What Happens During a GST Departmental Audit

Under Section 65 of the CGST Act, the department can conduct an audit of a registered taxpayer's books, returns, and records, either at the taxpayer's place of business or remotely, typically covering a financial year or a specified period. The taxpayer is given prior notice (usually 15 working days) and is expected to make records available, including invoices, e-way bills, bank statements, and reconciliation working papers between different returns.

The audit typically examines outward supply reporting against actual sales records, input tax credit claims against the Section 17(5) blocked list and supplier compliance, RCM liability discharge, and e-way bill and e-invoicing compliance where applicable. Discrepancies found during the audit are communicated to the taxpayer, who has an opportunity to respond and reconcile before the audit findings are finalised.

If discrepancies remain unresolved after the taxpayer's response, the audit typically concludes with a recommendation for further proceedings — usually a show-cause notice under Section 73 or 74, depending on the nature of the discrepancy found. This means the audit itself is not the final word; how a business responds during the audit process directly shapes what, if anything, follows it.

Businesses selected for a GST departmental audit should treat the preparation stage seriously — a well-organised, well-reconciled set of records presented proactively during the audit often prevents discrepancies from ever escalating into a formal notice. Our GST & Tax practice assists businesses in Chennai and Tamil Nadu through the departmental audit process, from document preparation to responding to audit findings.