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Indirect Tax Laws · Assessment and Audit

Scrutiny of Returns under GST (Section 61 and Rule 99)

Updated 5 October 2026 · Fact-checked

Scrutiny of returns is a desk review in which the proper officer checks a registered person's return for correctness. If he finds discrepancies, he issues notice in FORM GST ASMT-10. You either accept and pay, or explain. If the explanation is acceptable, ASMT-12 closes the matter. Otherwise he may start audit, inspection or demand action.

Understand Scrutiny of Returns

Every registered person files returns on self-assessment. The department does not check each one when it is filed. Scrutiny of returns is the tool it uses to check them afterwards, from the records already on the portal. The officer does not visit your premises and does not ask for books at this stage.

The proper officer compares the return and related particulars with other data. Examples are GSTR-1 against GSTR-3B, ITC claimed against GSTR-2B, and tax paid against tax due. If he finds a mismatch, he informs you of the discrepancy and asks for an explanation. This is done by notice in FORM GST ASMT-10 under Rule 99. The notice is only a request for clarification. It is not a show cause notice, and no demand or penalty is fixed through it.

You then have two choices. You can accept the discrepancy, pay the tax, interest and any other amount arising from it, and inform the officer in FORM GST ASMT-11. Or you can explain why the return is correct, also in ASMT-11. Under Rule 99(2), you must reply within 30 days of being informed, or such further period as the proper officer permits.

If the officer finds your explanation acceptable, he informs you in FORM GST ASMT-12, under Rule 99(3), that no further action will be taken. If you give no satisfactory explanation in time, or you accept the discrepancy but do not take the corrective step in your return, he can move to stronger action. That action can be audit (section 65), special audit (section 66), inspection, search and seizure (section 67), or determination of tax under the demand provisions.

Section 61 applies only to registered persons who have filed returns. Persons who have not filed returns are dealt with under a separate provision for non-filers. Keep the two apart in the exam.

Key rules to remember

Purpose of scrutiny (Section 61)
Proper officer scrutinises return and related particulars → verifies correctness → informs discrepancies → seeks explanation
It applies to returns furnished by registered persons. It is a desk review, not an audit.
Notice of discrepancy (Rule 99)
Discrepancy noticed → notice in FORM GST ASMT-10 → explanation sought
ASMT-10 is issued by the proper officer. It is not a show cause notice.
Reply by registered person (Rule 99(2))
Accept + pay tax, interest and other amount, or furnish explanation → FORM GST ASMT-11
Under Rule 99(2), reply within 30 days of being informed, or such further period as the proper officer permits.
Acceptance of explanation (Rule 99(3))
Explanation acceptable → proper officer informs in FORM GST ASMT-12 → no further action
ASMT-12 is an intimation of acceptance. The officer informs the registered person that no further action will be taken in the matter.
Consequence of non-reply or non-correction
No satisfactory explanation in time, or discrepancy accepted but not corrected in return → action under section 65 / 66 / 67 or determination of tax under the demand provisions
Corrective measure means correcting the return for the month in which the discrepancy is accepted.

How to solve Scrutiny of Returns questions

Use this order for any question on scrutiny of returns. It keeps your answer in provision-facts-conclusion form.

  1. 1Identify the stage: scrutiny, notice (ASMT-10), reply (ASMT-11), acceptance (ASMT-12) or follow-up action.
  2. 2State the provision: section 61 of the CGST Act and Rule 99, in plain words.
  3. 3Find the discrepancy in the facts, for example a GSTR-1 versus GSTR-3B difference or ITC beyond GSTR-2B.
  4. 4Apply the two options for the registered person: accept and pay, or explain. Name the form for each.
  5. 5Compute any tax and interest asked for. Show the working: tax difference, then interest at the stated rate and days.
  6. 6Check the timeline. Was the reply within the 30 days allowed by Rule 99(2), or the extended period the officer permitted?
  7. 7Conclude with the officer's outcome: ASMT-12 and no further action, or action under audit, special audit, inspection or demand.
  8. 8Add one line on the nature of the notice: ASMT-10 is not a show cause notice and no penalty is levied through it.

Quickest way: Form-chain method

When to use it: Use it for short-answer or MCQ questions that ask which form is used, who acts, or what happens next.

  1. Write the chain: Scrutiny → ASMT-10 (officer) → ASMT-11 (taxpayer) → ASMT-12 (officer).
  2. Ask which link the facts have reached.
  3. If the chain breaks because there is no reply or the explanation is unsatisfactory, write the fallback: audit, special audit, inspection or demand.
  4. For numbers, compute tax first and interest second, and state both clearly.

Common mistakes in Scrutiny of Returns

  • Treating ASMT-10 as a show cause notice and saying penalty can be imposed through it.

    Both are notices that follow a mismatch, so they look alike.

    Fix: Write that ASMT-10 only seeks an explanation. Demand and penalty come later, only through the demand provisions.

  • Mixing up ASMT-10, ASMT-11 and ASMT-12.

    The numbers are consecutive and students learn them as one block.

    Fix: Remember who signs each one: ASMT-10 by the officer (notice), ASMT-11 by you (reply), ASMT-12 by the officer (acceptance).

  • Saying the officer can scrutinise returns of unregistered persons or non-filers under section 61.

