GST Audit in India: Checklist, Applicability, Documents and Common Mistakes
Quick answer: “GST audit” covers three separate things: the self-certified GSTR-9C reconciliation filed above ₹5 crore turnover, a departmental audit under Section 65, and a special audit under Section 66. Only the first is routine annual compliance. For FY 2025-26, GSTR-9 and GSTR-9C are due by 31 December 2026. Knowing which one applies to you is half the work.
The phrase “GST audit” causes more confusion than the process itself. Ask three business owners what it means and you will get three answers, because three different things wear the same name. One is an annual filing most larger businesses handle themselves. The other two are enforcement exercises the department can start at any time. Sorting out which is which is the first thing worth doing, because the response to each is completely different.
Here is what a GST audit actually involves in 2026, who it applies to, the documents to keep ready, and the mistakes that turn a clean year into a demand.
What “GST Audit” Means in 2026
The version most people remember, a chartered accountant certifying your accounts, no longer exists as a mandatory requirement. The Finance Act 2021 removed the compulsory audit by omitting Section 35(5), following the 43rd GST Council meeting on 28 May 2021. Since FY 2020-21, the reconciliation statement in GSTR-9C is self-certified by the taxpayer, not signed off by a CA or cost accountant.
So in current terms, a GST audit is really one of three things. The GSTR-9C reconciliation is annual self-compliance. A departmental audit under Section 65 is initiated by the tax authorities. A special audit under Section 66 is directed in specific, difficult cases. The rest of this guide separates them, because conflating them is where most errors begin.
Applicability: Who Files, and at What Turnover
Two thresholds govern annual filing, and both turn on aggregate turnover.
Above ₹2 crore aggregate turnover, the annual return in GSTR-9 becomes mandatory. Below that, GSTR-9 is optional. Above ₹5 crore, you must also file GSTR-9C, the reconciliation statement that matches your annual return against your audited financial statements and explains any differences.
Aggregate turnover here follows Section 2(6): all taxable supplies, exempt supplies, exports and inter-state supplies of everyone sharing the same PAN, computed across India rather than per registration. That catches out multi-state businesses that measure turnover one GSTIN at a time. Composition dealers, casual and non-resident taxable persons, input service distributors, and those deducting or collecting tax under Sections 51 and 52 are outside the GSTR-9C requirement.
The Audits That Ignore Your Turnover
Here is the part that surprises people. A departmental audit under Section 65 has no turnover threshold at all. The Commissioner can order an audit of any registered person on risk parameters, and you receive at least fifteen working days' notice under Rule 101(2), with the officer being of Superintendent rank or above. The officer can go through your books, invoices, debit and credit notes, e-way bills, bank statements and stock registers.
A special audit under Section 66 is narrower and more serious. It is directed when a case involves complexity, a risk to revenue, mis-declared value, or input tax credit claimed beyond entitlement, and it is carried out by a CA or cost accountant nominated by the Commissioner. Separate again is Section 61, which is scrutiny of returns rather than an audit. None of these depend on crossing ₹5 crore. A business well under the annual-audit threshold can still find itself under departmental review.
The GST Audit Checklist
Whether you are preparing GSTR-9C or bracing for a departmental review, the reconciliations are broadly the same. Work through these before year-end, not after a notice arrives:
- Match outward supplies in GSTR-1 against GSTR-3B and against the sales register, and resolve every gap.
- Reconcile the purchase register against GSTR-2B each period, and confirm input tax credit claimed matches what is eligible.
- Check that no Section 17(5) blocked credit has been claimed as eligible ITC.
- Account for reverse-charge liability and tax on advance receipts.
- Confirm e-invoicing and e-way bill compliance across the year.
- Re-check HSN and SAC codes against the current rate slabs.
- Cross-verify GST turnover against the turnover reported in your income-tax return.
- Pay any identified shortfall voluntarily through Form DRC-03, with interest, before it is flagged for you.
Keep the supporting documents filed and retrievable: tax invoices, debit and credit notes, e-way bills, bank statements, stock records and a clean ITC working. A departmental officer asks for these on a short clock.
The FY 2025-26 Wrinkle: GST 2.0
FY 2025-26 is not an ordinary reconciliation year. The 56th GST Council approved a two-slab rate overhaul that took effect on 22 September 2025, moving most goods into a 5% and 18% structure, with 40% reserved for select luxury and sin goods. Because the financial year straddles that date, a single HSN code may carry one rate before 22 September and another after.
Reconciling GSTR-9C for FY 2025-26 without splitting the year at that point is likely to surface avoidable variances during review. Re-map every HSN and SAC code to the revised slab, since a stale rate master is a common cause of mismatches. Input tax credit reversal applies only where a supply genuinely became exempt from 22 September. Compensation cess wound down for most categories by 31 March 2026, with tobacco on separate rules. This one change is the single biggest reason a FY 2025-26 filing needs more care than last year's.
Common Mistakes
The recurring errors are predictable. Assuming a CA must still certify GSTR-9C, when it has been self-certified since FY 2020-21. Blurring the ₹2 crore and ₹5 crore thresholds, and filing the wrong form. Assuming turnover under ₹5 crore means no audit exposure, forgetting that Sections 65 and 66 carry no threshold. Claiming blocked credit under Section 17(5). Skipping the monthly GSTR-2B reconciliation and trying to fix a year of ITC at filing time. And, this year especially, running the reconciliation on a rate master that never updated for GST 2.0.
Where the Real Risk Sits
The annual return is the visible half of GST compliance. The half that actually carries risk is the mismatch that quietly triggers scrutiny under Section 61 or an audit under Section 65, often before any human at the department has looked at your file. A gap between your GSTR-1 and your income-tax turnover is enough to raise an automated alert. Clean, period-by-period reconciliation is worth far more than a year-end scramble, and it is the kind of ongoing discipline a firm like SPKG & Co. LLP builds into the monthly routine rather than the December rush. Get the reconciliation right through the year, and the audit, whichever of the three it turns out to be, stops being something to fear.
FAQs
Is a GST audit by a Chartered Accountant still mandatory? No. The mandatory audit by a Chartered Accountant or Cost Accountant under the erstwhile Section 35(5) of the CGST Act was removed with effect from FY 2020-21. Businesses required to file GSTR-9C now submit a self-certified reconciliation statement.
Who is required to file GSTR-9 and GSTR-9C? For FY 2025-26, taxpayers with an aggregate turnover exceeding ₹2 crore are generally required to file GSTR-9. Those with an aggregate turnover exceeding ₹5 crore must also file GSTR-9C, subject to the applicable statutory exemptions.
Can a business below ₹5 crore turnover still face a GST audit? Yes. The ₹5 crore threshold applies only to the annual GSTR-9C reconciliation requirement. Departmental audits under Section 65 and special audits under Section 66 of the CGST Act may be initiated irrespective of turnover where the statutory conditions are satisfied.
What documents should be kept ready for a GST audit? Businesses should maintain tax invoices, debit and credit notes, purchase and sales registers, GSTR-1, GSTR-3B, GSTR-2B reconciliations, e-way bills, bank statements, stock records, HSN/SAC workings, and supporting documents for input tax credit claims and tax payments.
What are the most common mistakes identified during a GST audit? Frequent issues include mismatches between GSTR-1 and GSTR-3B, incorrect input tax credit claims, failure to reconcile GST turnover with financial statements, errors in HSN or SAC classification, non-compliance with e-invoicing requirements, and delayed reconciliation of GSTR-2B with purchase records.