What changed in 2021, and why it still confuses people
Until FY 2019-20, businesses above a turnover threshold had to file GSTR-9C certified by a Chartered Accountant or Cost Accountant — a genuine CA-conducted audit, similar in spirit to a tax audit. The Finance Act, 2021 removed that requirement. From FY 2020-21 onward, GSTR-9C became a self-certified reconciliation statement — the taxpayer, not a CA, certifies it. A great deal of content still online was written before this change and describes GST audit as if the old CA-certification regime still applied. It doesn't.
That doesn't mean nothing happens. Removing CA certification shifted responsibility onto the taxpayer, and it made departmental audits under Section 65 more significant in practice — with self-certification replacing independent third-party sign-off, GST officers now have more reason to examine records directly. A business is more exposed to scrutiny today than it was when a CA's certification stood between its returns and a departmental audit, not less.
The three things "GST audit" can mean today
1. GSTR-9C — self-certified reconciliation
Required for businesses with aggregate turnover above ₹5 crore in the financial year. It reconciles the turnover, tax paid and input tax credit shown in the GST returns against the audited financial statements. Since it's self-certified, our role is to prepare the reconciliation and supporting workings for the client to review and certify — not to sign it ourselves the way we would a statutory or tax audit report.
2. Departmental audit — Section 65
GST officers can audit any registered person's records, regardless of turnover, on a frequency and selection basis decided by the department. The taxpayer is notified in Form GST ADT-01, given at least fifteen working days' notice, and the audit is meant to conclude within three months (extendable). Findings are communicated in Form GST ADT-02, and any discrepancy typically leads into demand proceedings under Section 73 or 74.
3. Special audit — Section 66
Where the Commissioner considers a case complex enough — valuation questions, ITC issues, or an unusual transaction structure — a Chartered Accountant or Cost Accountant is nominated by the department to conduct a special audit. This is not an audit the taxpayer chooses their own firm for; our role here is representing the taxpayer through the process, not conducting the audit itself.
Documents and records typically required
- GSTR-1, GSTR-3B and GSTR-9 filed for the relevant period, and the audited financial statements for the same year.
- Purchase and sales registers, with HSN/SAC-wise summaries.
- Input tax credit workings, including reversals and blocked credit under Section 17(5).
- E-way bills and delivery challans for the period under review.
- Reconciliation of turnover as per GST returns against turnover as per the books and the income tax return.
- Copies of any prior notices, replies or assessment orders relating to GST for the same or earlier periods.
- Bank statements, where the department requests them to verify cash flow against declared turnover.
Responding to a departmental GST audit, step by step
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Notice review
Form GST ADT-01 specifies the period, scope and the date the audit is proposed to begin. We review it immediately to confirm the notice period has been properly given and to understand exactly what's in scope.
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Document compilation
Records relevant to the stated scope are gathered and organised before the officer's first visit or the first data request — arriving prepared materially changes how the audit proceeds.
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Reconciliation ahead of the audit
We reconcile GSTR-1, GSTR-3B, GSTR-9 and the books ourselves before the department does, so that any genuine discrepancy is already identified and explainable, rather than surfacing for the first time in front of the officer.
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Attending and responding during the audit
Queries raised during the audit are responded to in writing where the process calls for it, with supporting documents referenced clearly against each query.
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Reviewing the findings (ADT-02)
Once the department issues its findings, we review them against the underlying records before deciding whether to accept a point, dispute it, or make a voluntary payment to close it out where that's the more sensible course.
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Follow-through into demand proceedings, if needed
Where a discrepancy leads into a show-cause notice under Section 73 or 74, we continue representing the client through that process rather than treating the audit response as a separate, disconnected engagement.
