GST Section 65 Audit Notice (ADT-01): What It Means and How to Prepare

By LegalInk Editorial · 2026-07-26

GST Section 65 Audit Notice (ADT-01): What It Means and How to Prepare

A GST Section 65 audit notice — served in Form ADT-01 — is a formal intimation from the Commissioner or an authorised officer that your client's records, returns, and accounts will be examined. It must be issued at least fifteen working days before the audit begins, and the audit must ordinarily conclude within three months of commencement, extendable by a further six months with written approval. It is not a demand or a show-cause notice; it signals the start of a structured departmental audit.

What Section 65 of the CGST Act Authorises

Section 65 of the CGST Act, 2017 empowers the Commissioner to audit any registered person. The authority extends to examining records, returns filed under Section 39, books of account, and other documents the officer considers relevant.

In practice, a Section 65 audit covers three things:

• Inspection of accounts, registers, and documents at the taxpayer's premises
• Verification of turnover declared, taxes paid, refunds claimed under Section 54, and input tax credit availed under Sections 16 and 17
• Calls for additional information or documents during the audit

Once the audit concludes, the officer must inform the registered person of the findings, give an opportunity to be heard, and issue a final report in Form ADT-02. Where discrepancies surface, the matter may proceed under Section 73 or Section 74, depending on whether suppression or fraud is alleged.

What the ADT-01 Notice Contains

The ADT-01 form specifies the taxpayer's name and GSTIN, the tax period under audit, the date and time of commencement, the place of audit, and the name and designation of the authorised officer.

Read it carefully for the specified tax period. Audits are usually period-specific, and documents outside that range — while potentially inspectable — are not the primary focus.

How Section 65 Differs from Section 61 Scrutiny

Practitioners frequently conflate the two, but they are structurally distinct.

Section 61 is a desk-based scrutiny of returns. The officer examines discrepancies between the return filed and information on the GST portal — a mismatch between GSTR-1 and GSTR-3B, for instance, or between returns and auto-populated data. It proceeds by a notice calling for an explanation, answered in writing. No site visit is involved.

Section 65 is a field audit. The officer physically examines records and may seek documents not captured in any return. The ADT-01 notice itself signals a deeper level of examination — often triggered by risk parameters, sector-specific drives, or internal referrals.

Put simply: Section 61 scrutiny is document-light and reactive; a Section 65 audit is records-intensive and proactive. The preparation strategy differs accordingly.

How to Prepare Records Before the Audit Begins

Fifteen working days is not a long runway. Prioritise the following between receiving the ADT-01 and the commencement date.

Reconcile Returns Against Books

Run a full reconciliation of GSTR-1, GSTR-3B, and GSTR-9/9C against the audited financial statements for every year in the specified period. Document any differences, whether from timing, classification, or genuine error. Unexplained variances are the most common trigger for demand proceedings.

Verify Input Tax Credit Workings

Cross-check ITC claimed in GSTR-3B against GSTR-2A/2B data. Confirm that credit availed satisfies the conditions under Sections 16 and 17, including payment to the supplier within 180 days. Reverse any ineligible credit proactively and document the basis for eligible claims.

Organise Physical Documentation

Compile purchase and sales invoices, e-way bills, delivery challans, and payment records for the audit period, indexed and retrievable. Officers can request documents on the spot, and disorganised records create avoidable delays and adverse inferences.

Prepare an Explanation Register

For known issues — pending litigation, ITC reversals already made, amendments filed — prepare a concise written summary so the audit team is not encountering these facts cold. Transparency on known items typically narrows the scope of further inquiry.

Our compliance framework for finance professionals sets out a structured checklist for exactly this kind of pre-audit organisation.

During the Audit: Practical Conduct Points

Assign a designated point of contact — typically the professional handling GST compliance — to liaise with the audit officer, and document all communications. If the officer raises a verbal query, confirm it in writing before responding.

Do not volunteer documents outside the specified audit period unless directly asked. If the officer expands the scope, note the request formally and seek reasonable time to produce documents not identified in the original ADT-01.

Where findings reveal a liability, consider whether voluntary payment under the applicable provision — before the final report issues — reduces penalty exposure under Section 75. Where the liability is disputed, preserve your objections for the show-cause stage.

After the Audit: ADT-02 and Next Steps

The officer must communicate findings in Form ADT-02 within thirty days of completing the audit. Review it carefully: ADT-02 is not a demand, but it forms the evidentiary foundation for any subsequent Section 73 or Section 74 proceedings.

Respond to ADT-02 in writing. Where you accept a finding, document the basis. Where you dispute it, articulate the legal and factual grounds clearly — those objections carry forward into adjudication and any appeal under Section 107.

You can structure and draft these responses efficiently using tools at legalink.co.in, including LegalInk's brief generator for downstream show-cause replies.

Frequently Asked Questions

Can the department conduct a Section 65 audit without issuing ADT-01?

No. The fifteen working-day advance notice in Form ADT-01 is a mandatory procedural requirement under Section 65. An audit commenced without it is procedurally vulnerable, and this should be recorded formally if it occurs.

What period can the audit cover?

The CGST Act does not prescribe an absolute cap on years, but audit jurisdiction is typically linked to the limitation periods applicable to demand proceedings. In practice, audits most commonly cover the preceding financial years within that limitation window.

What happens if records are not produced during the audit?

Failure to produce records can result in adverse findings in ADT-02 and may invite penalty proceedings. It can also escalate the matter from a departmental audit to a separate investigation. Produce what you can and document any genuine inability to produce specific records.

Is an ADT-01 audit notice the same as a demand notice?

No. ADT-01 is an intimation of audit commencement, not a demand or show-cause notice. A demand arises only after the audit concludes and the officer initiates proceedings under Section 73 or Section 74, if confirmed discrepancies are not settled.

Statute citations in this article are verified against LegalInk's verified law registry before publication. Always confirm the current text of any provision before relying on it.

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