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Taxation · Accounts and Records

Audit and Professional Compliance Aspects under GST for CA Inter

Updated 4 October 2026 · Fact-checked

From FY 2020-21 onwards, a registered person no longer needs a CA or CMA audit under section 35(5) CGST, which was omitted. Instead, those with aggregate turnover above ₹5 crore file a self-certified reconciliation in GSTR-9C (Rule 80(3)). Departmental audit (section 65) and special audit by a CA or CMA (section 66) still apply.

Understand Audit and Professional Compliance Aspects

GST law needs registered persons to keep proper records (section 35). Audit is the check that those records and the returns agree. You must know three different audits, and students often mix them up.

Audit by the taxpayer's professional (old section 35(5)). Earlier, a registered person whose turnover crossed ₹2 crore had to get accounts audited by a Chartered Accountant or Cost Accountant and file the audit report with the annual return. The Finance Act, 2021 omitted this, and the change applies from FY 2020-21 onwards. So there is no longer a mandatory GST audit by a CA or CMA for the taxpayer's own books. If a question is set on the current law, do not apply this limit.

Self-certified reconciliation (GSTR-9C). The replacement is a reconciliation statement between the audited annual financial statements and the annual return (GSTR-9). A registered person with aggregate turnover above ₹5 crore in a financial year files it with GSTR-9, and certifies it himself. A CA or CMA is not required to certify it. The professional's role is now advisory and optional.

Audit by tax authorities (section 65). The Commissioner or an officer authorised by him can audit any registered person. The taxpayer gets notice in advance, must make records available, and the audit is meant to be completed within a fixed time. This is the departmental audit.

Special audit (section 66). During scrutiny, inquiry, investigation or other proceedings, an officer of at least Assistant Commissioner rank may think that the value is not correctly declared or the credit availed is not within normal limits. With the Commissioner's prior permission, he can direct the person to get records audited by a CA or CMA nominated by the Commissioner. Here the professional is chosen by the department, not the taxpayer, and the cost is borne by the department.

Key rules to remember

Old section 35(5) audit (omitted)
Turnover > ₹2 crore → accounts audited by CA/CMA (omitted; applies from FY 2020-21 onwards)
Know it for history and for questions that ask what has changed. Do not apply it to current-law problems.
GSTR-9C threshold
Aggregate turnover > ₹5 crore in the financial year → self-certified reconciliation statement in GSTR-9C
Filed along with GSTR-9. Certified by the taxpayer; no CA/CMA certificate is needed. Rule 80(3) of the CGST Rules, applicable from FY 2020-21 onwards.
Departmental audit (section 65)
Notice in advance (15 working days) → audit by Commissioner's authorised officer → completion within 3 months of commencement, extendable by up to 3 months
Extension is by the Commissioner for sufficient cause. Findings are communicated, and demand proceedings may follow if tax is found unpaid.
Special audit (section 66)
Officer ≥ Assistant Commissioner + prior permission of Commissioner → CA/CMA nominated by Commissioner → report within 90 days, extendable by 90 days
Applies when value is not correctly declared or credit is not within normal limits. Cost is borne by the department.
Record retention (section 36)
Keep records for 72 months from the due date of the annual return for the year
Records stay relevant for any audit, so the retention period links this topic to section 35.

How to solve Audit and Professional Compliance Aspects questions

Use this method for any question on GST audit and professional compliance.

  1. 1Identify which audit the question is about: taxpayer's own audit (old section 35(5)), GSTR-9C reconciliation, departmental audit (section 65) or special audit (section 66).
  2. 2Check the date and law. Under current law, section 35(5) audit does not exist, so the answer will turn on GSTR-9C or sections 65 and 66.
  3. 3Note the aggregate turnover and compare it with ₹5 crore for GSTR-9C. Remember that annual return GSTR-9 has its own thresholds and exemptions.
  4. 4Identify who acts: the taxpayer (self-certifies), the Commissioner's officer (section 65) or a nominated CA/CMA (section 66).
  5. 5Apply the procedure and time limits: notice, completion period, extension, who bears the cost.
  6. 6State the consequence: for example, findings under section 65 can lead to recovery proceedings, and non-cooperation can lead to penalty.
  7. 7Write the answer in provision, facts, conclusion format and end with a clear one-line conclusion.

Quickest way: Four-way sort for MCQs and written answers

When to use it: Use it when you see the words audit, CA, CMA or GSTR-9C in a GST question and have little time.

  1. Ask who chooses the auditor. If the taxpayer, it is no longer mandatory GST audit. If the Commissioner's officer, it is section 65. If the Commissioner nominates a CA or CMA, it is section 66.
  2. In MCQs, eliminate any option that says a CA or CMA must audit the taxpayer's books under section 35(5), unless the question clearly tests the old position.
  3. For turnover cases, check ₹5 crore for GSTR-9C. A figure like ₹3 crore or ₹2 crore means no GSTR-9C.
  4. In written answers, write the section number, the condition, the authority, the time limit and the conclusion in separate short lines so each step earns a mark.

Common mistakes in Audit and Professional Compliance Aspects

  • Saying a CA or CMA audit is compulsory above ₹2 crore turnover under section 35(5).

    Older books and coaching notes still show the earlier law.

