A GST audit is a verification process under Section 2(13) of the CGST Act that cross-checks your returns, turnover, input tax credit (ITC) and tax payments to ensure accuracy and compliance. For businesses, it is essentially a review of whether reported figures match actual financial records and GST filings.
Under India’s GST system, which operates largely on self-assessment, an audit serves as a compliance safeguard to confirm that taxes have been correctly calculated and credits have been properly claimed. If your books, GST returns and reconciliations are accurate, a GST audit is a routine verification rather than a disruption.
This Present Article discusses about the GST Audit.
There is no threshold limit prescribed for GST Audit as per CGST Act,2017. GST audits are conducted under the following specific circumstances:
i) Huge ITC mismatches
ii) Immediate spike in turnover
iii)High refund claims
iv) Non-payment of RCM
v) Mismatch between GST and income tax turnover
There are following two types of departmental audit under GST-
| Section under which audit can be conducted | Types of departmental audit | Audit conducting personnel |
| Section 65 | Audit by tax authorities | Authorized departmental officer |
| Section 66 | Special audit under GST | CA/ CMA nominated by the Commissioner |
STEP-1: Intimation regarding the conduct of GST audit
Firstly, the department will issue a notice intimating the conduct of an audit. Such notice must be served to the registered person at least 15 working days prior to the conduct of the audit.
STEP-2: Commencement of GST audit by department
The audit will be marked as commenced within later of the following dates-
The date on which records/ documents/ information called for by the officer is submitted by the registered person; or
The actual commencement of the audit at the place of business of the registered person.
STEP-3: Manner of conducting the audit
GST Audit can be conducted by the officer at either of the following place-
- At the place of business of the registered person; or
- At his own office.
Verification of various records; returns; documents and information will be done by the departmental officer.
In general, for the selected audit period, the officer will ensure the correctness of the following-
- Turnover;
- Exemptions/ deductions claimed;
- Rate of GST applied;
- Input tax credit (availed as well as utilised);
- Refund claims;
- Any other issues relating to GST.
Notably, during the course of the audit, the departmental officer can ask the registered person to-
- Facilitate him to verify the books of accounts and any other documents; and
- Furnish such information as required by him.
STEP-4: Completion of the audit
On completion of the audit, the officer will inform the findings/ discrepancies noted by him to the registered person.
The registered person will have to appropriately reply to the findings/ discrepancies raised by the officer.
After considering the reply filed by the registered person, the officer will conclude the audit by noting the final observation in Form GST ADT-02 (or Form GST ADT-04 in case of a special audit)
Course of action post completion of departmental GST audit
Once the audit is completed, based on the observation of the officer and counter reply of the registered person, any of the following action will be adopted by the proper officer-
Conclude the matter
Under the following circumstances, the matter would be marked as closed without any further action-
- After completion of the GST Audit, there are no observation/ findings of the officer; or
- The observation/ findings of the officer are satisfactorily replied by the registered person. Accordingly, the findings are dropped by the officer.
Issuance of show cause notice
Show cause notice under section 73 or section 74 will be issued to the registered person, if during an audit, it is observed that there is any-
- Non-payment/ short payment of taxes; or
- Erroneous refund claim; or
- Availing of Ineligible ITC or wrong utilization of the GST input tax credit
- Any other non-compliance.
Assessment in Case of Non-Cooperation
- If the taxpayer fails to comply with the audit process or provide necessary documentation, authorities can initiate a Best Judgment Assessment under Section 62 of the CGST Act. This assessment must be completed within five years from the due date of the annual return for the relevant financial year.
Audit U/S.66 of CGST Act,2017:
The tax authority can order a special audit during any stage of scrutiny, inquiry, or investigation if they believe that:
Incorrect value: The value of goods or services has not been correctly declared.
Abnormal credit: The Input Tax Credit (ITC) availed is not within normal limits.
Complexity: The case has high complexity or potential revenue interest requiring expert financial analysis.
The Process and Timeline
Authorization: The Assistant Commissioner issues a written direction (Form GST ADT-03) with prior approval from the Commissioner.
Cost of Audit: The expenses and remuneration for the audit are determined and paid directly by the Commissioner.
Time Limit: The audit report must be submitted within 90 days. This can be extended by the Assistant Commissioner for another 90 days upon request or for sufficient cause.
Opportunity to be Heard: The taxpayer must be given a chance to explain or defend their case regarding any adverse findings before action is taken.
Outcome: If discrepancies, short payments, or tax evasion are found in the final report (Form GST ADT-04), the officer can initiate recovery proceedings under Section 73 or 74.
Synopsis
| Particulars | Section 65 | Section 66 |
| Format under which notice intimating conduct of audit is communicated to the registered person | Form GST ADT-01 | Form GST ADT-03 |
| Duration of audit | Three months. Commissioner can extend the same to further period of six months. | The nominated Chartered Accountant/ Certified Management Accountant will submit audit report within 90 days. |
| Period of audit | Financial year or part or multiples thereof | Financial year or part or multiples thereof |
| Format and time period under which observations will be intimated to the registered person | Form GST ADT-02 Within 30 days from the date of completion of the audit. | Form GST ADT-04 |
Appeal Against GST Audit Order both GST Audit conducted under section 65 & 66:
To appeal against a GST audit-cum-demand order, the taxpayer can file FORM GST APL-01 under section 107 of the CGST Act,2017 online via the GST Portal within 3 months of the order date. You must make a mandatory pre-deposit of 10% of the disputed tax demand from your electronic cash ledger before filing.
Conclusion: These are the provisions relating to GST Audit as per the CGST Act ,2017.
Note: This article is a part of Article Writing Competition 2026 conducted by onlinetaxupdate.com
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