Tax officer audit. 15-day notice, 3-6 month duration. On-site/document verification. Common findings (ITC, RCM, classification). Penalty 100% intent / 10% otherwise + 18% interest.
Section 65 = GST DEPARTMENT AUDIT by tax officers. KEY: (1) Commissioner-appointed audit. (2) FOCUS: verification of returns + ITC + GSTR-9 reconciliation. (3) ON-SITE or document-based. (4) 15 DAYS NOTICE (Form GST ADT-01). (5) DURATION: 3 months (extendable to 6 months). (6) PURPOSE: ensure compliance + detect tax evasion. DIFFERENT from STATUTORY AUDIT (CA-conducted under GSTR-9C).
AUDIT NOTICE RESPONSE: (1) READ Form ADT-01 carefully — audit period, scope, documents required. (2) GATHER DOCUMENTS: GSTR-1, 3B, 9, 9C, invoices, bank statements, expense ledger. (3) ENGAGE CA early for preparation. (4) COMPILE WORKING PAPERS — reconciliations of GSTR-1 vs 3B vs 2B vs 9. (5) REVIEW common issues — ITC discrepancies, RCM, e-way bills. (6) PREPARE TIMELINE for document submission. (7) COOPERATE — non-cooperation triggers escalation.
TYPICAL AUDIT FINDINGS: (1) ITC AVAILMENT excess vs GSTR-2B. (2) SUPPLIES under-reported in GSTR-1. (3) RCM not paid or wrong rate. (4) Reverse charge ITC not claimed. (5) HSN code errors. (6) Late filings. (7) Bank reconciliation issues. (8) Inter-state vs intra-state classification. HANDLE: (1) ACCEPT genuine errors + pay tax + interest. (2) DISPUTE incorrect findings with documentation. (3) APPEAL via Section 107 if final order adverse. (4) ENGAGE TAX LAWYER for serious cases.
AUDIT OUTCOMES: (1) DEMAND ORDER (Form ADT-04) issued if tax due found. (2) PENALTY: 100% of tax if intent to evade, 10% otherwise (Section 122). (3) INTEREST: 18% per annum on delayed tax payment. (4) PAYMENT WINDOW: 30 days. (5) APPEAL: within 90 days to Appellate Authority. EXAMPLE: ₹10L additional GST found. (a) Penalty 100% = ₹10L. (b) Interest 18% × ₹10L × 12 months = ₹1.8L. (c) Total ₹21.8L. SERIOUS — engage CA + tax lawyer.
AUDIT PREVENTION: (1) MONTHLY RECONCILIATION GSTR-1 vs 3B vs 2B vs Books. (2) ANNUAL GSTR-9 + 9C accurate filing. (3) MAINTAIN supplier compliance records — verify GSTR-1 filing. (4) E-WAY BILL discipline. (5) PROFESSIONAL CA quarterly review. (6) AUDIT TRAIL for all decisions. (7) DOCUMENT EXCEPTIONS (e.g., legitimate ITC blocked claim reasons). PROACTIVE: voluntary disclosure of errors via DRC-03 — avoid scrutiny + lower penalty.