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The tax function receives Form GST ADT-01 from the Commissionerate on a Tuesday morning. The notice specifies an audit under Section 65 of the CGST Act 2017 covering three financial years — FY 2022-23, FY 2023-24, and FY 2024-25. The audit is scheduled to commence in eighteen working days. The finance controller has never been through a general audit before and does not know what documents to assemble, what the audit visit itself involves, what happens if the officer flags discrepancies, or how the show-cause notice under Section 73 or Section 74 that may follow differs in exposure. For a corporate at roughly Rs 12 crore annual turnover across three FYs, the audit is a first-time compliance event that determines whether the next three months are a routine document-production exercise closing on a clean Form GST ADT-02 or an escalated Section 73 correction with interest — or a Section 74 suppression allegation at the one hundred per cent penalty ceiling. The classification is not automatic; it is a function of what the reconciliation working papers show and how the audit desk is run.
The Section 65 audit runs through six statutory stages. Stage 1 — Form GST ADT-01 notice served at least fifteen working days before the audit under Section 65(3) read with Rule 101(2). Stage 2 — audit commencement at the registered person's place of business or the office of the proper officer under Rule 101(3), with verification of books, tax invoices, purchase register, GSTR returns, ITC register, and any other information under Section 65(5). Stage 3 — the proper officer completes the audit within three months from the date of commencement under Section 65(4), extendable by up to six months by the Commissioner for reasons to be recorded in writing. Stage 4 — Form GST ADT-02 findings issued to the registered person within thirty days of concluding the audit under Section 65(6). Stage 5 — where the findings detect short payment, wrong ITC, or erroneous refund, pre-consultation may be initiated in Part A of Form GST DRC-01A under Rule 142(1A); the registered person may make partial payment and file Part B submissions on the balance. Stage 6 — where pre-consultation does not close the matter, a formal show-cause notice is served in Form GST DRC-01 under Rule 142(1) invoking Section 73 (non-fraudulent) or Section 74 (fraudulent), with a thirty-day reply window. The parallel Section 66 special audit track — triggered by an Assistant Commissioner or above having regard to the nature and complexity of the case, conducted by a departmentally nominated CA or cost accountant, with the report in Form GST ADT-04 — sits alongside the general Section 65 audit as an escalated variant available where valuation or credit issues warrant deeper examination.
A pre-audit preparation folder assembled during the fifteen-working-day ADT-01 window containing books of account for the period; the tax invoice register with all invoice-level details; the purchase register with GSTIN-level supplier data; the input tax credit register with the Section 17(5) blocked-credit tags and the Rule 42 or Rule 43 apportionment working papers; the Rule 37A supplier-default reversal register; the GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C for every FY in scope; the electronic credit ledger and cash ledger extracts. A working-papers folder with the monthly GSTR-2B reconciliation, the ITC-at-risk queue against the Section 16(4) November 30 following-FY deadline, the Rule 42 monthly D1 and D2 working paper, and the correspondence log with suppliers on GSTR-2B mismatches. A control-evidence folder capturing the sign-off log for each GSTR-3B, the reconciliation review notes from the controller, and the internal audit reports where applicable. A single point of contact from the tax function to run the audit desk during the visit, with backup coverage across the three-month audit window. A query-response template pack for the routine document requests that arise during the audit — invoice-level clarifications, ITC classification queries, rate-master reconciliation calls.
The audit closes on Form GST ADT-02 within thirty days of the audit conclusion. Where the findings identify no discrepancy, the audit is closed and the registered person's compliance posture is documented. Where the findings identify discrepancies, they are classified during pre-consultation in Part A of Form GST DRC-01A — a Section 73 case closes with tax and interest paid within thirty days of the eventual show-cause notice at nil penalty under Section 73(8); a Section 74 case can close at fifteen per cent penalty if paid before the show-cause notice is issued, twenty-five per cent within thirty days of the notice, or fifty per cent within thirty days of the adjudication order under Section 74(8). The reconciliation working papers assembled for the audit become the standing document set for the next audit cycle; the query-response template pack becomes a reusable audit-desk resource. The finance function's exposure closes at the Section 73 ceiling by design — through the working papers, the classification working paper, the Rule 42 monthly computation, and the ITC register — rather than escalating to a Section 74 suppression allegation because the reconciliation trail was not there to defend the position.
