugned decision”.
GST law has extensive provisions for Appeals and Revisions under Sections 107 to 121 of the CGST Act, 2017 and Rules 108 to 116 of the CGST Rules, 2017. There are multiple stages under the Appellate remedies but here we will discuss briefly about the first stage appeal.
- FIRST STAGE APPEAL
An aggrieved person can file an appeal against any decision or order passed by an adjudicating authority under CGST/SGST/UTGST Act. Sub-section 107 (1) reads as:
“Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.”
The time limit for exercising the right to the first appeal is three months from the communication of decision or order to the aggrieved person. However, as per 107 (4) of the CGST Act, the Appellate Authority may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the specified period of three months, allow it to be presented within a further period of one month.
It is advised that an appellant seeking condonation of delay must submit sufficient grounds for the same.
As per subsection 107 (5) every appeal u/s 107 shall be in such form and manner as may be prescribed. As per Rule 108 “An appeal to the Appellate Authority under sub-section (1) of section 107 shall be filed in FORM GST APL-01, along with the relevant documents, electronically or Manually only if certain conditions are satisfied and in such case, a provisional acknowledgement shall be issued to the appellant immediately.”
A final acknowledgement, indicating appeal number shall be issued thereafter in FORM GST APL-02 by the Appellate Authority or an officer authorised by him in this behalf.
A mandatory pre-deposit has to be made as mentioned U/s 107(6) of the Act before filing the appeal.
HEARING /ADJOURNMENT OF HEARING /GROUNDS/ EVIDENCE/ FINAL ORDER:
The statute requires the Appellant Authority to give an opportunity to the appellant of being heard. The appellate authority may, if sufficient cause is shown, grant a maximum of three adjournments to the appellant party. It is pertinent to note that at times the authority may pass the orders post one hearing itself so it is advisable to produce as much evidence and justification at the first hearing itself.
Under Rule 113 the Appellate Authority will issue a summary order in Form GST-APL-04 clearly indicating the final amount of demand confirmed, modified or annulled. Any person aggrieved by the decision of the 1st Appeal may further file for the case in GSTAT.
Note: This article is a part of Article Writing Competition 2026 conducted by onlinetaxupdate.com
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