GST Audit — Departmental Audit, Special Audit & GSTR-9C Guide
Updated: 3 June 2026 | CGST Act, 2017 — Sections 35, 36, 65, 66 | Rule 101
GST Audit has two main forms: (1) GSTR-9C Self-Certification — a reconciliation statement filed by taxpayers with turnover above ₹5 crore, certified by the taxpayer (CA certification removed from FY 2021-22 onwards); and (2) Departmental Audit under Section 65 — an on-premises audit by a GST officer with at least 15 working days' advance notice. A Special Audit under Section 66 can be ordered by the Commissioner, conducted by a CA or CMA at departmental expense.
6 Years
Record retention period under Section 36, CGST Act
Maintain all invoices, returns, ITC workings, e-way bills, and stock records for 72 months from the annual return due date
Maintain all invoices, returns, ITC workings, e-way bills, and stock records for 72 months from the annual return due date
Types of GST Audit
| Audit Type | Legal Basis | Trigger | Conducted By | Who Bears Cost | Outcome |
|---|---|---|---|---|---|
| GSTR-9C Self-Certification | Section 44 & Rule 80 | Aggregate turnover > ₹5 crore (automatic, annual) | Taxpayer self-certifies the reconciliation statement | Taxpayer | Filed with GSTR-9 annual return; discrepancies may trigger scrutiny |
| Departmental Audit (Sec 65) | Section 65, CGST Act | Risk-based selection by Commissioner; includes random audits | GST Officer (Joint/Deputy/Assistant Commissioner or above) | Department | Audit report → possible SCN → demand order → appeal |
| Special Audit (Sec 66) | Section 66, CGST Act | During scrutiny/audit, Commissioner finds value incorrectly declared or credit wrongly availed — complex cases | Chartered Accountant or Cost Accountant nominated by Commissioner | Department pays auditor fees | Detailed CA/CMA report → SCN if irregularities found → order → appeal |
Departmental Audit — Section 65 Process
The most common type of GST audit that businesses face. Here is the end-to-end process:
| Step | Action | Timeline |
|---|---|---|
| 1 | Commissioner authorises audit; officer issues notice in FORM GST ADT-01 | At least 15 working days before audit commences |
| 2 | Taxpayer prepares and produces requested records, registers, and documents | Within notice period |
| 3 | Audit officer examines records at business premises or GST office | Normally completed within 3 months; extendable by 6 more months by Commissioner |
| 4 | Officer communicates findings to taxpayer (FORM GST ADT-02 — audit report) | Within 30 days of audit completion |
| 5 | If discrepancies found: Show Cause Notice (SCN) under Section 73 or 74 | Taxpayer gets opportunity to reply |
| 6 | If taxpayer accepts liability voluntarily: pay tax + interest + penalty to close | Before SCN or during adjudication |
| 7 | Adjudication order (FORM GST DRC-07); appeal to Appellate Authority if aggrieved | Within 3 months of order receipt |
⚠
Section 73 vs Section 74: Section 73 applies to non-fraud cases (3 years time limit); Section 74 applies where fraud, suppression, or wilful misstatement is alleged (5 years time limit). Penalties under Section 74 are significantly higher.
Records to Maintain for GST Audit
MANDATORY
GST Returns & Workings
All filed GSTR-1, GSTR-3B, GSTR-9, GSTR-9C with acknowledgements; monthly ITC reconciliation between GSTR-3B claimed and GSTR-2A/2B; turnover reconciliation with books of accounts.
MANDATORY
Sales & Purchase Invoices
All tax invoices issued and received (original/electronic), debit notes, credit notes — for at least 6 years. For e-invoicing mandated businesses, IRN-linked invoices from the IRP.
MANDATORY
Stock & Production Records
Stock register showing opening/closing stock, production records, quantity accounts — critical for verifying HSN/SAC classification and ITC reversals under Rule 42/43.
IMPORTANT
E-Way Bills & Shipping Documents
E-way bill register/logs, lorry receipts, delivery challans, import/export documents — match with GSTR-1 reported supplies and e-invoice data.
