What Is GST Audit in India? Types, Applicability and Process (2026)

Goods and Services Tax in India works on a self-assessment model, where registered taxpayers calculate their own liability, claim input tax credit, and file periodic returns. To keep this system honest, the law provides for a GST audit, a structured examination of records, returns, and other documents to verify that turnover, taxes paid, refunds claimed, and input tax credit availed are correct. Understanding how GST audit works in 2026 is important, because the framework has changed significantly from what many businesses remember from the early GST years.

What Is a GST Audit?

A GST audit is the examination of a registered person’s records and returns to confirm that the declared turnover, taxes paid, input tax credit claimed, and refunds are accurate and in line with the provisions of the Central Goods and Services Tax (CGST) Act, 2017. The objective is to check whether the taxpayer has correctly assessed and discharged the GST liability. Broadly, a GST audit can be carried out by the taxpayer through a reconciliation exercise, by the tax department, or by a professional appointed by the department.

The Current Position: From CA-Certified Audit to Self-Certified GSTR-9C

When GST was introduced, Section 35(5) of the CGST Act required every registered person whose turnover exceeded the prescribed limit to get their accounts audited by a Chartered Accountant (CA) or Cost Accountant (CMA) and to submit an audited reconciliation statement in Form GSTR-9C.

This requirement has since been removed. The Finance Act, 2021 omitted Section 35(5) and amended Section 44, doing away with the mandatory CA or CMA certification. From financial year 2020-21 onwards, the audited reconciliation statement was replaced with a self-certified GSTR-9C. In other words, there is no longer a compulsory GST audit certified by a professional under the earlier provision. Instead, eligible taxpayers themselves certify and file GSTR-9C. This is the single most important change for anyone researching GST audit today.

GSTR-9 vs GSTR-9C

Two annual filings sit at the centre of the current framework:

• GSTR-9 is the annual return that consolidates the outward supplies, inward supplies, tax paid, and input tax credit reported across the monthly or quarterly returns during a financial year.
• GSTR-9C is a reconciliation statement that reconciles the figures in the annual return (GSTR-9) with the audited annual financial statements of the taxpayer. It is now self-certified rather than certified by a CA or CMA.

Aggregate Turnover in a Financial Year	GSTR-9 (Annual Return)	GSTR-9C (Reconciliation Statement)
Up to Rs 2 crore	Optional	Not required
Above Rs 2 crore up to Rs 5 crore	Mandatory	Not required
Above Rs 5 crore	Mandatory	Mandatory (self-certified)

The Rs 5 crore turnover threshold is the key trigger for GSTR-9C. Aggregate turnover is computed on an all-India basis for the same Permanent Account Number (PAN), so businesses operating across multiple states must add up turnover across all registrations to test the limit.

Types of GST Audit in India

1. Turnover-Based Reconciliation (Self-Certified GSTR-9C)

This is what most businesses refer to as their annual GST audit exercise, even though it is no longer a statutory audit. Taxpayers with aggregate turnover above Rs 5 crore must reconcile their books with their GST returns and file a self-certified GSTR-9C along with GSTR-9. While professional certification is not mandatory, many businesses still engage a CA or CMA to prepare and review the reconciliation, because errors here can invite departmental scrutiny.

2. Departmental Audit (Section 65)

Under Section 65 of the CGST Act, the Commissioner or an authorised officer may conduct an audit of any registered person for a financial year, part of a year, or multiples thereof. Key features include:

• The taxpayer is informed through a notice in Form GST ADT-01 at least 15 working days before the audit begins.
• The audit must ordinarily be completed within three months from the date of commencement, extendable by a further period not exceeding six months.
• On conclusion, the findings, along with the taxpayer’s rights and obligations, are communicated in Form GST ADT-02.
• If the audit reveals unpaid tax, wrong refunds, or wrongly availed credit, the department may initiate demand and recovery proceedings.

3. Special Audit (Section 66)

A special audit under Section 66 is ordered in specific situations. Where an officer not below the rank of Assistant Commissioner, during scrutiny, inquiry, or any other proceeding, is of the opinion that the value has not been correctly declared or that the input tax credit availed is not within normal limits, they may, with the prior approval of the Commissioner, direct a special audit. Its features include:

• The audit is conducted by a CA or CMA nominated by the Commissioner, not chosen by the taxpayer.
• The direction is issued in Form GST ADT-03, and the report is submitted in Form GST ADT-04.
• The report must generally be submitted within 90 days, extendable by a further 90 days.
• The expenses of the special audit, including the professional’s remuneration, are borne by the Commissioner.
• A special audit can be directed even if the taxpayer’s accounts have already been audited under any other law.

Documents and Reconciliations Required

Whether preparing GSTR-9C or facing a departmental or special audit, businesses should keep the following ready:

• Audited financial statements, including the balance sheet, profit and loss account, and notes to accounts.
• GSTR-1, GSTR-3B, and, where applicable, GSTR-2B for the full financial year.
• The annual return in GSTR-9 for the relevant year.
• Sales and purchase registers, e-invoices, and e-way bill records.
• Input tax credit ledgers, along with reconciliation between credit claimed and credit reflected in GSTR-2B.
• Records of exports, refunds, reverse charge transactions, and any exempt or non-GST supplies.

Common reconciliations include matching turnover as per books with turnover declared in GSTR-9, reconciling tax paid, reconciling input tax credit claimed with credit available, and explaining every difference with clear reasons. Because these reconciliations can be detailed and time-sensitive, many businesses rely on professional support such as TAXAJ’s GST compliance and return filing service to prepare accurate annual returns and reconciliation statements.

Penalties for Non-Compliance

Failure to meet GST audit and annual filing obligations can lead to real financial consequences:

• Late filing of GSTR-9 and GSTR-9C attracts a late fee for each day of delay, along with interest on any unpaid tax.
• General penalty under Section 125 of the CGST Act can extend up to Rs 25,000 for contraventions where no specific penalty is prescribed.
• Incorrect self-certification in GSTR-9C, or under-declaration detected during a departmental or special audit, can lead to demand of tax, interest, and penalty under the relevant provisions.

Since GSTR-9C is now self-certified, the responsibility for accuracy rests directly on the taxpayer, which makes careful reconciliation more important than ever.

Frequently Asked Questions

Is a CA-certified GST audit still mandatory in India?

No. The mandatory CA or CMA audit under Section 35(5) was removed by the Finance Act, 2021. From financial year 2020-21 onwards, eligible taxpayers file a self-certified GSTR-9C instead of an audited reconciliation statement.

What is the turnover limit for GSTR-9C in 2026?

GSTR-9C must be filed by registered persons whose aggregate turnover in a financial year exceeds Rs 5 crore. Turnover is aggregated across all GST registrations under the same PAN on an all-India basis.

What is the difference between GSTR-9 and GSTR-9C?

GSTR-9 is the annual return summarising the year’s supplies, tax, and input tax credit. GSTR-9C is a reconciliation statement that matches the annual return with the audited financial statements and is now self-certified by the taxpayer.

What is the difference between a departmental audit and a special audit?

A departmental audit under Section 65 is a general audit by the tax authorities, initiated with a Form ADT-01 notice. A special audit under Section 66 is directed in specific cases by an officer, with the Commissioner’s approval, and is conducted by a CA or CMA nominated by the department.

Can the department audit my business even if I have filed GSTR-9C?

Yes. Filing GSTR-9C does not prevent a departmental audit under Section 65 or a special audit under Section 66. These are independent powers of the tax authorities and can be exercised wherever they consider it necessary.