GST Audit Preparation Checklist for Indian Businesses

What a departmental GST audit actually examines, in the order Rule 101 sets out. 69 checks across 8 sections, the records the law already requires you to hold, and the clock that does not start where you would expect. Updated August 2026.

The three things people call a GST audit, and which one you have actually received
The seven heads of verification, straight from Rule 101(3), with what to reconcile under each
Your right of reply before the findings are finalised, and how to use it

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Petpooja presents

GST Audit Preparation Checklist

For Indian Businesses

Checks · PDF

Aug 2026

What's Inside

Eight sections, built on the rule that defines the audit

Which Notice You Have

Section 61 scrutiny, Section 65 audit and Section 66 special audit are three different things with three different clocks. A one-page table tells you which one has landed and what it means.

The Records Already Required

17 checks on what Section 35 and Rules 56 and 57 require you to hold before anyone asks, including an electronic-records obligation that surprises people.

The First Fifteen Working Days

What to establish, what to assemble, and why handing records over early is not the favour it looks like.

Turnover, Rate, Exemptions

Reconciling books to GSTR-1, GSTR-3B, the annual return and your financials, plus the rate question an FY 2025-26 audit will ask.

Input Tax Credit

10 checks on credit availed and credit utilised, which the rule treats as two separate tests.

Replying and Closing

Rule 101(4) gives you a reply before the findings are finalised. What to put in it, and what follows if a demand is raised.

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Why This Matters

The audit you were preparing for no longer exists

Ask about a GST audit and many people still describe a chartered accountant signing off the year. That audit was deleted from the law in 2021.

Section 35(5) of the CGST Act required businesses above a turnover limit to get their accounts audited by a chartered accountant or cost accountant. It was omitted by Section 110 of the Finance Act 2021, and GSTR-9C became a self-certified reconciliation statement. There is no longer an annual certified GST audit.

What remains is the departmental audit under Section 65, and it works on a different basis entirely. It is not triggered by your turnover. Section 65(1) lets the Commissioner audit any registered person. Turnover decides whether you file an annual return and a 9C, not whether you can be audited.

The second thing people get wrong is the clock. Section 65 gives the department three months to complete the audit, extendable by six. But the Explanation to that sub-section defines when it starts: the date the records called for are made available by you, or the audit is actually instituted at your premises, whichever is later. The three months does not run from the notice. It runs from the day you hand over your files. Being unprepared does not buy time, it just moves the start line.

Credit is where demands concentrate, and the rule treats availed and utilised as two separate questions. Anything wrongly availed and used carries interest as well as the tax, which our GST interest calculator will work out, and reverse charge liability has to be paid in cash rather than settled from the credit ledger. Our ITC reconciliation template is the working paper for this head.

The useful part is that the department has published exactly what it will look at. Rule 101(3) lists it: the documents behind your books, the returns and statements furnished, the correctness of turnover, the exemptions and deductions claimed, the rate of tax applied, the input tax credit availed and utilised, and refunds claimed. Seven heads. This checklist is built on them, in that order.

One of those heads has become sharper for anyone being audited on FY 2025-26. The rate structure changed on 22 September 2025, so "the rate of tax applied" now means the rate correct for the date of each supply, not the rate correct today. If your billing system was updated by overwriting a rate field rather than versioning it by date, your own records may now contradict the returns you filed. The rate rules for restaurants are worth re-reading before an audit.

Sample Preview

The seven heads, as Rule 101(3) lists them

Here's a preview of what you'll get inside. The rule itself is published at CBIC's tax repository:

1. The documents behind the books: tax invoices, bills of supply, delivery challans, credit and debit notes, and the receipt, payment and refund vouchers that sit outside the invoice trail.

3. Correctness of turnover: books to GSTR-1 to GSTR-3B to the annual return to the financial statements. Four sets that must agree, and a bridge you write yourself.

5. The rate of tax applied: correct for the date of supply, not correct today. Spot-check either side of 22 September 2025.

6. ITC availed and utilised: two separate tests. Credit can be wrongly availed and never used, or correctly availed and wrongly utilised.

7. Refunds claimed: each one listed with its status, sanction order, and the export documentation behind it.

... plus heads 2 and 4, the records Section 35 and Rules 56 and 57 already require, and what to do in the first fifteen working days.

Key Stats

The numbers that govern a departmental audit

15 working days

The minimum notice before an audit is conducted. The audit itself must be completed within three months of commencement, extendable by up to six months only for reasons recorded in writing.

Source: CGST Act 2017, Section 65(3) and 65(4)

72 months

How long records must be retained, counted from the due date of furnishing the annual return rather than from the end of the financial year. Longer where an appeal or investigation is running.

Source: CGST Act 2017, Section 36

1.51 crore

Active GST registrations as of 30 April 2025, up from around 60 lakh at rollout. Audit selection is not limited by turnover: Section 65(1) applies to any registered person.