Common GST Audit Issues & Red Flags
| Issue | Section | Risk Level |
|---|---|---|
| ITC claimed without matching GSTR-2B entries | Section 16 | High |
| Turnover underreported in GSTR-1 vs financial statements | Section 73/74 | High |
| Wrong HSN/SAC code resulting in lower GST rate applied | Section 73/74 | Medium |
| ITC not reversed on exempt/non-business use (Rule 42/43) | Section 17(2) | High |
| E-invoicing non-compliance for applicable turnover | Rule 48(4) | Medium |
| RCM liability not discharged on applicable inward supplies | Section 9(3)/9(4) | Medium |
| GSTR-2B vs GSTR-3B ITC mismatch not reconciled | Section 16(2)(aa) | High |
| Credit notes not reflected in supplier's GSTR-1 | Section 34 | Low-Medium |
GST Audit vs Scrutiny vs Assessment — Key Differences
| Parameter | Scrutiny (Sec 61) | Departmental Audit (Sec 65) | Special Audit (Sec 66) |
|---|---|---|---|
| Initiation | Officer identifies inconsistencies in returns | Commissioner authorises; risk-based | Commissioner's order during scrutiny/audit |
| Venue | Desk review — officer's office | Taxpayer's business premises | CA/CMA's or taxpayer's premises |
| Records inspected | Only filed returns & uploaded data | Books of accounts, registers, all documents | Comprehensive — accounts, documents, valuation |
| Notice required | Yes — FORM GSTR-3A or notice | Yes — FORM GST ADT-01 (15 days) | Yes — Commissioner's order |
| Taxpayer presence | Not required at office; reply in writing | Required for explanation | Required for information/documents |
GSTR-9C update (FY 2021-22 onwards): The requirement for mandatory CA/CMA certification of GSTR-9C was removed. From FY 2021-22, taxpayers with turnover > ₹5 crore self-certify GSTR-9C. However, voluntary CA certification is still permitted and is advisable for larger businesses facing higher scrutiny risk.
Frequently Asked Questions
Can a GST officer audit my business without any notice?
No. Under Section 65 of the CGST Act, a GST officer must give at least 15 working days advance notice before commencing a departmental audit. The notice must specify the period to be audited and the documents/records required. A special audit under Section 66 is also preceded by an order from the Commissioner, so you will always receive prior intimation.
How should I respond to a GST audit notice under Section 65?
On receipt of a Section 65 audit notice: (1) Acknowledge receipt within the timeline mentioned; (2) Compile all requested records — GSTR returns, purchase/sales registers, ITC workings, e-way bills, bank statements; (3) Cross-check your GSTR-9/9C figures with books; (4) Reconcile ITC claimed in GSTR-3B with GSTR-2A/2B; (5) If discrepancies exist, prepare a reconciliation note. Engage a GST consultant to represent you during audit proceedings.
For how many years must I maintain GST records?
Under Section 36 of the CGST Act, every registered person must maintain records for at least 72 months (6 years) from the due date of filing the annual return for that financial year. For matters under appeal or revision, records must be kept until the appeal is finally decided. Digital records are acceptable provided they can be produced and verified.
What is the difference between a GST audit (Section 65/66) and GST scrutiny (Section 61)?
GST Scrutiny under Section 61 is a desk review — the officer reviews your filed returns for inconsistencies and sends a notice asking for explanations; no physical inspection of your premises or books is involved. A Departmental Audit under Section 65 is a comprehensive on-premises examination of books of accounts, records, and documents by a GST officer. Section 66 (special audit) involves a CA or CMA appointed by the Commissioner conducting a detailed audit, with fees borne by the department.
What happens after the GST auditor finds discrepancies?
Post-audit, the officer prepares a final audit report within 30 days of completion. If discrepancies are found (excess ITC, under-declared turnover etc.), the officer may issue a Show Cause Notice (SCN) under Section 73 (non-fraud) or Section 74 (fraud/suppression). You have the right to reply to the SCN. If unsatisfied with the order, you can appeal to the GST Appellate Authority, then to the GST Appellate Tribunal (GSTAT), and subsequently to the High Court.
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