For a GST audit under Section 65 of India’s CGST Act, prepare a separate, indexed evidence file for every GSTIN in scope. Reconcile each registration’s returns and tax ledgers to its books and supporting documents, then maintain a crosswalk for consolidated accounts, inter-registration supplies and shared services. A PAN-level summary alone may not show how each state registration reported its transactions.
First, confirm which audit you are preparing for
This guide concerns a tax-authority audit under Section 65 of India’s Central Goods and Services Tax Act (CGST Act), not a special audit under Section 66 or a return scrutiny or assessment. Check the audit notice for the GSTIN or GSTINs, financial year or years, records requested, responsible officer and requested format. The CGST Act and rules can be amended, so verify the provisions that apply to the tax period under audit.
Under the Section 65 framework, the audit may take place at your place of business or at the officer’s office. The registered person must be given at least 15 working days’ notice; the prescribed notice form is GST ADT-01. The audit period is a financial year or multiples of a financial year under the rules.
Know the statutory timeline
| Event | Timing and meaning |
|---|---|
| Advance notice | At least 15 working days before the audit, under Section 65 of the CGST Act. |
| Audit completion | Three months from commencement. The Commissioner may extend this by up to a further six months for reasons recorded in writing. |
| When the audit commences | The later of the day you make the called-for records and documents available or the day the audit is actually instituted at your place of business. |
| Communication of findings | Within 30 days after conclusion. The rules prescribe Form GST ADT-02 for communicating findings. |
During the audit, an authorized officer may ask for books, documents, information and assistance needed to complete the work. The officer may raise discrepancies as observations; you may reply, and the officer is to consider your reply before finalizing findings. Findings of unpaid or short-paid tax, erroneous refunds, or wrongly availed or used input tax credit may lead to further action.
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Build the file around each GSTIN
Section 25 treats each registration obtained or required in a state or union territory as a distinct person under the Act. Use that registration-level structure for the audit file, while keeping a group-level crosswalk to shared ledgers and consolidated financial statements.
- Create one index and reconciliation pack per GSTIN. Mark the financial year or years and tax periods covered, and map each item in the notice to the document or working that answers it.
- Keep a group crosswalk. Identify which shared ledger accounts, consolidated schedules or common source systems feed each GSTIN’s figures; show how group totals connect to the registration-level figures.
- Document inter-registration transactions. For supplies between registrations sharing a PAN, identify the supplier GSTIN, recipient GSTIN, invoice or other supporting document, return treatment and accounting entry.
- Assign an owner for each response area. Make clear who can retrieve the records, explain the reconciliation and confirm that the evidence matches the relevant GSTIN and period.
Reconcile the areas the audit may examine
The rules identify review areas, not a universal checklist for every taxpayer. Tailor the evidence to your activities, transactions, tax period and the notice.
Rank #2
| Area | What to reconcile or retain |
|---|---|
| Turnover | Reconcile financial books to GST returns. Explain reconciling items by GSTIN and tax period, with supporting schedules. |
| Exemptions and deductions | Keep the calculation, the legal basis relied on and transaction-level evidence supporting the amounts claimed. |
| Tax rates | Link the rate applied to the supply description and invoice, with the relevant classification or supporting analysis. |
| Input tax credit (ITC) | Reconcile credits availed and utilized to invoices, ledgers and return data. Show reversals and adjustments, too. |
| Refunds | Retain the claim, supporting calculations and source records. |
| Other notice items | Answer each specific request or observation with indexed evidence rather than an unsupported assertion. |
Pay particular attention to shared input services
Central procurement can make it harder to show which state registration used a third-party service and how the related credit was handled. CBIC’s sectoral FAQ asks: “Would Input Tax Credit (ITC) be available to a GST registrant though the services procured from third party vendor are also directly used by various ‘distinct persons’?”
The FAQ says that credit for services used across states should be appropriately invoiced or distributed through the Input Service Distributor (ISD) mechanism to the distinct persons that actually used the services. For an audit file, identify the service, the registrations using it, the supporting invoice and the allocation or distribution records. Check the law and facts for the relevant service and tax period before concluding that a particular mechanism or allocation is correct.
Make the records and electronic trail reproducible
Keep the source documents supporting your books, returns and tax positions. The rules contemplate producing electronic records on demand in hard copy or in an electronically readable form. They also contemplate an account of the audit trail and inter-linkages, including source documents, financial accounts, record layout, data dictionary and explanations for codes.
A practical check is to select a return figure and trace it back through the ledger to the source document. Then confirm you can open the relevant electronic export and explain its fields, codes and links to the source records. An export that cannot be read or reconciled is difficult to use as evidence.
Apply the retention period to the relevant records
The Act states a retention period of 72 months from the due date for furnishing the annual return for the year to which the records pertain. It also provides for longer retention in specified appeal, revision, proceeding or investigation circumstances. Calculate the period using the relevant annual-return due date, and check whether proceedings affect retention before disposing of records.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Respond to observations with a traceable answer
- Record the exact observation. Preserve the question or discrepancy as received and identify the affected GSTIN and period.
- State your position. Set out the facts and the legal basis for the treatment, distinguishing documented facts from any interpretation.
- Attach numbered evidence. Point to the relevant reconciliation, invoice, ledger extract or other source record in the GSTIN’s audit index.
- Address any error consistently. If correction or remediation is appropriate, align the books, returns and registration-level workings, and retain the basis and evidence for any payment or other action.
For a material interpretive issue or a question involving cross-state credit, consider review by a GST professional familiar with the relevant period and registrations.
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Official references
- CGST Act, including Sections 25 and 65 (CBIC)
- CGST Rules (CBIC)
- Sectoral FAQ on GST, including the question on third-party services used by distinct persons (CBIC)
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