An envelope from the Commissionerate landed on the finance controller’s desk this morning. The letter is a single page. Form GST ADT-01. Reference to Section 65 of the CGST Act 2017. The audit covers three financial years — FY 2022-23, FY 2023-24, FY 2024-25 — and the proper officer will visit the registered office in eighteen working days.
The controller has never been through a general GST audit before. What documents does the tax function assemble? What actually happens on the day the officer arrives? What is the difference between Form ADT-02 and Form DRC-01? And if the audit findings escalate to a show-cause notice, is the exposure Section 73 or Section 74 — the ten per cent penalty or the one hundred per cent?
The quick answer
A Section 65 audit runs through six statutory stages. Form GST ADT-01 is the fifteen-working-day notice; the audit itself commences at the registered person’s place of business or the proper officer’s office and must complete within three months (extendable by six months); Form GST ADT-02 is the findings issued within thirty days of audit conclusion; Form GST DRC-01A is the pre-consultation communication of ascertained liability; Form GST DRC-01 is the formal show-cause notice that follows if the pre-consultation does not close the matter; and the reply window for the show-cause notice is thirty days.
The determining question is not whether the audit finds discrepancies. Most audits do. The determining question is whether the reconciliation working papers behind the returns are strong enough to hold the case at Section 73 (ten per cent penalty ceiling) rather than letting it slip to Section 74 (one hundred per cent penalty ceiling with a five-year demand time-limit).
Stage 1 — Form ADT-01 arrives (fifteen working days to prepare)
Section 65(3) of the CGST Act 2017 read with Rule 101(2) requires the proper officer to serve Form GST ADT-01 not less than fifteen working days before the conduct of the audit. Working days exclude Saturdays, Sundays, and gazetted holidays — a notice served on a Monday means the earliest audit-commencement date is roughly three weeks later. The notice specifies the period under audit (a financial year, a part thereof, or multiples thereof under Rule 101(1)), the venue (typically the principal place of business), and the initial document list.
The fifteen working days are not procedural padding. They are the window inside which the tax function assembles the pre-audit preparation folder — the books of account, the tax invoice register, the purchase register with GSTIN-level supplier data, the input tax credit register, the Rule 42 and Rule 43 apportionment working papers, the Rule 37A supplier-default reversal register, the GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C returns for every FY in scope, and the electronic credit ledger and cash ledger extracts. Any gap in the folder that surfaces at the audit desk becomes a live query the officer notes; any gap that closes before the officer arrives never becomes a query at all.
Stage 2 — The audit visit itself (Rule 101 procedure)
Rule 101(3) authorises the proper officer to conduct the audit at the registered person’s place of business or at the office of the proper officer. Most Section 65 audits for mid-market corporates run at the registered office — the proper officer and the audit team arrive on the specified date, the tax function opens the pre-audit folder, and the verification runs through the categories set out in Rule 101(4).
The Rule 101(4) verification covers the correctness of turnover reported in the returns against the underlying books; the exemptions and deductions claimed against the supporting notifications and classifications; the rate of tax applied against the rate schedule and the HSN or SAC code; the input tax credit availed and utilised against the purchase register and the GSTR-2B match; the refund claimed against the underlying documentation; and any other relevant issues the officer identifies during the verification.
The audit typically runs across five to fifteen working days for a mid-market corporate depending on the volume of transactions. The tax function runs a single point-of-contact from the desk — an indirect tax executive or the finance controller — who fields document requests, coordinates with the accounts team on live invoice-level clarifications, and maintains a query log so the same question does not surface twice.
Stage 3 — Audit completion within three months (extendable by six)
Section 65(4) requires the audit to be completed within three months from the date of commencement. Where the Commissioner is satisfied that the audit cannot be completed within three months, he may — for reasons recorded in writing — extend the period by a further period not exceeding six months. The theoretical outer limit is therefore nine months from the date of audit commencement, though most Section 65 audits for corporates in the Rs 5 crore to Rs 50 crore turnover band close within the initial three-month window.
