GST Departmental Audit Under Section 65: ADT-01, 15-Day Notice & Audit Checklist

Direct answer: A GST departmental audit under Section 65 of the CGST Act is an audit by the tax authorities of a registered person. The taxpayer must receive at least 15 working days’ prior notice, ordinarily in Form GST ADT-01. The audit is generally to be completed within three months from commencement, extendable by the Commissioner by up to six further months for recorded reasons. Findings are communicated in Form GST ADT-02, and tax, interest or demand proceedings can follow if discrepancies remain.

1. Why Section 65 GST audit matters in 2026

Many businesses still use “GST audit” to mean the old annual CA/CMA certification requirement. That professional audit requirement under former Section 35(5) is no longer the current annual-return framework. Section 65 is different: it is a departmental audit conducted by GST authorities. A business can therefore have no mandatory CA/CMA GST audit and still be selected for a Section 65 audit.

This distinction matters particularly for finance heads, tax managers and promoters because a Section 65 audit can test turnover, exemptions, rate classification, input tax credit, refunds, return consistency and the supporting books and documents.

2. Who can be audited under Section 65?

Section 65(1) authorises the Commissioner or an officer authorised by the Commissioner, through a general or specific order, to undertake audit of any registered person for the prescribed period, frequency and manner. The statute does not create a turnover threshold that protects a registered person from departmental audit.

The audit may be conducted at the registered person’s place of business or in the tax office. Rule 101 governs the procedure and allows the audit period to cover a financial year, part of a financial year, or multiple financial years.

3. Form GST ADT-01: the 15-working-day notice rule

Section 65(3) requires the registered person to be informed not less than 15 working days before the audit. Rule 101(2) prescribes Form GST ADT-01 for this purpose. The notice identifies the audit period and requires the taxpayer to make books, records and information available and to assist the authorised officers.

Practical point: do not treat ADT-01 as a routine portal notice. Immediately build an audit file, freeze the requested data set, nominate one response owner and reconcile key returns before the first substantive submission.

4. What will the GST audit team verify?

Rule 101 specifically contemplates verification of the documents on which books are maintained and the returns and statements furnished under GST law. The audit team may examine the correctness of turnover, exemptions and deductions, tax rates applied, input tax credit availed and utilised, refunds claimed and other relevant issues.

In practice, the highest-risk reconciliation areas usually include GSTR-1 versus GSTR-3B liability, GSTR-2B versus ITC claimed, e-invoice and e-way bill consistency, credit notes, reverse charge, exempt turnover, place of supply, zero-rated supplies, refund workings and ledger-level support for unusual adjustments.

5. Three-month completion period — and when it can extend

Section 65(4) provides a three-month period for completion of audit from the “commencement of audit”. The Act defines commencement as the later of: (a) the date on which records and documents called for are made available, or (b) the actual institution of audit at the place of business.

If the Commissioner is satisfied that the audit cannot be completed within three months, the period may be extended, for reasons recorded in writing, by a further period not exceeding six months.

6. Responding to audit discrepancies before findings are finalised

Rule 101 permits the proper officer to communicate discrepancies noticed during audit. The registered person may file a reply, and the officer is expected to finalise the audit findings after considering that reply. This stage is commercially important: a strong invoice-level and legal response may prevent an audit observation from becoming a larger demand dispute.

A useful response should separate pure reconciliation differences from legal-position disputes. For each observation, identify the period, GSTIN, return table, ledger entry, tax amount, evidence, legal provision and corrective action, if any.

7. Form GST ADT-02 and what happens after audit

Section 65(6) requires the proper officer, within 30 days of conclusion of audit, to inform the registered person of the findings, rights and obligations and the reasons for the findings. Rule 101(5) prescribes Form GST ADT-02 for communicating the audit findings.

If the audit detects tax not paid or short paid, erroneous refund, or input tax credit wrongly availed or utilised, further statutory action may follow under the applicable demand provisions. The audit finding itself should therefore be treated as the beginning of the dispute-management phase, not merely as an administrative closure document.

