What does the Section Say?

Section 65 authorizes GST authorities to conduct audits of registered persons. The objective is to verify correctness of turnover, taxes paid, refunds claimed, and input tax credit availed.

The taxpayer is informed through prior notice, generally at least 15 working days before commencement of audit. The audit may be conducted at the taxpayer's business premises or at the department's office. Taxpayers must provide books of accounts, records, invoices, and other relevant documents.

The audit is ordinarily required to be completed within three months, although extensions may be granted in specific circumstances. After completion, findings are communicated to the taxpayer, including any tax short payment, excess refund, or incorrect ITC claim.

If discrepancies are detected, further proceedings under Sections 73 or 74 may be initiated.

Practical Audit Triggers Observed by GST Professionals

A taxpayer is highly likely to be picked for audit when:

• Turnover exceeds ₹50–100 crore and above.
• ITC-to-turnover ratio is unusually high.
• GSTR-1 and GSTR-3B mismatches persist.
• Large refunds are claimed.
• Tax paid in cash is very low compared to output liability.
• E-way bill data differs from reported turnover.
• There are significant differences between GST turnover and Income Tax turnover.

These are not statutory criteria but common departmental risk parameters used for audit section.

Example

A manufacturing company claims substantial ITC. During departmental audit, officers verify purchase invoices and identify certain ineligible credits.

Key Points

• Conducted by GST department.
• Prior notice required.
• Verification of GST compliance.
• Audit findings communicated.
• May lead to demand proceedings.

One-Line Summary

Section 65 empowers GST authorities to audit registered taxpayers and verify GST compliance.