GST audit under Section 65: the clock, your rights and the first reply
An audit is a rehearsal for litigation. Treat the first reply as a pleading and the notice that follows will be narrower.
Section 65 permits the Commissioner or an authorised officer to undertake an audit of any registered person for such period, frequency and manner as prescribed. Notice in ADT-01 must be issued at least fifteen working days before the audit. The audit is to be completed within three months from the date of commencement, extendable by the Commissioner by a further six months on recorded reasons. The findings are communicated in ADT-02 within thirty days, and where liability is detected proceedings follow under Section 73 or 74.
The timeline, and why it matters
Fifteen working days notice in ADT-01, specifying the period and the records required.
Commencement is the date on which the records are made available or the actual institution of the audit at the place of business, whichever is later. That definition matters, because the three month period runs from it.
Three months to complete, extendable by six on recorded reasons. Where the audit runs beyond that without a recorded extension, the objection should be taken.
Findings in ADT-02 within thirty days of conclusion, with the rights and obligations of the taxpayer informed.
The department frequently issues a notice under Section 73 or 74 based on the audit findings; the audit reply is therefore the first draft of your defence.
How to run an audit from your side
Appoint one owner and one point of contact. Multiple people answering the same auditor produces inconsistent answers that appear in the report.
Insist that all queries be given in writing and answered in writing, with a query register recording date, query, answer and documents supplied.
Never hand over originals without a receipt, and keep a copy of everything supplied.
Answer completely. An incomplete answer becomes a finding, and a finding becomes a paragraph in a notice.
Where a query reveals a genuine liability, quantify it and consider payment under Section 73(5) before the notice; it eliminates penalty and shortens the file.
The reply to ADT-02
Answer each finding separately, with the legal position, the documents and the computation.
Where a finding is accepted, say so and pay. Partial acceptance improves credibility on the contested items.
Where a finding rests on a misunderstanding of the facts, correct the facts with documents rather than arguing the law.
Preserve the objections that matter later: limitation, jurisdiction, the audit period, and any breach of the timeline.
Treat the reply as the document a Tribunal will read in three years, because it is.
What to do on Monday
Appoint one owner and one point of contact for the audit, and route everything through them.
Maintain a written query register with documents supplied and receipts obtained.
Answer each ADT-02 finding separately with law, documents and computation.
Pay genuine liabilities under Section 73(5) before the notice issues.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Can an audit cover more than one year?
The notice specifies the period, and multi year audits are common. Check that each year is within limitation for any consequential demand.
Can we refuse to provide records?
No. Section 65(5) requires the registered person to afford the facility to verify records and furnish information. Manage the process instead.
What if the audit exceeds the statutory period?
Ask for the recorded extension. Where none exists, take the objection in the reply and in any appeal.
Does an audit bar a later investigation?
Not automatically, but where the investigation covers the same subject matter the Section 6(2)(b) and consistency objections are available.
Should we pay before the notice?
Where the liability is genuine, yes. Section 73(5) payment before notice eliminates penalty.
In this cluster
- Special audit under Section 66: when an accountant is appointed against you
- ADT-01 to ADT-04: the audit paper trail
- The eleven findings that appear in almost every departmental audit
- GSTR-9 and GSTR-9C: reconciliation exposure and correction strategy
- Turnover reconciliation between GST, income tax and the financial statements
- E-invoicing non compliance: consequences and cure
- Section 35(6): tax on goods not accounted for
- Audit objections versus anti evasion investigation: two different files
- Building the audit defence file before the audit begins
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.