The “date of commencement” is the date the proper officer first arrives at the audit venue and starts the verification, not the ADT-01 notice date. A notice served on 1 September with a commencement date of 20 September starts the three-month clock on 20 September — the audit must complete by 20 December in the standard case.
Stage 4 — Form ADT-02 findings within thirty days
On conclusion of the audit, Section 65(6) requires the proper officer to inform the registered person of the audit findings in Form GST ADT-02 within thirty days. The ADT-02 sets out the findings, the reasons for the findings, and the registered person’s rights and obligations arising from them. Where the findings identify no discrepancies, the ADT-02 closes the audit. Where the findings identify tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised, Section 65(7) authorises the proper officer to initiate proceedings under Section 73 or Section 74.
The thirty-day window between audit conclusion and ADT-02 issuance is a statutory maximum. In practice, findings for a well-prepared corporate often issue within two to three weeks; findings for a corporate where the audit surfaced material gaps can take the full thirty days as the department drafts the reasoning.
Stage 5 — Pre-consultation in DRC-01A (before the show-cause notice)
Before serving the formal show-cause notice under Rule 142(1), the proper officer may communicate the ascertained liability in Part A of Form GST DRC-01A under Rule 142(1A). The DRC-01A pre-consultation is not a mandatory step but is a common practice for cases where the department is open to closure without formal show-cause notice service.
The registered person receiving Part A of DRC-01A may make partial payment against the ascertained liability and file submissions in Part B of DRC-01A on the balance amount. A DRC-01A that closes fully — the ascertained liability is paid or the department accepts the Part B submissions — does not escalate to a show-cause notice. A DRC-01A where the pre-consultation does not resolve the matter escalates to a formal show-cause notice in Form GST DRC-01.
Stage 6 — Show-cause notice in DRC-01 (Section 73 versus Section 74)
The formal show-cause notice is served in Form GST DRC-01 under Rule 142(1), invoking either Section 73 or Section 74. The classification between the two is what determines the exposure ceiling:
- Section 73 covers tax not paid, short paid, erroneously refunded, or ITC wrongly availed for any reason other than fraud, wilful-misstatement, or suppression of facts. The demand time-limit is three years from the due date of the annual return. The penalty ceiling under Section 73(9) is ten per cent of the tax or Rs 10,000, whichever is higher. Section 73(8) allows a nil penalty if the tax with interest is paid within thirty days of the show-cause notice.
- Section 74 covers the same categories but where the reason is fraud, wilful-misstatement, or suppression of facts to evade tax. The demand time-limit is five years from the due date of the annual return. The penalty ceiling under Section 74(9) is one hundred per cent of the tax. Section 74(8) allows a reduced penalty of fifteen per cent before the show-cause notice is issued, twenty-five per cent within thirty days of the notice, and fifty per cent within thirty days of the adjudication order.
The reply window for a DRC-01 show-cause notice is thirty days from the date of service. The registered person files submissions with documentary evidence, working papers, and legal submissions before the proper officer passes the adjudication order.
The one to escalate first — the Section 73 versus Section 74 classification
Every audit that surfaces a discrepancy has to decide, at the pre-consultation stage, whether the case sits at Section 73 or Section 74. The classification is not automatic — it is determined by whether the reconciliation working papers behind the return support the position as a bona fide interpretation, a genuine calculation error, or an honest oversight, or whether the sustained absence of any working paper reads to the department as suppression of facts.
The concrete difference is the tenfold penalty gap. On an illustrative Rs 40 lakh short-payment finding: Section 73 penalty at 10 per cent is Rs 4 lakh; Section 74 penalty at 100 per cent is Rs 40 lakh. Both carry Section 50 interest at 18 per cent per annum on the tax; both carry the same underlying tax. The gap is entirely the penalty.
The reconciliation working paper — the monthly GSTR-2B match, the Rule 42 monthly D1 and D2 computation, the Section 17(5) blocked-credit classification file, the Rule 37A supplier-default reversal register — is what holds an ambiguous case at Section 73. The absence of any such working paper is what escalates the classification to Section 74. The machine-readable evidence trail is the finance function’s audit-defensibility asset and the direct answer to whether a discrepancy reads as bona fide or suppression.