Timelines and penalties
| Item | Detail |
|---|---|
| GSTR-9 due date | 31 December following the end of the financial year |
| GSTR-9C due date | Filed together with GSTR-9, by the same 31 December deadline |
| Departmental audit notice period | At least 15 working days before the audit is to commence |
| Departmental audit duration | To be completed within 3 months of commencement, extendable by a further 6 months by the Commissioner |
| Default | Consequence |
|---|---|
| Late filing of GSTR-9/9C | A late fee applies per day of delay, subject to a cap linked to turnover |
| Non-filing of GSTR-9C where required | General penalty under Section 125, up to ₹25,000 |
| Discrepancy found in a departmental or special audit | Demand of tax, interest and penalty under Section 73 (no intent to evade) or Section 74 (fraud or wilful misstatement), depending on the finding |
Practical notes from our engagements
- Businesses still budgeting for a "CA-certified GST audit" that no longer exists. The work that matters now is GSTR-9C preparation and readiness for a departmental audit — not a certification exercise that was removed in 2021.
- Reconciliation left until the GSTR-9C deadline. The reconciliation between books, returns and financial statements is genuinely easier to do through the year than compressed into the run-up to the 31 December deadline, particularly for a business with multiple GSTINs.
- ADT-01 notices treated as routine paperwork. A departmental audit notice has a real notice period and a real scope — reading it carefully and preparing before the audit starts changes how the whole process goes.
- E-way bill and invoice mismatches. Discrepancies between e-way bills generated and invoices actually raised are a common focus of departmental audits, particularly for businesses moving goods across state lines.
- ITC reversal under Section 17(5) missed or miscalculated. Blocked credit — on items like motor vehicles or certain personal-consumption expenses — is one of the more frequent findings in both self-review and departmental audits.
How we handle GST audit and reconciliation work
For clients above the GSTR-9C threshold, we prepare the reconciliation working papers well ahead of the 31 December deadline, so the self-certification the client signs is genuinely reviewed, not rushed. Where a client receives a departmental audit notice, we review it immediately, compile the relevant records, and handle the department's queries directly, carrying the matter through to a demand notice and appeal if it comes to that.
Related services
Frequently asked questions
Do I still need a CA to certify my GST audit?
No. Mandatory CA/CMA certification of GST audit was removed by the Finance Act, 2021, effective from FY 2020-21. GSTR-9C is now self-certified by the taxpayer, though a CA firm can still prepare the reconciliation working papers.
Who needs to file GSTR-9C?
Businesses with aggregate turnover above ₹5 crore in the financial year. Below that, GSTR-9C isn't required, though GSTR-9 may still apply above ₹2 crore.
What's the difference between GSTR-9 and GSTR-9C?
GSTR-9 is the annual return summarising the year's GST filings. GSTR-9C is a reconciliation statement matching those returns against the audited financial statements, required only above the ₹5 crore threshold.
Can the GST department audit a small business with turnover well below ₹5 crore?
Yes. A departmental audit under Section 65 can apply to any registered person, regardless of turnover — the ₹5 crore figure is specific to GSTR-9C, not to departmental audit eligibility.
What is Form GST ADT-01?
The notice a GST officer issues to inform a taxpayer that a departmental audit under Section 65 is being initiated, giving at least fifteen working days before the audit begins.
Can I choose which Chartered Accountant conducts a special audit under Section 66?
No. A special audit is conducted by a CA or CMA nominated by the department, not one engaged by the taxpayer. The taxpayer's own advisor's role is to represent them through the process, not to conduct the audit.
What happens if a departmental audit finds a discrepancy?
It typically leads to a show-cause notice under Section 73 (where there's no allegation of fraud) or Section 74 (where fraud or wilful misstatement is alleged), followed by demand and adjudication proceedings.
Is there a penalty for not filing GSTR-9C when it's required?
Yes, a general penalty under Section 125 applies, up to ₹25,000, in addition to any late fee for the annual return itself.
How long does a departmental GST audit take?
It's meant to be completed within three months of commencement, though the Commissioner can extend this by up to a further six months in a given case.