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Goods and Services Tax (GST) and Corporate Tax Planning · Assessment, Audit, Scrutiny, Demand and Recovery, Advance Ruling, Appeals and Revision

GST Audit, Scrutiny and Inspection under CGST Act

Updated 11 October 2026 · Fact-checked

GST audit, scrutiny and inspection are the department's verification tools. Section 61 lets the officer scrutinise returns. Section 65 allows audit by tax authorities. Section 66 allows special audit by a nominated CA or cost accountant. Section 67 allows inspection, search and seizure. Answer by stating the section, the trigger, the time limits and the outcome.

Understand GST Audit, Scrutiny and Inspection

GST is self-assessed. You file returns and pay tax yourself. The law therefore gives the department four ways to check you, from lightest to heaviest: scrutiny of returns, audit, special audit, and inspection, search and seizure.

Scrutiny (section 61) is a desk check. The proper officer examines your return and related particulars, points out discrepancies and seeks your explanation. If the explanation is acceptable, you are told and no further action is taken. If you give no satisfactory explanation within thirty days, or such further period as the officer permits, or you accept the discrepancy but do not correct it in the return for the month of acceptance, the officer may start action under section 65, 66 or 67, or determine tax under section 73, 74 or 74A.

Audit (section 65) is a check of your records by the Commissioner or an officer he authorises. It can be at your place of business or in their office. Frequency, period and manner are as prescribed. You must get a notice at least fifteen working days before the audit. It must be completed within three months of commencement. The Commissioner may extend this by up to six months, for reasons recorded in writing. Commencement means the date records called for are made available, or the actual start of audit at your premises, whichever is later.

Special audit (section 66) is for complex cases. An officer not below Assistant Commissioner, during scrutiny, inquiry, investigation or other proceedings, may form the opinion that value is not correctly declared or credit availed is not within normal limits. With the Commissioner's prior approval, he directs you in writing to get your records audited by a CA or cost accountant nominated by the Commissioner.

Inspection, search and seizure (section 67) are the strongest powers. They need an officer not below Joint Commissioner who has reasons to believe that tax is being evaded. Inspection comes first, search and seizure follow if goods, documents or books are believed to be secreted.

Key rules to remember

Scrutiny response period (s.61)
30 days from being informed, or further period permitted by the officer
Failing this, or failing to correct an accepted discrepancy, the officer may act under section 65, 66, 67 or determine tax under section 73, 74 or 74A.
Audit notice (s.65(3))
Notice not less than 15 working days before audit
Notice is given in the prescribed manner.
Audit completion (s.65(4))
3 months from commencement; extension up to a further 6 months
Extension is by the Commissioner, with reasons recorded in writing.
Audit findings (s.65(6))
Inform findings, rights, obligations and reasons within 30 days of conclusion
The proper officer does this.
Special audit report (s.66(2))
90 days; extendable by a further 90 days
Extension by the Assistant Commissioner on application by the registered person or the CA/cost accountant, or for material and sufficient reason.
Special audit authority (s.66(1))
Officer not below Assistant Commissioner + prior approval of Commissioner
Auditor is a CA or cost accountant nominated by the Commissioner. Expenses are determined and paid by the Commissioner.
Inspection and search authority (s.67)
Proper officer not below Joint Commissioner, with reasons to believe
He authorises other central tax officers in writing, or may search and seize himself.
Return of documents (s.67(3))
Within 30 days of notice, for documents not relied upon
Applies to documents, books or things not relied upon for the notice.
Seized goods without notice (s.67(7))
Return if no notice within 6 months; extendable by up to 6 months
Extension is by the proper officer on sufficient cause.

How to solve GST Audit, Scrutiny and Inspection questions

Use this order for any case-based question on audit, scrutiny or inspection.

  1. 1Identify the stage: return check, audit, special audit, or inspection, search and seizure.
  2. 2State the provision: section 61, 65, 66 or 67, in one line.
  3. 3List the conditions: who can act, what approval is needed, what trigger applies.
  4. 4Apply the facts: compare the dates, ranks and notices given in the question with the statutory limits.
  5. 5Check procedure: notice period, time to complete, hearing, return of documents.
  6. 6Conclude on whether the action is valid and what follows, such as action under section 73, 74 or 74A.
  7. 7Add a practical point: what records you should keep and how you should respond.

Quickest way: Rank, notice, clock

When to use it: Use when the question gives dates, designations and notices, and you must decide whether the action is valid.

  1. Rank: check who acted. Special audit needs Assistant Commissioner or above. Inspection and search need Joint Commissioner or above.
  2. Approval: special audit needs the Commissioner's prior approval.
  3. Notice: audit needs 15 working days notice.
  4. Clock: audit 3 months plus 6, special audit 90 days plus 90, scrutiny reply 30 days, seized goods 6 months plus 6.
  5. Outcome: if tax shortfall or wrong ITC is found, action under section 73, 74 or 74A.

