Audit under GST: Types, Notices, and What Businesses Should Check

The main statutory audit processes are a Section 65 audit and a Section 66 special audit. GSTR-9C and scrutiny of returns are separate compliance processes, although a scrutiny or other proceeding can lead to further action under Section 65 or Section 66.

Do not treat all four processes as an audit under GST. The form you receive determines the immediate response you need to make.

A Section 65 audit under GST is conducted by the Commissioner or an officer authorised by the Commissioner. The registered person must receive notice at least 15 working days before the audit. The audit may be conducted at the place of business or at the office of the tax authority.

The officer may examine books and supporting documents for the period under review. Rule 101 covers checks such as turnover, exemptions, tax rates, input tax credit, and refunds. The registered person must provide facilities, information, and assistance required for timely completion.

Form GST ADT-01 is the audit notice. During the process, maintain a record of every document submitted and every clarification provided. This creates a clear trail if an observation needs to be reconciled later.

The three-month period is linked to the legal commencement of the audit. Under Section 65, commencement means the date when the requested records and documents are made available or the audit actually begins at the place of business, whichever is later.

A Section 65 audit under GST therefore has more than one date to track: notice service, commencement, any approved extension, and communication of findings. Record each date separately rather than relying only on the notice date

A Section 66 special audit under GST can be directed when an authorised officer, having regard to the nature and complexity of the case and the interest of revenue, considers that the value has not been correctly declared or the credit availed is not within normal limits. The direction requires prior approval of the Commissioner.

A chartered accountant or cost accountant nominated by the Commissioner examines the records. The nominated professional must normally submit the signed and certified report within 90 days. The Assistant Commissioner can extend the period by a further 90 days for material and sufficient reasons.

The Commissioner determines and pays the expense of the special audit, including the nominated professional’s remuneration. A special audit is not triggered automatically by crossing Rs. 5 crore or filing GSTR-9C.

If you receive Form GST ADT-03, read the direction carefully. The scope of a Section 66 special audit under GST can differ from the scope of a Section 65 audit.

Start by identifying the form and the statutory process. Form GST ADT-01 concerns a Section 65 audit, Form GST ADT-03 concerns a Section 66 special audit, and Form GST ASMT-10 concerns scrutiny of returns.

• Record the notice date, financial year or tax period, records requested, and response deadline.
• Download and preserve the notice and supporting attachments from the GST portal.
• Gather returns, invoices, credit and debit notes, ledgers, payment records, refund records, and ITC support relevant to the period.
• Reconcile sales, purchases, tax payments, and ITC between the books and GST returns.
• Prepare a period-wise explanation for material differences and attach supporting evidence.
• Submit the requested records through the prescribed GST portal process and retain copies of every response.

GST portal functionality provides for audit notices and reports under “Additional Notices and Orders”, along with options to reply and upload documents. The exact portal workflow can change, so follow the options shown for your notice.

For a Section 65 audit under GST, the proper officer must inform the registered person within 30 days of conclusion about the findings, rights and obligations, and reasons for the findings. Rule 101 provides for Form GST ADT-02 for this communication.

If the audit identifies tax that was not paid or was short paid, an erroneous refund, or input tax credit wrongly availed or utilised, the proper officer may initiate the applicable proceedings. An audit finding should therefore be read together with any subsequent statutory notice rather than treated as an automatic final demand.

Review the calculation, period, legal provision, supporting records, and response deadline before taking action. The rules and demand provisions applicable to a particular financial year should be checked before correcting a return or making a payment.

The most useful preparation is traceability: you should be able to connect a figure in a GST return to the underlying invoice, ledger entry, payment record, and supporting document. This makes discrepancies easier to explain and reduces the time needed to assemble records.

• Maintain organised sales and purchase registers for each financial year.
• Keep invoice-level support for taxable, exempt, export, and other relevant supplies.
• Reconcile output tax and input tax credit with the corresponding books and GST returns.
• Retain documentation supporting refunds, credit notes, debit notes, and adjustments.
• Document explanations for material differences when they arise instead of waiting for a notice.
• Preserve records for the statutory retention period and any longer period required because of pending proceedings.

An internal review can help identify missing invoices or ITC mismatches, but it does not replace a statutory audit under GST, a special audit, scrutiny, or an annual filing obligation.

Consider Rahul, aged 35, who operates a food-processing business in Pune. His business has annual aggregate turnover of Rs. 6 crore, has operated for five years, and has a CIBIL score of 720. He receives Form GST ADT-01 covering a specified financial period.

Rahul should first confirm the period and records requested. He can then reconcile sales in the books with GST returns, trace significant invoices, verify ITC support, and prepare explanations for material differences. His Rs. 6 crore turnover may create a GSTR-9C filing obligation, but it does not by itself mean that the notice is an audit under GST.

This example is illustrative. It does not predict whether a tax authority will select a business for audit, what findings it will make, or whether any subsequent tax liability will arise.

Well-organised GST and accounting records can help you present consistent business information when you apply for finance, but an audit under GST does not guarantee loan approval. A lender may assess income, credit history, business vintage, repayment capacity, and other documents under its eligibility and underwriting criteria.

For eligible borrowers, a Bajaj Finance Business Loan offers loan amounts from Rs. 2 lakh to Rs. 80 lakh, with repayment tenures from 12 months to 96 months. Review the applicable business loan interest rate, fees, and repayment obligations before borrowing. 

If you are evaluating a business loan, use the business loan EMI calculator to estimate repayments before deciding how much to borrow. 

• Click the 'Check Loan Offer' button to open the online application form.
• Enter basic details, including Name, PAN, Date of Birth, PIN Code, and Business details, and click 'CONTINUE'.
• Complete banking verification and continue.
• View your offer details, select the loan type — Term Loan, Flexi Dropline Loan, or Flexi Hybrid Loan — and choose the repayment tenure.
• Review the details and submit the business loan application.