GST Audit Types Every CA Must Know in 2025
Introduction to GST Audit Types
Navigating the world of GST compliance can feel overwhelming—especially when it comes to audits. Whether you’re a business owner, finance manager, or practicing CA, understanding the different types of audits under GST is essential to stay prepared and avoid penalties. In 2025, as scrutiny from tax authorities intensifies and new provisions like Section 74A come into play, it’s more important than ever to know what triggers an audit, how each type differs, and what steps to take when you’re served a notice.
This guide breaks down all major GST audit types, including lesser-known ones like forensic and limited scrutiny audits, to help you stay one step ahead.
What is a GST Audit?
A GST audit refers to the detailed examination of a taxpayer’s records, returns, and other related documents to ensure compliance with the Goods and Services Tax laws. As per Section 2(13) of the CGST Act, an audit involves verifying the correctness of turnover declared, taxes paid, refunds claimed, and input tax credit availed.
The primary objective is to plug revenue leakages, identify non-compliance, and promote transparency in business operations.
Purpose of GST audits:
To ensure proper maintenance of books, accurate tax filing, and to detect any fraudulent or unintentional errors in GST compliance.
Three Core Audits Explained
1. Turnover-Based (Statutory) Audit
This audit applies when a taxpayer’s aggregate turnover exceeds ₹2 crore in a financial year. It must be conducted by a Chartered Accountant or Cost Accountant, as mandated by Section 35(5) of the CGST Act (until its omission post-FY 2020–21).
Key requirements:
Filing of GSTR-9C, a reconciliation statement between audited financials and annual return (GSTR-9)
Even after the statutory audit requirement was dropped, large taxpayers are still recommended to conduct internal reconciliation to avoid departmental scrutiny
2. Departmental Audit
Conducted by tax authorities under Section 65 and guided by Rule 101, this audit is initiated through a notice in Form ADT-01. The taxpayer gets a 15-day advance notice, and the audit must be completed within 3 months from the audit start date.
The audit may extend up to 6 months with permission from the Commissioner.
Pro tip: Keep key records ready—GSTRs, e-invoices, reconciliations, and audit trails to avoid compliance delays.
3. Special Audit
Invoked under Section 66 and Rule 102, the Special Audit is ordered by a GST officer, but conducted by a CA or cost accountant nominated by the Commissioner.
When is it triggered?
Discrepancy in declared values or credits claimed
Unusual patterns in returns or financials
Revenue authority believes that books require expert evaluation
Timeline: The audit report must be submitted within 90 days, extendable by another 90 days.
Beyond the Usual: Niche & Focused Audits
Limited Scrutiny Audit
Often confused with a full-fledged audit, limited scrutiny focuses only on specific discrepancies or red flags, such as:
Mismatch between GSTR-3B and GSTR-1
Excessive Input Tax Credit claims
Irregular high-value transactions
This is not formally termed in the GST Act but is gaining traction as a focused compliance tool, especially in MSME segments.
Forensic GST Audit
A forensic audit digs deeper to uncover intentional fraud or structured tax evasion. Typically ordered in high-stakes investigations, it involves:
Reverse trail mapping
E-invoice manipulations
Shell entity detection
Who needs to worry? Businesses with:
Repeated notices or irregular compliance patterns
Sudden spikes/drops in returns
Multi-state input credit misuse
Internal & Voluntary Audits
These are self-initiated audits, usually conducted quarterly or annually by internal finance teams or external consultants to:
Ensure error-free GST returns
Prepare for future statutory or departmental audits
Identify ITC mismatches early
This is a best practice for mid to large-sized enterprises and startups scaling operations.
GST Audit Misuse & Red Flags (New in 2025)
What is Section 74A?
Recently introduced, Section 74A deals with tax evasion with fraudulent intent. However, concerns are rising that this clause is being overused, especially against MSMEs, for minor discrepancies.
Examples of misuse:
Issuing 74A notices for simple mismatches in GSTR returns
Treating clerical errors as intentional fraud
Penalizing small businesses without proper scrutiny
How to respond:
Review the notice critically—Is it Section 61 (Scrutiny) or 74A?
Engage a GST professional before responding.
Maintain clean reconciliations—GSTR-2B, 3B, 1, and books.
Respond with documentation in Form DRC-06 within the stipulated time.
Conclusion
Understanding the types of GST audits is no longer optional—it’s essential for compliance, risk reduction, and peace of mind. While statutory audits may have reduced in frequency, departmental scrutiny and special audits have intensified. And with the evolving role of Section 74A, every business, especially MSMEs, must stay vigilant.