ADT explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The audit ends and a form arrives. It carries numbers, and it feels like a demand. It is not one — and how the next few weeks are handled decides whether it becomes one.
Section 65(6): on conclusion of the audit, the proper officer shall, within thirty days, inform the registered person of the findings, his rights and obligations, and the reasons for such findings. Rule 101(5) prescribes FORM GST ADT-02. Nothing is payable on an ADT-02. Under s.65(7), the officer may then initiate action under s.73, s.74 or s.74A — a separate proceeding with its own notice, limitation and hearing.
The three statutory contents
Section 65(6) requires three things in the communication, and the third is the one most often thin.
1. The findings. What the audit concluded, paragraph by paragraph.
2. Rights and obligations. What the taxpayer may do — including the option to pay under s.73(5) or s.74(5) — and what it must do.
3. The reasons for such findings. Not the conclusion; the reasoning that produced it. A paragraph reading "ITC of ₹X is inadmissible under section 17(5)" states a conclusion. A paragraph identifying which clause of s.17(5), which invoices, and why the clause applies to them states reasons.
Where reasons are absent, that is worth saying in the reply — clearly and without rancour — because it will matter later. A show cause notice that simply reproduces a reasonless audit paragraph inherits the defect. Section 65 audit →
What an ADT-02 is not
It is not a demand. No amount is legally payable on it. There is no due date, no interest running by virtue of the form, and no recovery available on it.
It is not appealable. Section 107 allows an appeal against a decision or order passed by an adjudicating authority. An ADT-02 communicates findings; it decides nothing. An appeal against it is liable to be rejected as not maintainable, and the time spent is lost.
It is not final. Section 65(7) uses "may". Findings are sometimes dropped between the ADT-02 and the show cause notice, and more often after the reply.
It does not require payment to close the audit. The audit is concluded by the communication itself.
Sorting the paragraphs
The productive response is to take the ADT-02 paragraph by paragraph and place each finding in one of three buckets.
Accept. The finding is right. Genuine arrears, a missed reversal, a rate applied wrongly. Here the arithmetic still needs checking — the period, the rate, and the interest computation — but the position is conceded.
Contest. The finding is wrong in law or on the facts. This is where the reply does its work: the notification entry, the contract clause, the invoice sample, the circular, the reconciliation.
Clarify. The finding rests on a misunderstanding of the data — a duplicate counted twice, a credit note not netted, an inter-branch flow read as a supply. These are the cheapest to close, and they close on documents rather than argument.
Sorting matters because it changes the economics. Accepting a genuine ₹4 lakh arrear while contesting a wrong ₹40 lakh finding is a far better position than contesting everything and losing credibility on both.
The section 73(5) / 74(5) decision
Where a finding is accepted, paying before the show cause notice is materially cheaper.
Section 73(5): a person may pay the tax with interest on the basis of his own ascertainment or as ascertained by the proper officer and inform the officer in writing, before service of notice. Section 73(6): the officer shall then not serve any notice in respect of the tax so paid.
No penalty attaches in that case for a non-fraud matter.
Section 74(5) allows the same in a fraud matter but with penalty equal to fifteen per cent of the tax, rising sharply once a notice is issued.
The payment is made in FORM GST DRC-03, and the ascertainment must be communicated in writing — the payment alone does not engage s.73(6). DRC-03 →
Two cautions. First, a DRC-03 payment on one finding does not concede the others, but the intimation should say so expressly. Second, do not pay a finding you intend to contest merely to end the audit; recovering it later requires a refund claim within two years, and the payment will be read as an admission.
The weeks after the ADT-02
- Diarise. Note the date of receipt, and the limitation dates under s.73, s.74 or s.74A for each year in the audit period.
- Reconcile the numbers. ADT-02 figures are frequently gross, unadjusted for credit notes or for amounts already reversed.
- Reply in writing, paragraph-wise, even though the Act does not require a reply to an ADT-02. It fixes your position on record before the notice is drafted, and a well-supported explanation often removes a paragraph entirely.
- Pay what is genuinely due, in DRC-03, with a written ascertainment.
- Preserve the record — the ADT-01, the covering letters, the acknowledged inventories, any Rule 101(4) communication and reply. These become the procedural record if the matter goes to appeal.
- Expect the notice for what is not resolved, and prepare the defence now rather than on receipt.
Key takeaways
- ADT-02 must state findings, rights and obligations, and reasons — within thirty days of conclusion.
- It is not a demand, not appealable, and not final.
- Sort each paragraph into accept, contest or clarify before responding.
- Paying an accepted finding before the notice under s.73(5) avoids penalty entirely.
- The payment must be accompanied by a written ascertainment, not merely a DRC-03.
- A written paragraph-wise reply, though not required, often removes findings before the notice is drafted.
Read next
- Section 65 Audit: ADT-01, the Three Months and the Extension
- Rule 101: How a GST Audit Is Actually Conducted
- From Audit Finding to Demand: The Section 65(7) Handoff
- DRC-03 Voluntary Tax Payment — Before or After Notice
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition).