Indirect Tax Laws · Assessment and Audit

Audit by Tax Authorities under Section 65 and Rule 101 CGST

Updated 5 October 2026

Audit by tax authorities is a departmental check of a registered person's records under Section 65 and Rule 101. The officer sends FORM GST ADT-01 at least 15 working days ahead, verifies records and returns, and finishes within three months of commencement, extendable by up to three months. Findings go in FORM GST ADT-02 within 30 days of conclusion.

Understand Audit by Tax Authorities

GST runs on self-assessment. You declare your own tax, so the department needs a way to check you. Audit by tax authorities is that check. The Commissioner, or any officer he authorises by a general or specific order, can audit any registered person. Under Rule 101, the notice in FORM GST ADT-01 and the findings in FORM GST ADT-02 are issued by the proper officer.

The audit is not a surprise. You get a notice in FORM GST ADT-01, at least 15 working days before the audit starts. The notice names the audit period. The audit can be held at your place of business or at the tax office. You must give the facility to verify books and documents, give information, and help finish the audit on time.

The officer checks the documents behind your books of account, and also your returns and statements. The checks include correctness of turnover, exemptions and deductions claimed, rate of tax applied, ITC availed and utilised, refunds claimed and other relevant issues. If the officer notices discrepancies, he can tell you and you can file a reply.

There is a time limit. The audit must be completed within three months from commencement. The Commissioner can extend it under Section 65(4) by a further period of up to three months. The extension is not automatic. It needs sufficient cause recorded in writing. So the audit can run for up to 3 + 3 = 6 months from commencement. Commencement is the later of two dates: the date the records called for are made available, or the date the audit actually starts at your place of business.

When the audit ends, the officer must tell you the findings, your rights and obligations, and the reasons, within 30 days. This is done in FORM GST ADT-02. If the audit finds tax unpaid or short paid, a wrong refund, or ITC wrongly availed or utilised, the officer can start demand action under the demand provisions. Sections 73 or 74 apply to periods up to FY 2023-24. Section 74A applies from FY 2024-25 onwards. Do not confuse this with special audit (Section 66). Under Section 66, an Assistant Commissioner or higher officer, with the Commissioner's prior approval, directs the registered person to get its records audited by a chartered accountant or cost accountant nominated by the Commissioner.

Key rules to remember

Authority to audit: Commissioner or officer authorised by general or specific order → audit of any registered person; Section 65(1). The audit is by the department, not by your own auditor.
Notice: FORM GST ADT-01, not less than 15 working days before the audit; Working days, not calendar days. The notice also specifies the audit period.
Place of audit: Place of business of the registered person OR office of the tax authorities; Rule 101.
Time limit: Audit completed within 3 months from commencement; extension of up to 3 more months by the Commissioner, for sufficient cause recorded in writing; The extension is not automatic. The audit can run for up to 3 + 3 = 6 months from commencement.
Date of commencement: Later of (date records called for are made available) and (date of actual institution of audit at the place of business); The 3 months are counted from this date, not from the notice date.
Communication of findings: FORM GST ADT-02 within 30 days of conclusion of audit; It states findings, your rights and obligations, and reasons for the findings.
Action on detection: Tax not paid / short paid / erroneously refunded / ITC wrongly availed or utilised → proper officer may initiate action under Section 73 or 74 (periods up to FY 2023-24) or Section 74A (FY 2024-25 onwards); The audit itself does not create the demand. A notice and order process follows.

How to solve Audit by Tax Authorities questions

Use this method for any question on audit by tax authorities. Most questions test a time limit, a form, or who has the power.

1Identify the audit. Check that it is a departmental audit under Section 65 and Rule 101, not special audit under Section 66 or a record-keeping rule.
2Check the authority. The Commissioner, or any officer he authorises by a general or specific order, may audit the registered person. Under Rule 101, the proper officer issues the ADT-01 notice and the ADT-02 findings.
3Check the notice. It must be in FORM GST ADT-01 and given at least 15 working days before the audit. Note the audit period and the place.
4Fix the commencement date. Take the later of the date the records are made available and the date the audit actually starts at the premises.
5Compute the deadline. Add 3 months to commencement. An extension is not automatic. It is given by the Commissioner, for sufficient cause recorded in writing, for up to 3 more months. So the audit can run up to 6 months in all.
6List what the officer verifies: books, returns, turnover, exemptions, rate of tax, ITC, refunds. Note that you may reply to discrepancies.
7State the outcome. Findings in FORM GST ADT-02 within 30 days of conclusion. If tax or ITC issues are found, the officer may initiate demand action. Use Section 73 or 74 for periods up to FY 2023-24 and Section 74A for FY 2024-25 onwards.
8Write the answer as provision, facts, conclusion. Quote the rule first, apply the dates, then state the conclusion.

Quickest way: Four-number recall: 15, 3, 3, 30

When to use it: Use it for MCQs and for the date-based parts of case scenarios.

15 working days is the minimum notice (ADT-01).
3 months is the time to complete the audit, counted from commencement.
3 months is the maximum extension, granted by the Commissioner in writing (6 months in all).
30 days is the time to communicate findings (ADT-02) after conclusion.
For any date question, find commencement first. It is the later of records made available and actual start.

Common mistakes in Audit by Tax Authorities

Counting the 3-month limit from the date of the notice
The notice feels like the start of the audit.
Fix: Count from commencement, the later of the date the records are made available and the date the audit actually starts at the premises.
Treating the 15 days in the notice as calendar days
Students remember '15 days' and drop the word 'working'.
Fix: Write 'not less than 15 working days' every time.
Saying the proper officer can extend the audit
The proper officer issues the notice and the findings, so he seems to control the time.
Fix: The extension is granted by the Commissioner under Section 65(4). It is not automatic. It needs sufficient cause recorded in writing and is for up to 3 more months.
Adding a 6-month extension to the 3-month limit to get 9 months
Students confuse the extension period with the total time allowed.
Fix: The extension is up to 3 months. The audit can run for up to 3 + 3 = 6 months from commencement.
Mixing up audit under Section 65 with special audit under Section 66
Both have 'audit' in the name and both are initiated by the department.
Fix: Section 65 audit is done by departmental officers. Under Section 66, an Assistant Commissioner or higher officer, with the Commissioner's prior approval, directs the registered person to get records audited by a chartered or cost accountant nominated by the Commissioner.
Forgetting ADT-02 or the 30-day rule for findings
Students focus on the start of the audit and the demand that follows.
Fix: Remember the sequence: ADT-01 notice, verification, reply to discrepancies, ADT-02 findings within 30 days, then demand action if needed.
Saying the audit itself imposes the tax demand or penalty
Students skip the step between findings and demand.
Fix: Write that the proper officer may initiate action under the demand provisions. The demand needs a notice and an order.

Worked examples

Example 1

A department audit of Neel Traders, a registered person, is ordered by the Commissioner. The records called for are made available on 5 July 2026. The officers actually start the audit at Neel's premises on 12 July 2026. Find the date by which the audit must normally be completed, and the latest date up to which it can run if the Commissioner grants the maximum extension.

Show the solution

Commencement is the later of the date the records are made available (5 July) and the date the audit is actually instituted at the place of business (12 July). So commencement is 12 July 2026.
The normal limit is 3 months from commencement: 12 October 2026.
The Commissioner can extend by a further period of up to 3 months. The extension is not automatic and needs sufficient cause recorded in writing. With the full extension, the audit can run up to 12 October 2026 + 3 months = 12 January 2027. This is 6 months from commencement in all.

Answer: The audit must normally be completed by 12 October 2026. If the Commissioner grants the full 3-month extension for sufficient cause recorded in writing, it can run up to 12 January 2027.

Example 2

Kaveri Ltd received FORM GST ADT-01 for an audit of FY 2024-25. The audit concluded on 15 January 2027. The officer found that Kaveri had availed ITC for FY 2024-25 that it was not entitled to. Advise on what the officer must do and by when.

Show the solution

On conclusion, the proper officer must inform Kaveri of the findings, its rights and obligations, and the reasons for the findings, within 30 days. This is done in FORM GST ADT-02.
30 days from 15 January 2027 ends on 14 February 2027.
Since the audit detected ITC wrongly availed, the proper officer may initiate action under the demand provisions. The audited period is FY 2024-25, so Section 74A applies (Sections 73 and 74 apply only to periods up to FY 2023-24).
The audit finding is not itself a demand. A notice and an order are needed before any amount becomes payable as a demand.

Answer: The officer must communicate the findings in FORM GST ADT-02 by 14 February 2027. He may then initiate action under Section 74A for the wrongly availed ITC of FY 2024-25. The demand follows only through the notice and order process.

Exam tips

Learn the four numbers 15 working days, 3 months, 3 months (extension) and 30 days. Most MCQs test one of them.
In date problems, write the commencement date first and show the working. Marks are given for the method.
Name the forms: ADT-01 for the notice and ADT-02 for the findings. Examiners like precise form references.
In a case scenario, name who does what: the Commissioner authorises the audit and grants any extension (Section 65(4), reasons in writing, up to 3 months), and under Rule 101 the proper officer issues ADT-01 and ADT-02.
Keep Section 65 audit separate from special audit (Section 66) and scrutiny of returns. Show the difference if the question hints at both.

Practice questions from Assessment and Audit

Audit by Tax Authorities: frequently asked questions

How long does a GST department audit take?

It must be completed within three months from commencement. The Commissioner can extend this by up to three more months, but only for sufficient cause recorded in writing. So the audit can run for up to six months. The three months run from the later of the date records are made available and the date the audit actually starts at the premises.

What is FORM GST ADT-01?

It is the notice sent to a registered person before the department audits it under Rule 101. It must be given at least 15 working days before the audit begins. It states the audit period.

Where can the audit be conducted?

It can be conducted at your place of business or at the office of the tax authorities, as per Rule 101. The officer may ask for books and documents wherever the audit is held.

What happens after the audit ends?

The proper officer must inform you of the findings in FORM GST ADT-02 within 30 days of conclusion. If the audit shows tax unpaid or short paid, a wrong refund, or wrong ITC, he may start demand action. Sections 73 or 74 apply to periods up to FY 2023-24 and Section 74A applies from FY 2024-25 onwards. That action goes through a notice and an order.

How is audit by tax authorities different from special audit?

Audit under Section 65 is done by the departmental officers. Under Section 66, an Assistant Commissioner or higher officer, with the Commissioner's prior approval, directs the registered person to get its records audited by a chartered accountant or cost accountant nominated by the Commissioner. The registered person's books must then be examined by that professional.