Common mistakes in GST Audit, Scrutiny and Inspection

  • Treating audit under section 65 and special audit under section 66 as the same.

    Both use the word audit.

    Fix: Section 65 is by tax officers. Section 66 is by a CA or cost accountant nominated by the Commissioner, in complex cases.

  • Saying audit must be done within three months of the notice date.

    Students link the clock to the notice.

    Fix: The three months run from commencement of audit, which is the later of records being made available or actual institution of audit at the premises.

  • Saying the audit notice period is 15 days.

    The word working is skipped.

    Fix: Write fifteen working days.

  • Forgetting the hearing right after special audit.

    Focus stays on the auditor's report.

    Fix: Under section 66(4) you must get an opportunity of being heard on any material gathered through special audit that is proposed to be used against you.

  • Saying the auditor under section 66 is chosen by the taxpayer.

    Confusion with statutory audit.

    Fix: The Commissioner nominates the CA or cost accountant and determines and pays the expenses.

  • Giving seizure power to any officer.

    Ranks are not memorised.

    Fix: The reasons to believe must be held by a proper officer not below Joint Commissioner, who authorises others in writing or acts himself.

Worked examples

Example 1

Meera Textiles Pvt Ltd, Surat, is told by the department on 1 March that audit under section 65 will begin on 10 March at its office. The company says the notice is invalid. Advise.

Show the solution
  1. Provision: section 65(3) requires notice not less than fifteen working days before audit.
  2. Facts: 1 March to 10 March is nine calendar days, so fewer than fifteen working days.
  3. Conclusion: the notice period is not met, so the company's objection is correct unless the audit is rescheduled to give the full notice.
  4. Practical point: the company should reply in writing citing section 65(3) and keep its records ready for the rescheduled date.

Answer: The notice is short of the fifteen working days required by section 65(3), so the company's objection is valid. The audit can proceed only after proper notice is given.

Example 2

An Assistant Commissioner, during an inquiry into Kumar Steels Ltd, believes its input tax credit is beyond normal limits. He directs Kumar Steels in writing to get its books audited by a CA he has chosen himself. Is the direction valid? What is the time limit for the report?

Show the solution
  1. Provision: section 66(1) permits special audit where value is not correctly declared or credit availed is not within normal limits.
  2. Rank: an Assistant Commissioner is eligible, and the stage (inquiry) is covered.
  3. Approval: the direction needs the Commissioner's prior approval, and the auditor must be nominated by the Commissioner. Neither is shown.
  4. Conclusion: the direction is defective because the auditor was chosen by the Assistant Commissioner and prior approval is not mentioned.
  5. Time: the auditor must report within 90 days, extendable by a further 90 days under section 66(2).

Answer: The direction is not valid as given, since the CA must be nominated by the Commissioner and prior approval is required. If done properly, the report is due in 90 days, extendable by another 90 days.

Exam tips

  • Write the section number first, then the conditions. Case answers score on provision, analysis and conclusion.
  • Learn the time limits as pairs: audit 3 plus 6 months, special audit 90 plus 90 days.
  • In scrutiny answers, show the escalation to sections 65, 66, 67 and 73, 74 or 74A.
  • Always add a practical line on records, replies and hearing rights.
  • For compare questions, use rank, trigger, who audits, and time limit as headings in prose.

Practice questions from Assessment, Audit, Scrutiny, Demand and Recovery, Advance Ruling, Appeals and Revision

GST Audit, Scrutiny and Inspection in other exams

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

GST Audit, Scrutiny and Inspection: frequently asked questions

What is the difference between audit under section 65 and special audit under section 66?

Section 65 audit is by the Commissioner or an authorised officer, on a general or specific order. Section 66 special audit is by a CA or cost accountant nominated by the Commissioner, directed by an officer not below Assistant Commissioner in complex cases.

How does scrutiny of returns work under section 61?

The officer checks your return, informs you of discrepancies and asks for an explanation. If it is acceptable, matters end. If not, within thirty days or the extended period, he may proceed under section 65, 66, 67, or determine tax under section 73, 74 or 74A.

Who can order inspection, search and seizure under GST?

A proper officer not below Joint Commissioner who has reasons to believe that tax is being evaded, or that goods or documents are secreted. He authorises another central tax officer in writing or may act himself.

What happens if audit finds tax short paid?

Under section 65(7), where audit detects tax not paid, short paid or erroneously refunded, or ITC wrongly availed or utilised, the proper officer may initiate action under section 73, 74 or 74A. Section 66(6) says the same for special audit.