Section 65 CGST Audit: Complete Guide to GST Audit by Tax Authorities (2025 Update)

Section 65 of the CGST Act, 2017 empowers tax authorities to conduct audits of registered taxpayers to verify the accuracy of returns and compliance with GST laws.

The audit can be conducted at the taxpayer’s place of business or the department’s office, following a notice in FORM GST ADT-01 issued at least 15 working days in advance.

It must be completed within three months, extendable by six months. Post-audit findings are shared via FORM GST ADT-02, and if discrepancies are found, proceedings under Section 73, 74, or the newly added Section 74A may be initiated.

Audit by Tax Authorities under Section 65 of the CGST Act, 2017 – A Complete Guide

Under the Goods and Services Tax (GST) regime, compliance is king 👑. Among the key enforcement tools available to tax authorities is Section 65 of the CGST Act, 2017, which empowers them to conduct audits of registered taxpayers. This section, backed by Rule 101 of the CGST Rules, plays a vital role in maintaining transparency, accuracy, and discipline in tax reporting.

In this comprehensive AUBSP guide, we’ll walk you through everything you need to know about audits under Section 65 — from authority and scope to timelines, rights, responsibilities, and post-audit actions.

Introduction: What is Section 65 of the CGST Act?

GST audits are not just formalities—they’re legal mechanisms for verifying the correctness of returns and ensuring tax compliance.

Section 65 of the CGST Act empowers tax authorities to audit GST-registered taxpayers. This audit can be carried out to assess the accuracy of returns, evaluate input tax credit claims, and detect any non-compliance. Implemented alongside Rule 101, this section lays down procedures, rights, and obligations for both taxpayers and officials, creating a transparent environment of accountability.

📝 Stay updated with the latest GST compliance changes — subscribe to AUBSP alerts!

Authority and Scope of Audit under Section 65(1) & 65(2)

This section defines who can audit, when, where, and how often the audit can occur — giving tax authorities both authority and discretion.

The power to conduct audits lies with the Commissioner or an officer authorized by the Commissioner, either through a general or specific order. These officers can audit any registered person for any period, at any time, and in any manner prescribed. Audits can be conducted either at the taxpayer’s place of business or the department’s office, offering logistical flexibility.

💡 Tip from AUBSP: Always keep digital and physical records organized—random audits are a reality!

Commencement and Timelines of Audit – Section 65(3) & 65(4)

GST audits are not surprise raids—they follow a legally defined process with advance notice and fixed timelines.

Before beginning the audit, the tax officer must issue a FORM GST ADT-01 notice at least 15 working days in advance. The audit must be completed within 3 months from its commencement. The law wisely defines “commencement of audit” as either:

• The date when documents are made available by the registered person, or
• The date of physical audit initiation,

whichever is later.

For complex cases, the Commissioner can extend this period by another 6 months with valid justification.

📅 Stay compliant! Add audit timelines to your compliance calendar via AUBSP’s downloadable planner.

What Happens During the Audit – Section 65(5)

Once the audit starts, both parties have specific roles and responsibilities to ensure a smooth process.

During the audit, taxpayers are legally required to:

1. Provide access to books of accounts and records.
2. Cooperate fully with the tax officer.
3. Offer any information necessary for the audit.

On the other hand, auditors must conduct the audit in a fair, objective, and time-bound manner. The emphasis here is on mutual cooperation — the smoother the audit, the quicker the closure.

📂 Pro Tip by AUBSP: Use cloud-based accounting software to simplify data access and audit readiness.

Conclusion of Audit and Reporting – Section 65(6)

Post-audit, clarity and communication take center stage. The findings must be shared officially and transparently.

Once the audit is concluded, the proper officer must issue an Audit Report in FORM GST ADT-02 within 30 days. This report will include:

• Detailed audit findings,
• Legal basis for conclusions,
• Rights and duties of the registered person.

This step is essential as it informs taxpayers about errors or discrepancies, giving them an opportunity to take corrective action or respond appropriately.

🧠 Knowledge Boost: Read AUBSP’s guide on how to interpret and respond to GST audit reports.

Post-Audit Action (Section 65(7)): What Happens If Discrepancies Are Found?

The audit doesn’t just end with a report—it may lead to further legal proceedings based on findings.

If the audit reveals:

• Tax short payment,
• Excess refunds,
• Wrongful ITC availed or utilized,

then the officer may initiate proceedings under Section 73, 74, or the newly inserted Section 74A of the CGST Act.

Breakdown of Post-Audit Legal Provisions:

• 🔸 Section 73 – For issues not involving fraud or willful misstatement.
• 🔸 Section 74 – For fraud or suppression of facts.
• 🔸 Section 74A – (Effective from 01-Nov-2024): Details awaited—follow AUBSP for a breakdown soon!

📌 Don’t wait for a notice! Conduct self-audits regularly with AUBSP’s GST audit checklist.

Relevant Rules & Forms You Must Know

Understanding the correct formats and procedures can help taxpayers respond to audits more efficiently.

Here are the key compliance tools:

• ✅ Rule 101 – Governs the manner of audit under Section 65.
• 📄 FORM GST ADT-01 – Audit initiation notice.
• 📄 FORM GST ADT-02 – Final audit report with observations.

