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CA Final · Indirect Tax Laws · Assessment and Audit

Mehta Textiles Pvt Ltd, a registered person in Surat, receives a notice that the proper officer intends to audit its records for the period 1 October 2023 to 31 March 2024 (six months only). The company contends that audit can only be of a full financial year. Under the CGST Rules, 2017, what is the correct position on the audit period?

The audit period may be a financial year, a part of a financial year, or multiples of a financial year. Hence the six-month audit of Mehta Textiles is valid, because the rules expressly allow a part period and do not insist on a full year.

  1. AAudit period must be exactly one financial year; a part period is not permitted
  2. BAudit period may be a financial year or part thereof, or multiples thereofCorrect
  3. CAudit period may be only a quarter or multiples of a quarter
  4. DAudit period may be a part of a year but never multiple years

Explanation

Rule 101(1) states that the period of audit under section 65(1) shall be a financial year or part thereof or multiples thereof. A six-month period is therefore valid. The option insisting on a full year ignores the words 'or part thereof'.

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