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A GST audit checks a registered person’s records; an assessment or demand process determines tax liability under the applicable law. An audit can lead to further proceedings, but an audit finding is not automatically an assessment order. Return scrutiny, a departmental audit, a special audit, and assessment are separate processes—and annual return filing and GSTR-9C reconciliation are separate compliance obligations.
What is the difference between GST audit and GST assessment?
Under India’s GST system, return scrutiny, departmental audit, special audit, and assessment or demand determination have different purposes. Scrutiny checks a return for discrepancies. An audit examines records and compliance. A special audit is a separate, directed examination by a nominated professional in specified circumstances. Assessment and demand provisions determine tax liability through the applicable statutory route.
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The procedures can be connected: scrutiny or an audit may identify an issue that leads to another proceeding. But an audit finding alone does not decide that tax is due. The CGST Act and the Assessment-Audit Rules provide for distinct powers, forms, and steps.
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|---|---|---|---|---|
| Return scrutiny Section 61 |
The proper officer checks returns and related particulars for discrepancies. | Explain the discrepancy, generally using supporting records and calculations. | ASMT-10 communicates the discrepancy; ASMT-11 is the response. The Rules prescribe a response period of up to 15 days. Section 61 separately describes follow-on action where no satisfactory explanation is provided within 30 days or a further period allowed. Rules; Act. | If the explanation is accepted, no further action is taken on that discrepancy; ASMT-12 communicates acceptance. Otherwise, the officer may take an appropriate further statutory step. Scrutiny itself is not necessarily a tax determination. |
| Departmental audit Section 65 |
The Commissioner or an officer authorized by general or specific order may audit a registered person. | Provide access to records and premises as required, information, and assistance. The audit may cover books, supporting documents, returns, turnover, exemptions, tax rates, input tax credit, refunds, and other relevant matters. | At least 15 working days’ advance notice is required. ADT-01 is the prescribed notice; ADT-02 communicates findings. The ordinary completion period is three months from commencement, extendable by up to six months for recorded reasons. Findings, rights, obligations, and reasons must be communicated within 30 days after conclusion. Rules; Act. | The audit produces findings, not automatically a demand order. Discrepancies may lead to separate tax action under the applicable law. |
| Special audit Section 66 |
During another proceeding, an Assistant Commissioner or higher officer may invoke it in the circumstances set out in the Act, with prior Commissioner approval. | Cooperate with the audit conducted by a chartered accountant or cost accountant nominated by the Commissioner. The taxpayer must have an opportunity to be heard on audit material proposed to be used against it. | ADT-03 directs the special audit; ADT-04 communicates its findings. The report is due within 90 days, with a possible further extension of up to 90 days for an application or sufficient reason. The Commissioner determines and pays the audit expenses. Rules; Act. | The report may inform the ongoing matter or later action, but the special audit itself is not automatically an assessment or demand order. |
| Assessment or demand determination | The proper statutory route depends on the facts. The Act provides, among other routes, provisional assessment, specified best-judgment assessments, and summary assessment; separate demand provisions address tax not paid or short paid, erroneous refunds, and wrongly availed or utilized input tax credit. | Respond to the notice or process under the applicable provision, provide representations and evidence, and comply with any resulting order or further rights. | There is no single deadline or notice form for every kind of assessment or demand. It depends on the provision, tax period, and operative law. CGST Act. | This is the process that can determine liability. For the relevant provisions in the Act text, a notice and opportunity to make representations precede an order; section 75 also addresses hearings and the contents and scope of an order. Check the provision that applies to the specific case. |
For section 65, the Act says: “The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed.” The 15 working days are advance notice, not the time allowed to finish the audit.
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Does every business need a GST audit?
No. A departmental audit under section 65 is an authority-led process; the fact that a business files GST returns does not mean it must obtain a separate GST audit by a chartered accountant or cost accountant. A special audit under section 66 is also directed by the tax authority under specified conditions, rather than being a routine annual audit selected by the business.
Do not confuse those procedures with the annual return and GSTR-9C reconciliation statement. CBIC Circular No. 246/03/2025-GST describes the rule effective from 1 August 2021: registered persons whose aggregate turnover in a financial year exceeds ₹5 crore furnish a self-certified GSTR-9C reconciliation statement with the annual return. GSTR-9C reconciles supplies reported in the annual return with the audited annual financial statements; filing it is not itself an order to undergo a separate departmental GST audit. The applicable year, taxpayer category, exceptions, and later notifications should be checked before applying the threshold to a particular business. CBIC Circular No. 246/03/2025-GST; CGST Rules, amended Part A.
What should you do after receiving an ASMT-10 or ADT-01?
First identify what the document actually does. An ASMT-10 is a scrutiny discrepancy notice; an ADT-01 is a departmental audit notice. Neither should be treated as interchangeable with a special-audit direction or a notice proposing a tax demand.
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- Read the requested action and deadline. Establish whether the notice asks for a discrepancy explanation, records, audit access, or a response to a proposed demand. Note the response date and required submission method.
- Match each point to evidence. Reconcile the notice against returns, ledgers, invoices, credit notes, input tax credit records, payment records, and relevant computations. Keep the explanation and supporting documents organized by issue.
- Submit a focused response and retain proof. Address each point raised, explain any reconciliation difference, attach appropriate evidence, and keep the submission acknowledgement and a copy of everything filed.
- Get qualified advice when liability or rights are at stake. A GST practitioner or lawyer can help assess the statutory provision, tax and interest exposure, penalty risk, limitation, and any representation or appeal rights. A payment or reconciliation should not be assumed to close proceedings automatically.
What happens after a GST audit?
For a section 65 audit, the taxpayer is to be informed of the findings, rights and obligations, and reasons within 30 days after the audit concludes. The Rules provide for communicating findings in ADT-02 and allow the taxpayer to respond to discrepancies before findings are finalized. If an issue remains, the department may take a separate step under the applicable law, including a demand process where appropriate. Whether tax is ultimately payable depends on that process and its facts—not simply on the existence of an audit observation.
A special audit is different: the nominated accountant’s report is considered in the proceeding in which the audit was directed, and the taxpayer must have an opportunity to be heard on material from that report proposed for use against it. Any resulting determination remains a separate legal step.
Which demand provision applies?
Do not rely on an old general summary that assigns demand cases to sections 73 or 74 using a simple “three years versus five years” distinction. The CBIC-hosted Act text linked here contains sections 73 and 74 but does not show section 74A, and it therefore is not enough to establish the complete current regime or transition rules for every tax period. Before identifying the applicable demand section or calculating a notice or order deadline, check the operative CGST Act amendments, commencement notifications, rules, and circulars for the period and facts in question. CBIC-hosted CGST Act; CBIC GST portal.
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