    The name 'Scrutiny of Returns and Notice to Non-Filers' blends two provisions.

    Fix: Section 61 covers returns that have been furnished by registered persons. Non-filers are handled by a separate provision.

  • Writing that paying the tax after ASMT-10 ends the matter automatically.

    Students forget that the officer must be satisfied and must also see the correction in the return.

    Fix: State that acceptance needs payment of tax, interest and other amounts, a reply in ASMT-11, and corrective measure in the return. Closure is by ASMT-12.

  • Omitting interest when the discrepancy is accepted.

    Students focus on the tax difference only.

    Fix: Always list tax, interest and any other amount arising from the discrepancy, as Rule 99 says.

  • Treating scrutiny as an audit with visits to the premises.

    The words 'verification' and 'audit' sound similar.

    Fix: Say that scrutiny is a desk review of returns. Audit under section 65 and inspection under section 67 are separate powers that can follow.

Worked examples

Example 1

Case: Meera Traders is a registered person. Its GSTR-1 for a month shows taxable outward supplies of ₹50,00,000 at 18% GST. Its GSTR-3B for the month shows output tax paid of ₹7,20,000. The proper officer issues ASMT-10 pointing out the difference. Meera Traders finds that the invoices were correct and the 3B was understated. It decides to pay the shortfall after a delay of 73 days, treating the interest rate as 18% per annum. Advise the amount payable and the procedure.

Show the solution
  1. Provision: under section 61 and Rule 99, the officer has informed the discrepancy by ASMT-10. The registered person may accept it and pay, or explain.
  2. Tax as per GSTR-1 = ₹50,00,000 × 18% = ₹9,00,000.
  3. Tax paid as per GSTR-3B = ₹7,20,000.
  4. Shortfall = ₹9,00,000 − ₹7,20,000 = ₹1,80,000.
  5. Interest = ₹1,80,000 × 18% × 73 ÷ 365 = ₹32,400 × 0.2 = ₹6,480.
  6. Total to pay = ₹1,80,000 + ₹6,480 = ₹1,86,480.
  7. Procedure: pay the amount, inform the officer in FORM GST ASMT-11 within the time allowed, and take corrective measure in the return for the month in which the discrepancy is accepted.

Answer: Meera Traders should pay tax of ₹1,80,000 and interest of ₹6,480, a total of ₹1,86,480. It should then reply in ASMT-11 and correct its return. If the officer is satisfied, he closes the matter by ASMT-12 and takes no further action.

Example 2

Case: Kiran Enterprises receives an ASMT-10 notice saying its ITC claimed in GSTR-3B is higher than the ITC in GSTR-2B. Kiran Enterprises neither accepts the difference nor replies. 45 days pass and the officer has not extended the time. What can the officer do, and is the ASMT-10 notice a demand order?

Show the solution
  1. Provision: Rule 99(2) allows 30 days from being informed, or such further period as the officer permits, for the reply.
  2. Facts: no reply was made and no extension was given, so no satisfactory explanation has been furnished in time.
  3. Consequence: the officer may initiate appropriate action. This includes audit under section 65, special audit under section 66, inspection, search or seizure under section 67, or determination of tax and other dues under the demand provisions.
  4. Nature of notice: ASMT-10 only seeks an explanation. It does not fix any demand, interest or penalty. Those can arise only through the later proceedings.

Answer: The officer can initiate further action such as audit, special audit, inspection, search and seizure, or a demand proceeding. ASMT-10 is not a demand order or a show cause notice. Kiran Enterprises should have replied in ASMT-11 with evidence within the time allowed.

Exam tips

  • Learn the form chain ASMT-10, ASMT-11 and ASMT-12 cold. Examiners often ask which form is used at which stage.
  • In case scenarios, always compute tax and interest and show the working, because the numbers carry marks.
  • State that scrutiny is a desk review of furnished returns and does not involve inspection of premises.
  • End each answer with the consequence: closure by ASMT-12 on acceptance, or follow-up action if the reply is missing or unsatisfactory.
  • Write the reply period as: within 30 days of being informed, or such further period as the proper officer permits.

Practice questions from Assessment and Audit

Scrutiny of Returns in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Scrutiny of Returns: frequently asked questions

What is ASMT-10 under GST?

ASMT-10 is the notice issued by the proper officer under Rule 99 when scrutiny of a return shows discrepancies. It informs you of the discrepancies and asks for an explanation. It is not a show cause notice.

How do I reply to a scrutiny notice under GST?

You reply in FORM GST ASMT-11. Either accept the discrepancy and pay the tax, interest and other amount arising from it, or give an explanation with supporting documents showing that the return is correct. Under Rule 99(2), you must reply within 30 days of being informed, or such further period as the proper officer permits.

What is ASMT-12?

ASMT-12 is the intimation, issued under Rule 99(3), in which the proper officer informs you that your explanation is acceptable. It is an intimation of acceptance, not an adjudication order and not a demand. After it, no further action is taken on the discrepancy raised in that notice.

What happens if I do not reply to ASMT-10?

The officer can initiate further action. That action can be audit, special audit, inspection, search or seizure, or determination of tax under the demand provisions. So you should reply in time, or ask for more time.