The parallel Section 66 special audit track
Distinct from the general Section 65 audit is the Section 66 special audit — triggered by an Assistant Commissioner or above having regard to the nature and complexity of the case and the interest of revenue. The special audit is conducted by a chartered accountant or cost accountant nominated by the Commissioner, not by the department directly. The report is issued in Form GST ADT-04. The Section 66 window is ninety days extendable by another ninety days.
Section 66 typically follows either a Section 65 audit that flagged material valuation or credit issues, or an inquiry under Section 67. It is not the first-step audit for a mid-market corporate; it is the escalated track where the department wants an independent professional examination of a specific area — usually a complex valuation dispute, a large ITC pool with disputed classification, or a suspected suppression of facts case.
Records to keep for six years — Section 35 and Section 36
Section 35(1) requires every registered person to maintain at the principal place of business a true and correct account of production or manufacture; inward and outward supplies of goods or services; stock of goods; input tax credit availed; output tax payable and paid; and such other particulars as may be prescribed. Section 36 mandates retention of the records for seventy-two months from the due date of the annual return for the year to which they pertain — the retention window is effectively six years.
For an FY 2022-23 record set, the annual return due date is 31 December 2023 (extended in most years). The retention window runs until December 2029 in the standard case. An audit commencing in FY 2026-27 covering FY 2022-23 to FY 2024-25 sits comfortably inside the retention window, and every record required by the Rule 101 verification has to be available on request.
Illustrative engagement — Rs 12 crore turnover, three FYs in scope
For an illustrative Rs 12 crore annual turnover corporate under a first-time Section 65 audit covering three financial years, the typical engagement runs forty-five to sixty days from Form ADT-01 receipt to Form ADT-02 findings. The visit itself typically runs across five to ten working days across two or three visit weeks. External consultancy support runs in the Rs 8 to Rs 15 lakh range depending on the volume of transactions to reconcile, the number of open GSTR-2B mismatches at ADT-01 date, the depth of the Rule 42 apportionment history, and the complexity of the ITC classification.
The internal finance function owns the underlying record production and the point-of-contact role during the audit. The external consultant, where engaged, typically owns the audit desk during the visit, prepares reply drafts for any DRC-01A pre-consultation, and drafts the formal show-cause notice reply if the audit findings escalate.
When the pre-audit preparation stops fitting inside fifteen days
For a corporate with a single-state GST registration, a single line of business, under 500 monthly purchase register entries, and a compliant monthly close discipline, the pre-audit preparation folder can be assembled inside the fifteen-working-day ADT-01 window without disruption to the running finance calendar. The statutory audit reconciliation checklist covers the parallel documentation discipline for the annual financial audit and doubles as the base document set for a Section 65 audit.
Above three concurrent state registrations, or above 2,000 monthly purchase register entries, or where the ITC pool carries a Rule 42 apportionment history, a Rule 37A reversal register, and a Section 17(5) blocked-credit classification file that has to be reconstructed from the ledger, the fifteen-day window becomes a compression. The pre-audit assembly starts leaking — a missing supplier reconciliation letter, an ITC classification working paper that does not tie to the return, a Rule 42 D1 figure the tax executive cannot defend without opening the underlying invoice ledger.
At that scale, moving the reconciliation working papers, the ITC classification file, and the supplier correspondence log onto continuously refreshed detection — where Terra Insight’s GST reconciliation software treats the monthly GSTR-2B match, the ITC-at-risk queue, the Rule 42 apportionment, and the Rule 37A supplier-default register as first-class continuously-maintained outputs — is what keeps the pre-audit preparation folder audit-ready before ADT-01 arrives rather than reconstructed under time pressure once it lands. The statutory audit preparation kit is the free manual template for the pre-audit assembly at the mid-market scale where the compression is still manageable.
Go deeper
- GSTR-9C three-way mismatch reconciliation — the annual reconciliation that the auditor examines first
- Statutory audit reconciliation checklist — the parallel documentation discipline for the annual financial audit
- The difference between Section 73 and Section 74 CGST — the tenfold penalty gap in detail
- Machine-readable evidence trail for audit defensibility — the working-papers standard that holds a case at Section 73
- Deterministic reconciliation and audit reproducibility
- Statutory audit preparation kit — free manual template
- GST reconciliation software for India
Frequently Asked Questions
I received Form ADT-01. How many days do I actually have before the officer visits?
