The verification of “unreasonable” transitional credit claims would be conducted in four phases. In the first phase, the tax officers will verify transitional credit claims where the growth is more than 25 per cent or the credit availed is in excess of Rs 25 lakh. Onethird of the remaining claims of 50,000 taxpayers will be verified in three phases — July-September, October-December and January-March (2019). Credit verification will remain one of the focus areas in 2018-19. One of the important tools for credit verification available with the government is special audit u/s 66. As per section 66, at any stage of scrutiny, inquiry, investigation or any other proceedings direction to registered person to get accounts examined and audited can be given. Direction has to be given by Proper Officer before whom scrutiny, inquiry, investigation or any other proceeding is done (and none else). Direction for special audit can be made only by officer not below the rank of Asstt Comm. Direction for special audit is given having regard to nature and complexity of the case and the interest of the revenue Direction for special audit can be given only if officer is of the opinion that
a) value has not been properly declared orb) the credit availed is not with in normal limits
Hence if proper officer wants to direct special audit to examine proper claim of credit he has to form opinion that the credit availed is not with in normal limits. The following areas of excessive input tax credit in general, industry specific and transitional credit can be identified triggering the special audit by Chartered Accountant or Cost and Works Accountant.
Areas where excess credit may be taken:
Areas of Excessive Transitional Credit
Prior approval of Commissioner is required for special audit. Direction for Special audit has to be made by communication in writing to Registered Person. Direction for special audit has to be communicated in ADT-03. Direction to special audit shall involve getting records including Books of accounts examined and audited. Special audit has to be done by Chartered Accountant or Cost and Works Accountant nominated by Commissioner. Expenses And Remuneration of CA/CWA shall be determined and paid by Commissioner and such determination shall be final.. Report of Audit has to be submitted by such nominated CA or CWA within 90 days.
a) Food and Beverages b) Outdoor Catering c) Beauty Treatment d) Health Services e) Cosmetic and Plastic surgery f) Membership of a club, health and fitness centre g) Rent a Cab h) Life Insurance i) Health Insurance j) Works Contract Service supplied for construction of an immovable property k) Goods or services covered by composition scheme u/s section 10. l) Travel benefits extended to employees on vacation such as leave or home travel concession m) Goods or Services received by non-resident taxable person n) Goods or Services used for personal consumption
a) tax invoice issued by supplier or b) self Invoice made u/s 31(3)(f) in case of RCM c) debit note or d) bill of entry e) ISD Invoice f) ISD Credit Note
[S. 16(2)(a) read with Rule 36(1)] D1= Ineligible ITC attributable to exempt supplies and D2= Ineligible ITC attributable to supplies for non business purpose goods in earlier tax periods being used exclusively for taxable supplies and subsequently used for common purpose [Proviso to Rule 43(1)(d)] a) Transport of passengers, with or without accompanied belongings, by rail in first class or air conditioned coach.[Sl 8(i) of 11/2017- CTR] b) Transport of goods by rail [Sl 9(i) of 11/2017-CTR] Hence taking of credit is not prohibited, only utlilization is prohibited. a) Transport of passengers, with or without accompanied belongings, by air in economy class.or b) Transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme Airport, as notified by the Ministry of Civil Aviation.[8(iii) and (iv) of 11/2017-CTR] c) Leasing of aircrafts by an operator for operating scheduled air transport service or scheduled air cargo service by way of transaction covered by clause (f) paragraph 5 of Schedule II of the Central Goods and Services Tax Act, 2017 i.e. transfer of right to use [Sl. 15(iv) of 11/2017-CTR] Special Audit may be directed even if accounts of the registered person have been audited under any other law or under other provisions of this Act. Registered Person shall be given an opportunity of being heard in respect of material gathered on the basis of special audit which is proposed to be used in any proceedings against RP under this Act or Rules. On conclusion of special audit Registered Person shall be informed about the findings of special audit in ADT-04. Where audit results in detection of tax not paid/short paid etc, Proper Officer may initiate action u/s 73 or 74
