GST Notice & Audit Response

Section 61 empowers the proper officer to scrutinise returns and issue a notice for discrepancies — GSTR-1 vs GSTR-3B mismatch, ITC claimed exceeding GSTR-2B, turnover reported differently across returns, or tax paid below assessed liability. The taxpayer must explain within 30 days. If satisfactory, no action follows. If not, assessment under Section 62 (best judgment) or Section 73/74 (demand + penalty) is initiated.

Section 73: tax shortfall due to reasons other than fraud — penalty 10% of tax or ₹10,000, whichever is higher; limitation 3 years. Section 74: shortfall due to fraud, wilful misstatement, or suppression — penalty 100% of tax (reducible to 50% on payment before the adjudication order); limitation 5 years. The penalty under Section 74 reduces to 25% if paid within 30 days of the demand order.

Section 65: a GST officer can audit any registered person's books and records at the business premises or the officer's office. Minimum 15 working days advance notice. Duration: 3 months (extendable to 6 months by the Commissioner). Covers the last 5 financial years. After completion, the officer shares the audit report; if a demand is identified, a show cause notice under Section 73/74 is issued. The taxpayer responds before the final demand order.

Rule 56: every registered person must maintain accounts for 72 months (6 years) from the due date of the annual return. Required: purchase and sales registers, stock registers, ITC availed and utilised, e-way bills, tax payment challans (GSTR-3B), and import-export records. Electronic records are acceptable if accessible and printable on demand. Failure to maintain records: penalty under Section 122(1)(x) — ₹10,000 or tax amount, whichever is higher.

Section 107: appeal to Commissioner (Appeals) within 3 months of the order, pre-deposit 10% of disputed tax. Section 112: appeal to GSTAT within 3 months, pre-deposit 20%. Section 117: High Court on questions of law. Section 118: Supreme Court. Until GSTAT is operational (most states are still setting it up as of June 2026), the High Court provides interim relief and effectively handles GSTAT-tier disputes.