Not less than fifteen working days from the date of service of the notice. Section 65(3) of the CGST Act 2017 read with Rule 101(2) requires the proper officer to issue Form GST ADT-01 at least fifteen working days before the conduct of the audit — working days meaning excluding Saturdays, Sundays, and gazetted holidays. If Form ADT-01 arrives on a Monday, the earliest the audit can commence is roughly three weeks later. The fifteen-day window is the mandatory minimum; it is not a maximum and the notice may specify a later date. The window is what the finance function uses to close the reconciliation working papers for the audit period, assemble the tax invoice folder, purchase register, input tax credit register, GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C for every financial year within the audit scope, and identify a single point of contact from the tax function for the visiting officer.
The audit period specified in Form ADT-01 goes back three years. Which records do I need to produce?
Every record required to be maintained under Section 35(1) of the CGST Act 2017 for the entire period specified in Form ADT-01 — books of account showing production or manufacture, inward supply of goods and services, outward supply of goods and services, stock of goods, input tax credit availed, output tax payable and paid; tax invoices, credit notes, debit notes, and delivery challans issued and received; the GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C returns filed for the period; the electronic credit ledger and electronic cash ledger extracts; the ITC register with the Rule 42 and Rule 43 apportionment working papers if applicable; the Rule 37A supplier-default reversal register; and any correspondence with suppliers on GSTR-2B mismatches. Section 36 of the CGST Act 2017 mandates retention of the records for seventy-two months from the due date of the annual return for the year to which they pertain — an audit covering FY 2022-23 can go back through records that had to be retained until December 2029 in the standard case.
The proper officer flagged discrepancies in the ADT-02 findings. What happens next?
Section 65(6) requires the proper officer to inform the registered person of the audit findings in Form GST ADT-02 within thirty days of concluding the audit. Where the findings identify tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed, Section 65(7) authorises the proper officer to initiate proceedings under Section 73 (non-fraudulent) or Section 74 (fraudulent). Before formal service of the show-cause notice under Rule 142(1), the department may communicate the ascertained liability in Part A of Form GST DRC-01A for pre-consultation — the registered person may make partial payment against the ascertained liability and file submissions in Part B of DRC-01A on the balance. If the DRC-01A route does not close the matter, the formal show-cause notice follows in Form GST DRC-01, and the registered person has thirty days to reply with documentary evidence, working papers, and legal submissions before the adjudication order is passed.
How does the department decide between Section 73 and Section 74?
The distinction is the presence or absence of fraud, any wilful-misstatement, or suppression of facts to evade tax. Section 73 covers the non-fraudulent case — a bona fide error in the ITC classification, a genuine dispute on the interpretation of a rate notification, a Rule 42 or Rule 43 apportionment miscomputation the registered person can defend as an honest oversight. Section 74 covers the fraudulent case — invoices booked without underlying supply, ITC availed against non-existent suppliers, deliberate misclassification of outward supply to reduce output tax, or a sustained non-computation the department reads as a device to evade tax. The penalty ceilings differ by an order of magnitude: Section 73(9) caps penalty at ten per cent of the tax or Rs 10,000 whichever is higher; Section 74(9) caps penalty at one hundred per cent of the tax. Section 73(8) allows a nil penalty if the tax with interest is paid within thirty days of the show-cause notice; Section 74(8) allows a reduced penalty of fifteen per cent before the show-cause notice, twenty-five per cent within thirty days of the notice, and fifty per cent within thirty days of the adjudication order. The reconciliation working paper trail — a monthly Rule 42 computation, a documented GSTR-2B match, a Section 17(5) blocked-credit classification file — is what holds an ambiguous case at the Section 73 ceiling rather than allowing it to escalate to Section 74.
Should we engage external tax consultants for the audit response?
