Section 65 of the CGST Act empowers the tax authorities to audit the records of a registered person at their premises or office. The audit begins with a notice in Form ADT-01, must generally be completed within three months (extendable), and the findings are communicated in Form ADT-02.
What a Section 65 audit is
A departmental audit under Section 65 is a verification of a registered person's returns, records and compliance by the GST authorities. It is distinct from the taxpayer's own GSTR-9C reconciliation and from a special audit under Section 66 (which is conducted by a CA/CMA nominated by the department in complex cases).
The process and timeline
- Notice in Form ADT-01 at least 15 days before the audit.
- Audit completed within three months of commencement, extendable by up to six months by the Commissioner.
- Findings, rights and obligations communicated in Form ADT-02 within 30 days of conclusion.
- Any tax/interest/penalty arising is pursued under Section 73 or 74.
What officers typically examine
- Reconciliation of GSTR-1, GSTR-3B, GSTR-2B and the books.
- ITC eligibility, blocked credits and reversals under Rules 42/43.
- RCM liabilities and self-invoicing.
- Classification, rate and HSN; place of supply on inter-State transactions.
Preparing for the audit
Keep a year-wise reconciliation file (turnover, ITC, tax paid), the RCM register, and documentation for major ITC claims and reversals. Respond to ADT-01 with organised records; resolving issues during the audit (via DRC-03) can avoid a formal demand and reduce penalty exposure.
Key takeaways
- Section 65 is a departmental audit, starting with Form ADT-01.
- Complete within 3 months (extendable by 6); findings in ADT-02.
- Focus areas: GSTR reconciliation, ITC, RCM, classification.
- A reconciliation file and DRC-03 can pre-empt formal demands.