8. Section 65 audit vs Section 66 special audit

Section 65 departmental audit should not be confused with Section 66 special audit. Under Section 66, an officer not below the rank of Assistant Commissioner may, with prior approval of the Commissioner and in specified circumstances involving complexity, valuation or abnormal credit, direct examination by a Chartered Accountant or Cost Accountant nominated by the Commissioner.

For businesses, this distinction matters because the trigger, auditor, forms and process differ. Section 65 uses ADT-01/ADT-02 and is performed by tax authorities. Section 66 uses ADT-03/ADT-04 and involves a nominated CA/CMA.

9. Practical 10-point Section 65 audit readiness checklist

1) Reconcile GSTR-1 with GSTR-3B month by month. 2) Reconcile GSTR-2B with ITC claimed and reversals. 3) Match e-invoice and e-way bill data to books. 4) Review exempt, nil-rated and zero-rated supplies. 5) Recheck reverse-charge liabilities. 6) Validate tax-rate and classification positions. 7) Reconcile credit notes, debit notes and amendments. 8) Tie refund claims to supporting exports/invoices/ledgers. 9) Preserve contracts, invoices, payment evidence and legal opinions for material positions. 10) Maintain an observation tracker showing issue, amount, owner, evidence and response status.

10. Example: how a Section 65 issue can arise

Assume a company reports ₹12 crore of taxable outward supplies in GSTR-1 but ₹11.6 crore in GSTR-3B over the audit period. The ₹40 lakh difference does not automatically prove a tax shortfall: it may include timing differences, amendments, credit notes or reporting errors. But unless the taxpayer can reconcile the difference invoice by invoice and tie it to subsequent returns, the mismatch can become an audit observation and potentially move into demand proceedings.

11. FAQs

Is there a turnover limit for Section 65 audit?

No specific turnover threshold in Section 65 prevents a registered person from being selected for departmental audit.

How much prior notice is required?

At least 15 working days before conduct of the audit, with the procedural notice issued in Form GST ADT-01.

Can GST audit be conducted at the taxpayer’s premises?

Yes. Section 65 permits audit either at the place of business or in the tax office.

How long can a Section 65 audit continue?

The statutory completion period is three months from commencement, with a possible extension of up to six additional months where the Commissioner records reasons.

Does ADT-02 itself mean tax is immediately payable?

ADT-02 communicates audit findings. Where tax, ITC or refund issues remain, the department may initiate the applicable statutory demand process. The taxpayer should analyse the findings and preserve the factual and legal defence immediately.

12. Related PGT & Associates guides

GST Audit Limit for FY 2025-26: https://www.pgtandassociates.com/post/gst-audit-limit-fy-2025-26

GST Dispute Resolution in India 2026: https://www.pgtandassociates.com/post/gst-dispute-resolution-appeals-gstat

GSTR-1 vs GSTR-3B Mismatch — DRC-01B: https://www.pgtandassociates.com/post/gstr1-gstr3b-mismatch-drc01b

GSTR-2B vs GSTR-3B Mismatch — DRC-01C: https://www.pgtandassociates.com/post/drc-01c-gstr2b-gstr3b-mismatch

13. Primary statutory references

CBIC — CGST Act, Section 65 (Audit by tax authorities): https://cbic-gst.gov.in/hindi/CGST-bill-e.html

CBIC — Rule 101, Audit; Forms GST ADT-01 and ADT-02: https://cbic-gst.gov.in/assessment-audit-rules.html

How PGT & Associates can help

For businesses facing GST departmental audit, the highest-value work usually happens before the first major submission: transaction-level reconciliations, quantification of exposures, evidence mapping and legally consistent responses. PGT & Associates can assist with GST audit readiness, reconciliation, reply strategy and subsequent dispute support. For professional assistance, use the contact/enquiry options on pgtandassociates.com.

Disclaimer: This article is for general professional information and does not constitute legal or tax advice. GST positions should be evaluated on the facts, period involved, applicable notifications, circulars and subsequent amendments before action is taken.