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Demystifying GST Audits: A Comprehensive Guide to Section 65 & Rule 101 - Essential Insights for Businesses

CA Harshit Goyal , Last updated: 24 May 2023  


GST audits play a vital role in ensuring tax compliance and transparency in business operations. Section 65 and Rule 101 of the GST Act provide the legal framework for conducting audits of registered persons. In this article, we will delve into the intricacies of these provisions, shedding light on the audit process from both the taxpayer's and the tax authorities' perspectives. By gaining a comprehensive understanding of GST audits, businesses can navigate this process with confidence and meet their compliance obligations.

The Audit Process: A Closer Look

Under Section 65, the Commissioner or authorized officers are empowered to undertake audits of registered persons for a financial year or part thereof, as determined by them. These audits can be conducted either at the registered person's place of business or at the office of the authorized officers.

Demystifying GST Audits: A Comprehensive Guide to Section 65 and Rule 101 - Essential Insights for Businesses

Prior Notice and Information Sharing

To ensure procedural fairness, registered persons are notified about the upcoming audit through FORM GST ADT-01. This notice is issued not less than fifteen working days before the audit commencement, allowing businesses ample time to prepare their records and cooperate with the audit process.

Verification and Observations

During the audit, the authorized officer, accompanied by a team of officers and officials, carefully verifies various aspects of the registered person's business. This includes examining the documents on which the books of account are maintained, reviewing the filed returns and statements, validating turnover calculations, assessing exemptions and deductions claimed, verifying tax rates applied, scrutinizing input tax credit utilization, refund claims, and addressing other relevant issues. The observations made during the audit are recorded in the officer's audit notes.

Cooperation and Timely Completion

The registered person is obligated to provide necessary facilities for verifying books of account and other requested documents. Additionally, they must furnish any information required by the authorized officer to facilitate a timely completion of the audit.


Finalizing Audit Findings

After the audit, the proper officer informs the registered person of any discrepancies observed during the audit. The registered person has the opportunity to file a reply, addressing the discrepancies identified. The proper officer then finalizes the findings, taking into consideration the reply furnished by the registered person.

Audit Timeline and Communication

As per Section 65, the audit should be completed within three months from the date of its commencement. However, if the Commissioner is satisfied that the audit cannot be concluded within this timeframe, an extension of up to six months may be granted, provided valid reasons are recorded in writing. The "commencement of audit" refers to either the date when the records and other documents are made available to the tax authorities or the actual institution of the audit at the place of business, whichever occurs later.

Informing the Registered Person

Within thirty days of concluding the audit, the proper officer shares a comprehensive report, FORM GST ADT-02, with the registered person. This report includes the audit findings, the rights and obligations of the registered person, and the reasons behind the conclusions. It is crucial for the registered person to review the report carefully and take appropriate action based on the findings.


Implications of Audit Findings

If the audit reveals unpaid or underpaid taxes, erroneously refunded amounts or misuse of input tax credit, the proper officer may initiate action under Section 73 or Section 74 of the GST Act. It is essential for registered persons to ensure compliance and rectify any discrepancies identified during the audit process.


GST audits, conducted under Section 65 and Rule 101, are integral to maintaining tax compliance and fostering transparency in business operations. By understanding both sides of the audit journey, registered persons can proactively prepare for audits, cooperate with authorized officers, and address any discrepancies identified. Staying compliant

We hope that this article has been helpful in summarizing these important sections and encourage you to stay updated with the latest news and legal provisions in the GST in India by following our updates in the future.

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CA Harshit Goyal
Category GST   Report

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