🗂️ Download AUBSP’s free template pack of GST forms to stay audit-ready.

Legal and Historical Context of Section 65

Knowledge of legislative history helps you understand the purpose and evolution of Section 65.

Section 65 was brought into effect on 1st July 2017 through Notification No. 9/2017-Central Tax. Recently, Section 74A was inserted via the Finance (No. 2) Act, 2024, notified by Notification No. 17/2024-Central Tax, effective 1st November 2024.

This shows the dynamic nature of GST law, emphasizing the need for continual updates in audit frameworks.

🕰️ Stay ahead of legal updates—bookmark AUBSP’s GST Notification Tracker.

Conclusion: Be Prepared, Not Surprised

Section 65 audits are designed to foster accountability, not fear. A well-maintained record system, awareness of rights, and cooperation with tax authorities can make the audit process seamless and even beneficial in the long run.

With evolving provisions like Section 74A, the GST audit landscape is constantly evolving—and so should your preparedness.

FAQs on Section 65 of CGST Act 2017

What is Section 65 of the CGST Act, 2017?
Section 65 empowers tax authorities to conduct an audit of GST-registered taxpayers to verify return accuracy, compliance with the law, and proper utilization of input tax credit.

Who can conduct an audit under Section 65?
The Commissioner or any officer authorized by the Commissioner, either through a general or specific order, can conduct the audit.

Where can the audit be conducted?
The audit may be carried out either at the taxpayer’s place of business or at the office of the tax authority, depending on suitability and nature of records.

What is the procedure before starting a GST audit under Section 65?
The tax authority must issue a notice in FORM GST ADT-01 at least 15 working days before the commencement of the audit.

When does the audit officially commence?
The audit commences on the later of two dates: (i) the day records are made available by the taxpayer, or (ii) the day audit actually begins at the taxpayer’s premises.

What is the time limit to complete an audit under Section 65?
The audit must be completed within three months from the date of commencement.

Can the audit period be extended?
Yes, the Commissioner can extend the audit period by a maximum of six months, provided valid reasons are recorded in writing.

What are the obligations of the taxpayer during the audit?
The taxpayer must provide necessary facilities to inspect books and records, furnish information requested, and cooperate with the audit officer.

How are the audit findings communicated?
Audit findings are communicated through FORM GST ADT-02, which must be issued within 30 days of completing the audit.

What if discrepancies are found during the audit?
If the audit reveals unpaid tax, excess refund, or wrongful ITC claims, the officer may initiate proceedings under Section 73, 74, or 74A of the CGST Act.

What is Section 73 in relation to audit findings?
Section 73 deals with recovery of tax not paid or short paid, or ITC wrongly claimed, in cases that do not involve fraud or willful misstatement.

What is Section 74 in relation to audit findings?
Section 74 deals with recovery actions when tax discrepancies arise due to fraud, willful misstatement, or suppression of facts.

What is Section 74A of the CGST Act?
Section 74A, introduced from November 1, 2024, enables further audit-related proceedings; its specific applications will be clarified through rules or notifications.

Which rule governs the audit process under Section 65?
Rule 101 of the CGST Rules, 2017 outlines the audit procedures, including manner, format, and conduct.

What are FORM GST ADT-01 and ADT-02?
FORM GST ADT-01 is the audit initiation notice, and FORM GST ADT-02 is the audit report issued after completion of the audit.

Is prior notice mandatory before a GST audit?
Yes, at least 15 working days’ notice must be given through FORM GST ADT-01 before the audit begins.

Are taxpayers legally bound to assist during an audit?
Yes, as per Section 65(5), the taxpayer must provide access to documents and assist the audit officer for timely audit completion.

What is the legal significance of the audit findings?
Audit findings can form the basis for initiating adjudication or recovery proceedings if discrepancies are observed.

Can a taxpayer challenge the audit findings?
Yes, taxpayers can respond to audit findings and, if required, appeal against further proceedings initiated based on the audit.

When did Section 65 become effective?
Section 65 came into effect from July 1, 2017, as per Notification No. 9/2017–Central Tax dated June 28, 2017.

What are the key compliance tips to avoid audit issues?
Maintain proper documentation, reconcile returns regularly, ensure accurate ITC claims, and respond promptly to notices.

Can audits be conducted for past financial years?
Yes, audits can be initiated for any period as specified by the tax authorities, subject to the limitation period under the Act.

Is there a limit to how frequently audits can be conducted?
The law allows audits at such frequency as prescribed or deemed necessary by the Commissioner, with discretion based on risk profiling.

How does Section 65 differ from special audit under Section 66?
Section 65 is a general audit by tax authorities, whereas Section 66 is a special audit conducted by a chartered or cost accountant nominated by the Commissioner.

What is the role of technology in GST audits?
Technology enables data analysis, risk profiling, and efficient audit execution through digital access to GST returns and financial data.

Are small taxpayers also subject to audit under Section 65?
Yes, all registered persons, regardless of size, can be selected for audit based on risk factors or random selection by authorities.

Can an audit report be used for prosecution?
While audit findings alone may not lead to prosecution, they can form the basis for proceedings under Sections 73, 74, or other penal provisions if fraud or evasion is detected.