For an illustrative Rs 12 crore turnover corporate under a first-time Section 65 audit covering three financial years, a typical engagement runs forty-five to sixty days from Form ADT-01 receipt to Form ADT-02 findings, with external consultancy support in the Rs 8 to Rs 15 lakh range depending on the volume of transactions to reconcile, the number of open GSTR-2B mismatches, and the depth of the Rule 42 apportionment history. For mid-market corporates without a dedicated indirect tax head, the external consultant typically owns the audit desk during the visit, prepares the reply drafts for any DRC-01A pre-consultation, and drafts the formal Section 73 or Section 74 reply if the audit findings escalate to a show-cause notice. The internal finance function owns the underlying record production, the reconciliation working papers, and the point-of-contact role. Where the corporate carries a strong internal tax function with continuously refreshed reconciliation working papers and a documented ITC register — the kind of setup where the monthly GSTR-2B match, the Rule 42 D1 and D2 computation, and the Rule 37A supplier-default queue are first-class monthly outputs — the external consultancy cost typically halves because the record production is already audit-ready before Form ADT-01 arrives.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
- ▸ Section 65, Central Goods and Services Tax Act 2017 — The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed. The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed. The audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the audit, provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months. On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings in Form GST ADT-02. Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under Section 73 or Section 74.
- ▸ Rule 101, Central Goods and Services Tax Rules 2017 — The period of audit to be conducted under sub-section (1) of Section 65 shall be a financial year or part thereof or multiples thereof. Where it is decided to undertake the audit of a registered person in accordance with the provisions of Section 65, the proper officer shall issue a notice in Form GST ADT-01 in accordance with the provisions of sub-section (3) of the said section. The proper officer authorised to conduct the audit of the records and the books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the documents on the basis of which the books of account are maintained and the returns and statements furnished under the provisions of the Act and the rules made thereunder, the correctness of the turnover, exemptions and deductions claimed, the rate of tax applied in respect of the supply of goods or services or both, the input tax credit availed and utilised, refund claimed, and other relevant issues and record the observations in his audit notes. The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit and the said person may file his reply and the proper officer shall finalise the findings of the audit after due consideration of the reply furnished. On conclusion of the audit, the proper officer shall inform the findings of audit to the registered person in accordance with the provisions of sub-section (6) of Section 65 in Form GST ADT-02.
- ▸ Section 35 and Section 36, Central Goods and Services Tax Act 2017 — Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of production or manufacture of goods, inward and outward supply of goods or services or both, stock of goods, input tax credit availed, output tax payable and paid, and such other particulars as may be prescribed. Every registered person required to keep and maintain books of account or other records under sub-section (1) of Section 35 shall retain them until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. The seventy-two-month retention window is the outer perimeter within which any Section 65 audit or subsequent Section 73 or Section 74 proceeding can require the registered person to produce the underlying books, tax invoices, credit and debit notes, delivery challans, and the input tax credit register.
- ▸ Section 73 and Section 74, Central Goods and Services Tax Act 2017 — Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under Section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. Section 74 mirrors Section 73 where the reason is fraud, any wilful-misstatement, or suppression of facts to evade tax — with a longer notice window (six months versus three months before the demand time-limit), a longer demand time-limit (five years versus three years from the due date of the annual return), and a higher penalty ceiling (one hundred per cent of the tax versus ten per cent of the tax or Rs 10,000 whichever is higher).
- ▸ Rule 142, Central Goods and Services Tax Rules 2017 — The proper officer shall serve, along with the notice issued under Section 52 or Section 73 or Section 74 or Section 76 or Section 122 or Section 123 or Section 124 or Section 125 or Section 127 or Section 129 or Section 130, a summary thereof electronically in Form GST DRC-01. Before service of notice under Section 73(1) or Section 74(1), the proper officer may communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of Form GST DRC-01A. The registered person may make partial payment against the ascertained liability communicated in Part A of Form GST DRC-01A and file submissions in Part B against the balance amount. The formal show-cause notice service in Form GST DRC-01 follows the Section 65 audit findings in Form GST ADT-02 when the discrepancies detected are not resolved during the audit or through the DRC-01A pre-consultation route.
- ▸ Section 66, Central Goods and Services Tax Act 2017 — If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner. The special audit under Section 66 is a separate, escalated track from the general Section 65 audit — it is triggered by the department, conducted by a departmentally nominated CA or cost accountant, and its report is issued in Form GST ADT-04. The Section 66 window is ninety days extendable by another ninety days, and it typically follows either a Section 65 audit that flagged material valuation or credit issues, or an inquiry under Section 67.