Source: Press Information Bureau, Eight Years of GST, 30 June 2025

Common Mistakes

7 mistakes that turn an audit into a demand

Assuming a CA sign-off is still the GST audit

Section 35(5) was omitted by the Finance Act 2021 and GSTR-9C is now self-certified. Preparing only for a certification exercise leaves you unprepared for the audit that can actually arrive.

Thinking turnover decides whether you can be audited

It decides whether you file GSTR-9 and 9C. Section 65(1) allows the Commissioner to audit any registered person, with no turnover floor.

Treating a scrutiny notice as paperwork

Section 61(3) is explicit: where no satisfactory explanation is furnished within thirty days, the officer may move to an audit under Section 65, a special audit under Section 66, inspection under Section 67, or straight to a demand.

Handing over records before reconciling them

The three-month clock starts when the records are made available, so there is no clock advantage in rushing. There is a large disadvantage in letting the officer find a mismatch you had not yet explained to yourself.

Keeping every outlet's accounts at head office

Section 35(1) requires the accounts relating to each place of business to be kept at that place of business where more than one is on the registration certificate. The related exposure is storage: under Rule 56(6), taxable goods found at a place not declared on your registration, without valid documents, are taxed as if you had supplied them. A godown taken on rent mid-year and never added to the registration is the usual case.

Running billing software that can edit history silently

Rule 56(8) requires that no entry be erased or overwritten, and that where records are electronic, a log of every entry edited or deleted is maintained. If your system has no audit trail, the reliability of the whole set is open to question, and the same applies to how your billing system syncs into your books.

Not knowing who holds the passwords

Rule 57(3) requires you, on demand, to provide file details, passwords and an explanation of any codes used, plus a sample print of what is stored. That is a conversation to have before the officer arrives.

Comparison

Scrambling after the notice vs being ready before it

Aspect	Scramble	Prepared
Which notice you received	Everything is 'a GST audit'	Section 61, 65 or 66 identified, with its own clock
When the clock starts	Assumed to run from the notice date	Known to run from the day records are made available
Records	Assembled after the notice arrives	Already held as Section 35 and Rules 56 and 57 require
Turnover reconciliation	Built during the audit, under time pressure	Bridge from books to GSTR-1, 3B, annual return and financials, prepared
Rate applied	Assumed correct because it is correct today	Checked by date of supply, including either side of 22 Sep 2025
Input tax credit	Presented as one net figure	Availed and utilised answered separately, as the rule asks
Electronic records	Nobody has tested a restore	Backup restorable, audit log on, credentials identified
Discrepancy memo	Answered verbally across a table	Answered in writing with the document attached, before ADT-02
Next year	The same scramble again	Document index retained, process fixed

FAQ

Frequently asked questions

Is GST audit still mandatory for businesses above a turnover limit?

No. Section 35(5) of the CGST Act, which required accounts above a prescribed turnover to be audited by a chartered accountant or cost accountant, was omitted by Section 110 of the Finance Act 2021. GSTR-9C is now a self-certified reconciliation statement rather than a certified audit report. What still exists is the departmental audit under Section 65, and that is not limited by turnover at all. Our GSTR-9 annual return checklist covers the filing side.

How much notice does the department have to give before a GST audit?

Section 65(3) requires the registered person to be informed by notice not less than fifteen working days before the audit is conducted. The notice is issued in FORM GST ADT-01 under Rule 101(2). The audit itself must be completed within three months of commencement, and the Commissioner may extend that by a further period not exceeding six months, for reasons recorded in writing. You can read the section at CBIC's tax repository.

When does the three-month audit period actually start?

Not on the date of the notice. The Explanation to Section 65(4) defines commencement of audit as the date on which the records and other documents called for are made available by the registered person, or the actual institution of the audit at the place of business, whichever is later. So the clock starts when you hand over your files. Delaying does not shorten the audit, it simply moves the start date, which is why the useful work is reconciling before you submit rather than afterwards.

What will the officer actually examine?

Rule 101(3) sets out the scope. The officer verifies the documents on the basis of which the books of account are maintained, the returns and statements furnished, the correctness of turnover, the exemptions and deductions claimed, the rate of tax applied, the input tax credit availed and utilised, and refunds claimed, along with other relevant issues. Those seven heads are the structure of this checklist.

What happens if the audit finds something?

Rule 101(4) gives you a step before the findings are finalised: the officer may inform you of discrepancies noticed, you may file a reply, and the findings are finalised after due consideration of that reply. On conclusion, Section 65(6) requires the officer to inform you of the findings, your rights and obligations, and the reasons, within thirty days, in FORM GST ADT-02. Where the audit detects tax not paid, short paid, erroneously refunded, or credit wrongly availed or utilised, Section 65(7) allows the officer to initiate action under Section 73, Section 74 or Section 74A.

Make the audit trail a by-product of billing

Petpooja Invoice issues GST-compliant invoices with the tax calculated automatically, generates e-invoices with IRNs and e-way bills, tracks stock live as you bill, and consolidates reporting across every location. The records an audit asks for exist because you billed, not because someone rebuilt them afterwards.

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