One of the most searched — and most misunderstood — topics in GST compliance is the GST audit. Many businesses still believe there is an annual mandatory GST audit similar to a statutory audit. The reality, as it stands after the Finance Act 2021 amendments, is more nuanced: the mandatory CA-certified GST audit under Section 35(5) was abolished. What continues to exist are GSTR-9C self-certified reconciliation, departmental audits initiated by GST officers under Section 65, special audits ordered under Section 66, and the critical need for a professional GST compliance review to manage the significant audit risk that businesses face during assessments and scrutiny proceedings.

N D Savla & Associates provides comprehensive GST audit and compliance review services — covering GSTR-9 and GSTR-9C preparation, ITC reconciliation, pre-audit compliance checks, departmental audit representation, and GST Health Check reviews. Our GST audit practice connects to our broader GST Registration and Indirect Tax services, GST Assessment & Audit Support, Audit & Assurance Services, and Income Tax Audit — giving clients a fully coordinated compliance function across all audit types.

What Is GST Audit and What Does It Cover Today?

The term ‘GST audit’ currently refers to three distinct situations that businesses need to understand separately:

1. GSTR-9 Annual Return and GSTR-9C Reconciliation Statement

Every registered taxpayer with aggregate annual turnover above Rs. 2 crore in a financial year must file GSTR-9 — the annual return — by December 31 following the financial year. Taxpayers with turnover above Rs. 5 crore must additionally file GSTR-9C — a reconciliation statement that reconciles the figures declared in the annual return with the audited financial statements. Prior to the Finance Act 2021, GSTR-9C required certification by a chartered accountant. After the amendment, GSTR-9C is now self-certified by the taxpayer — but the reconciliation itself remains mandatory and must be accurate, as discrepancies between GSTR-9C and the financial statements are a primary trigger for departmental scrutiny and assessment.

2. Departmental Audit Under Section 65

A GST Commissioner or an authorised officer can initiate a departmental audit of a registered person under Section 65 of the CGST Act. The officer examines the taxpayer’s records, books of account, documents, and returns at the taxpayer’s place of business (or a specified place). The officer must notify the taxpayer at least 15 working days before the audit. The audit must be completed within 3 months (extendable by a further 6 months). If discrepancies are found, the taxpayer is given an opportunity to rectify — but if not satisfactorily explained, a demand notice under Section 73 or Section 74 is issued. Being under a departmental audit without professional representation is one of the most expensive compliance mistakes a business can make.

3. Special Audit Under Section 66

A special audit under Section 66 is ordered by a GST Commissioner when, during scrutiny or proceedings, the nature and complexity of the business and the interest of revenue so require. The Commissioner can direct that the taxpayer’s accounts be audited by a chartered accountant or a cost accountant nominated by the Commissioner. The special auditor submits a report to the Commissioner within 90 days (extendable by 90 more days). The taxpayer must be provided an opportunity to respond to the findings. Section 66 audits are typically initiated in high-value or complex cases where departmental officers require expert accounting analysis.

Our GST Audit and Compliance Review Services

Our GST audit practice covers the complete spectrum of GST review, annual return compliance, and departmental audit management:

GSTR-9 and GSTR-9C Preparation

Preparing GSTR-9 and GSTR-9C accurately requires careful reconciliation between the monthly GSTR-1 and GSTR-3B returns filed during the year, the books of account, and the audited financial statements. Common discrepancies arise from ITC claimed in excess of what appears in GSTR-2B, turnover figures that differ due to timing of invoices, advances received but not invoiced, credit note adjustments, and exempt supplies not properly classified. Our team prepares the annual return and reconciliation statement from a clean reconciliation of all these data points — not a mechanical filing — and identifies any adjustment that should be made before GSTR-9 is filed to minimise subsequent notice risk. We also file GSTR-9C with complete reconciliation notes where required.

GST ITC Reconciliation and GSTR-2B Review

Input tax credit is the most audit-prone area of GST compliance. The gap between ITC claimed in GSTR-3B and ITC available per GSTR-2B is one of the first things a departmental officer examines during any scrutiny. Our GSTR-2B Reconciliation & ITC Review service performs a line-by-line comparison of ITC claimed versus ITC eligible under the GSTR-2B data, identifies excess claims, blocked credit under Section 17(5), and vendor filing gaps — and recommends corrective action before the discrepancy reaches the department.

Pre-Audit GST Compliance Health Check

Many businesses approach us only after receiving a notice — by which point the opportunity to proactively correct discrepancies has passed. Our GST Health Check service provides a structured pre-audit review of the business’s GST compliance for the preceding financial year — covering rate classification, place of supply determination, reverse charge mechanism obligations, ITC eligibility, export compliance, and GSTR-1 vs GSTR-3B consistency. The output is a detailed findings report with specific remediation recommendations, which the business can act on before the annual return is filed or before a departmental audit is initiated.

Departmental Audit and Section 65 Representation

When a business receives a Section 65 audit notice, the response must be organised, factual, and professionally managed. Our team handles the complete departmental audit cycle — reviewing the audit notice, preparing the document package, accompanying management during the audit proceedings, responding to the auditor’s queries in writing, and reviewing the draft audit report before it is finalised. Where preliminary findings involve demand proposals, we assess the merits and prepare written responses under Section 65(7). Our GST Assessment Proceedings Assistance and Demand & Show Cause Notice handling services operate in close coordination with the audit representation.

Section 66 Special Audit Support

If a Special Audit under Section 66 is initiated, the nominated auditor has significant powers of access to the taxpayer’s records. Our team supports businesses through the special audit process — preparing the records and reconciliations that the auditor requires, advising management on the audit scope, reviewing the draft special audit report, and preparing the taxpayer’s written response to the Commissioner before the report is acted upon.

Who Needs Professional GST Audit Support?

Our GST audit services are particularly relevant for:

• Businesses with turnover above Rs. 5 crore: Mandatory GSTR-9C filers who need professional preparation of the reconciliation statement.
• Businesses with large ITC portfolios: Companies with significant purchase volumes where ITC reconciliation errors accumulate over the year.
• Exporters and businesses with zero-rated supplies: Where LUT compliance, refund claims, and export turnover reconciliation require specialist review.
• Businesses receiving Section 65 audit notices: Who need structured representation and document management during the departmental audit.
• E-commerce operators and marketplace sellers: Where TCS deduction, turnover reconciliation, and multi-state supply complexity create specific audit exposure.
• Businesses with cross-state or inter-company transactions: Where place of supply, IGST vs CGST/SGST classification, and related-party transaction values need review.
• Any registered business doing a pre-filing compliance check: Before GSTR-9 is filed, to identify and correct discrepancies that could trigger notices.