    Fix: Remember that section 35(5) was omitted, applying from FY 2020-21 onwards. Present law needs only a self-certified GSTR-9C above ₹5 crore.

  • Writing that GSTR-9C must be certified by a CA or CMA.

    Students recall the earlier audited form and its certification.

    Fix: Under current rules the statement is self-certified by the registered person. A professional may help, but certification is not required.

  • Confusing section 65 with section 66.

    Both are called audit and both involve officers.

    Fix: Section 65 is audit by authorities themselves. Section 66 is special audit by a CA or CMA nominated by the Commissioner, with the Commissioner's prior permission.

  • Forgetting who bears the cost of special audit.

    Students assume the taxpayer pays for any audit of his books.

    Fix: In a section 66 special audit, the cost of the nominated professional is borne by the department, not the taxpayer.

  • Mixing up the time limits for sections 65 and 66.

    Both have extensions, and the numbers look alike.

    Fix: Remember 3 months plus 3 months for section 65, and 90 days plus 90 days for section 66.

  • Treating GSTR-9C as required for every taxpayer who files GSTR-9.

    The two forms are filed together.

    Fix: GSTR-9C applies only when aggregate turnover exceeds ₹5 crore. Below that, only GSTR-9 is needed, where it is applicable.

Worked examples

Example 1

Mehta Traders is a registered person with aggregate turnover of ₹7 crore in the financial year. It asks whether it must get its accounts audited by a CA or CMA under section 35(5) of the CGST Act and what annual compliance applies.

Show the solution
  1. Provision: Section 35(5), which required audit by a CA or CMA above the prescribed turnover, was omitted by the Finance Act, 2021, applying from FY 2020-21 onwards.
  2. Facts: Aggregate turnover is ₹7 crore, which is above ₹5 crore.
  3. Rule 80(3) requires a registered person with aggregate turnover above ₹5 crore to file a self-certified reconciliation statement in GSTR-9C along with the annual return GSTR-9.
  4. Therefore the compulsory audit by a CA or CMA does not apply. The reconciliation is certified by Mehta Traders itself.

Answer: No audit by a CA or CMA is required under section 35(5), as it is omitted. Mehta Traders must file GSTR-9 and a self-certified GSTR-9C because turnover exceeds ₹5 crore.

Example 2

During scrutiny of the return of Rao Ltd, an Assistant Commissioner believes the value of supplies is not correctly declared. State whether he can direct a special audit and how it works.

Show the solution
  1. Provision: Section 66 allows an officer not below the rank of Assistant Commissioner to direct a special audit at any stage of scrutiny, inquiry, investigation or other proceedings.
  2. Condition: He must consider the nature and complexity of the case and the interest of revenue, and form the opinion that the value is not correctly declared or credit availed is not within normal limits.
  3. Procedure: He needs the prior permission of the Commissioner. The records, including books of account, are examined and audited by a CA or CMA nominated by the Commissioner.
  4. Time limit: The audit report is to be submitted within 90 days, extendable by a further 90 days on an application.
  5. Cost: The expenses of the examination and audit, including the professional's remuneration, are borne by the department.
  6. Conclusion: The facts match the section 66 condition, so he can direct a special audit once the Commissioner permits it.

Answer: Yes. With the Commissioner's prior permission, the Assistant Commissioner can direct Rao Ltd to get its records audited by a CA or CMA nominated by the Commissioner. The report is due within 90 days, extendable by 90 days, and the department bears the cost.

Exam tips

  • Treat 'GST audit by a CA or CMA under section 35(5)' as a current-law trap. Write that it was omitted (from FY 2020-21 onwards), then explain what replaced it.
  • Memorise the two thresholds separately: ₹5 crore for GSTR-9C today, and ₹2 crore for the old audit.
  • In a comparison question, make a two-column answer: who conducts, who appoints, trigger, time limit, cost. Put section 65 against section 66.
  • For MCQs on timelines, remember 15 working days notice for section 65, and 3+3 months versus 90+90 days.
  • Link your answer to records. A line that records must be kept for 72 months from the annual return due date shows the connection to section 35 and 36.

Practice questions from Accounts and Records

Audit and Professional Compliance Aspects in other exams

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

Audit and Professional Compliance Aspects: frequently asked questions

Is GST audit by a CA or CMA still mandatory?

No. The requirement in section 35(5) CGST was omitted by the Finance Act, 2021, applying from FY 2020-21 onwards. A CA or CMA can still be engaged for special audit under section 66, but only when the department nominates one.

What is the turnover limit for GSTR-9C?

A registered person with aggregate turnover above ₹5 crore in a financial year must file GSTR-9C. It is a self-certified reconciliation statement between the audited financial statements and the annual return, filed with GSTR-9.

What is the difference between GST audit and departmental audit?

Departmental audit under section 65 is done by the Commissioner or an officer he authorises, after notice to the taxpayer. The old section 35(5) audit was done by a CA or CMA appointed by the taxpayer, and it no longer exists. Special audit under section 66 is a separate case, where a CA or CMA is nominated by the Commissioner.

Who pays for a special audit under section 66?

The department pays. The cost of the examination and audit, including the nominated professional's fees, is borne by the department and not by the registered person.