🔹 Introduction

GST law provides for audit and assessment to verify the correctness of returns, ITC claims, and overall compliance. With data-driven scrutiny by GSTN, audits and assessments have become more rigorous in 2025. Non-compliance can lead to penalties, interest, and notices under Sec. 74A.

(Reference: Sec. 65, 66, 74A of CGST Act; Rule 101–104 of CGST Rules; CBIC instructions till 2025)

🔹 Types of GST Audit

✅ 1. Departmental Audit (Sec. 65)

• Conducted by Commissioner or authorized officer.

• Advance notice of 15 days given in Form ADT-01.

• Audit must be completed within 3 months (extendable to 6 months).

✅ 2. Special Audit (Sec. 66)

• Ordered by Assistant/Deputy Commissioner with approval of Commissioner.

• Conducted by nominated CA/CMA.

• Required if valuation or ITC credit is in doubt.

✅ 3. CAG/AG Audit (Sec. 65(6))

• Comptroller & Auditor General may audit GST accounts of Government departments and PSU entities.

🔹 Types of Assessment under GST

✅ 1. Provisional Assessment (Sec. 60)

• Allowed when taxpayer is unable to determine tax liability.

• Bond & security may be required.

✅ 2. Scrutiny of Returns (Sec. 61)

• Officer scrutinizes GSTR-1, 3B & 2B for mismatches.

• Discrepancies communicated in Form ASMT-10.

✅ 3. Best Judgment Assessment (Sec. 62)

• Done when taxpayer fails to file returns.

• Officer assesses liability to best of judgment.

✅ 4. Summary Assessment (Sec. 64)

• Immediate assessment in interest of revenue, with Commissioner’s approval.

🔹 Step-by-Step GST Audit Procedure

📌 Step 1: Notice in Form ADT-01 issued at least 15 days before audit.
📌 Step 2: Taxpayer provides records (invoices, ledgers, ITC registers).
📌 Step 3: Officers examine turnover, ITC, exemptions, refunds, E-way bills.
📌 Step 4: Audit report issued in Form ADT-02.
📌 Step 5: If discrepancies found → demand raised under Sec. 74A.

🔹 Step-by-Step GST Assessment Procedure

📌 Step 1: Scrutiny notice in ASMT-10 issued.
📌 Step 2: Taxpayer replies via ASMT-11.
📌 Step 3: If unsatisfactory, officer may proceed to demand order.
📌 Step 4: In non-filing cases, best judgment order issued.
📌 Step 5: Taxpayer can appeal under Sec. 107.

🔹 Practical Examples

Example 1: Trader in Ghaziabad
Fails to file GSTR-3B for 3 months. Department issues best judgment assessment order. Trader files appeal, pays liability + interest.

Example 2: Exporter in Noida
Refund claim of ₹50 lakh under LUT flagged for mismatch in invoices. Special audit ordered under Sec. 66. CA audit confirms excess refund claimed. Refund reversed + penalty imposed.

Example 3: Service Provider in Delhi
Mismatch between GSTR-1 turnover ₹5 crore and books turnover ₹5.2 crore. Scrutiny notice issued. Taxpayer reconciles with debit notes and resolves without demand.

🔹 Common Mistakes Leading to Audit Issues

• Claiming ITC on blocked items (Sec. 17(5)).

• Not reconciling GSTR-1 vs books vs 26AS.

• Excess refund claims without documentation.

• Ignoring scrutiny notices (ASMT-10).

🔹 Penalties under Sec. 74A (from FY 2024-25)

• Wrongful ITC claim or tax suppression → Tax + Interest + Penalty (100%).

• Fraudulent invoices → Higher penalties + prosecution under Sec. 132.

🔹 Best Practices for Audit & Assessment

• ✅ Maintain proper books & GST reconciliations.

• ✅ Do quarterly self-audit.

• ✅ Keep export/ refund documents ready.

• ✅ Respond promptly to notices.

• ✅ Engage professionals for audit representation.

🔹 FAQs

Q1. Is GST audit by CA mandatory?
➡️ No, self-certification in GSTR-9C is sufficient. Special audit may be ordered by officer.

Q2. Can audit extend beyond 6 months?
➡️ Only with Commissioner’s approval.

Q3. Can taxpayer challenge best judgment assessment?
➡️ Yes, appeal under Sec. 107.

Q4. What if taxpayer ignores audit notice?
➡️ Officer can raise demand order with penalty.

Q5. Are scrutiny notices common?
➡️ Yes, based on automated data mismatch detection.

🔹 Conclusion

GST audits and assessments are now data-driven and frequent. Timely reconciliations, correct ITC claims, and compliance with notices are key to avoiding penalties. Businesses must prepare proactively to handle departmental scrutiny.

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