Library / Goods and Services Tax: The Professional's Master Guide

35. Assessment, Scrutiny and Audit (Sections 59 to 66)

GST is a self-assessed tax. The registered person works out the tax, pays it and files returns without any officer first approving the figures. The department then checks those returns in several ways: a desk scrutiny, an audit at the premises, a special audit by an outside professional, or an assessment where no return has been filed at all. Section 2(11) of the CGST Act defines assessment as determination of tax liability and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgement assessment.

Knowing which type of assessment is in play tells the professional what the officer can do, which form will come next and how much time is available. The table below is the map for this chapter.

Type	Section	Who starts it	Main forms
Self-assessment	59	Taxpayer	GSTR-1, GSTR-3B, GSTR-9
Provisional assessment	60	Taxpayer applies	ASMT-01 to ASMT-09
Scrutiny of returns	61	Proper officer	ASMT-10, ASMT-11, ASMT-12
Best judgement (non-filer)	62	Proper officer	GSTR-3A notice, ASMT-13 order
Unregistered person	63	Proper officer	ASMT-14 notice, ASMT-15 order
Summary assessment	64	Proper officer with prior approval	ASMT-16 to ASMT-18
Departmental audit	65	Commissioner or authorised officer	ADT-01, ADT-02
Special audit	66	Assistant Commissioner or above, with Commissioner's approval	ADT-03, ADT-04

35.1 Self-assessment (Section 59)

Section 59 says every registered person shall self-assess the taxes payable and furnish a return for each tax period. The return is the assessment. There is no separate order confirming it. This is why errors in GSTR-3B matter so much: once filed, the figures stand as the taxpayer's own assessment and the department only has to show where they are wrong.

Self-assessed tax that is declared but not paid can be recovered directly under section 79 without a show cause notice (section 75(12)). From 1 January 2022 (Explanation to section 75(12), inserted by the Finance Act, 2021) this also covers outward supplies declared in GSTR-1 but not carried into GSTR-3B; rule 88C and DRC-01B flag such gaps.

35.2 Provisional Assessment (Section 60)

Sometimes a taxpayer honestly cannot determine the value or the rate of tax, for example a new product that falls between two tariff entries. Section 60 lets the taxpayer ask the proper officer to allow payment of tax on a provisional basis, so that business continues without the risk of a later allegation of suppression.

Request and order: request in ASMT-01; the officer may seek information in ASMT-02 (reply in ASMT-03) and passes an order in ASMT-04 within 90 days (rule 98).
Bond and security: the taxpayer executes a bond in ASMT-05 with security, in the form of a bank guarantee, of not more than 25% of the amount covered by the bond. The bond covers the difference between the tax finally assessed and the tax provisionally paid.
Final assessment: within six months from communication of the provisional order. The Joint or Additional Commissioner can extend this by six months and the Commissioner by up to four years in all (section 60(3)).
Interest: tax payable on final assessment carries interest under section 60(4) from the first day after the original due date until actual payment, whether paid before or after the final order.
Refund and release: a lower final tax gives a refund with interest (section 60(5)); security is released on application in ASMT-08, order in ASMT-09.

Illustration 176: Provisional assessment and interest on final assessment (FY 2024-25, before GST 2.0)

Mehta Agro Implements, Pune, launched a combined spraying and pumping unit in April 2024. It believed the unit attracted 12% as agricultural machinery. The department's view was 18%. Mehta applied for provisional assessment and was allowed to pay tax at 12% for April to September 2024, on a bond of Rs. 7,20,000 with a bank guarantee of Rs. 1,80,000 (25%).

Step 1: Monthly taxable value Rs. 20,00,000. Differential rate 6%. Differential tax per month Rs. 1,20,000; for six months Rs. 7,20,000.

Step 2: The final assessment order in March 2025 held the rate to be 18%. Mehta paid the full Rs. 7,20,000 on 31 March 2025.

Step 3: Interest at 18% runs from the day after each month's GSTR-3B due date to 31 March 2025, as computed below.

Month	Due date	Days to 31.03.2025	Interest (Rs.)
April 2024	20.05.2024	315	18,641
May 2024	20.06.2024	284	16,807
June 2024	20.07.2024	254	15,031
July 2024	20.08.2024	223	13,197
August 2024	20.09.2024	192	11,362
September 2024	20.10.2024	162	9,587
Total			84,625

Each line is Rs. 1,20,000 x 18% x days / 365, rounded to the rupee. Provisional assessment did not save the interest; it saved Mehta from a later allegation of suppression, and hence from the higher penalty and the extended period.

Practice note

Provisional assessment is under-used. An advance ruling (Chapter 4 of this Part) settles a question for the future; provisional assessment protects the present while it is decided. The two can be used together.

35.3 Scrutiny of Returns (Section 61)

Scrutiny is a desk check. The proper officer compares the returns with each other and with data available to the department, such as GSTR-2B, e-way bills, e-invoices, customs data and income-tax data. Section 61 and rule 99 lay down the steps. The officer issues ASMT-10 listing the discrepancies and asking for an explanation. The taxpayer replies in ASMT-11 within 30 days or any longer time the officer allows, and may pay any tax found short through DRC-03. If the explanation is accepted, the officer issues ASMT-12 and the matter closes. If not, the officer may take up audit, special audit, inspection or demand proceedings under sections 73, 74 or 74A.

CBIC has issued standard operating procedures for scrutiny with system-generated risk parameters. ASMT-10 must state the discrepancy with figures; if it only says "mismatch noticed", ask for the working in the reply. ASMT-10 is not a demand. The common discrepancies and their usual explanations are set out below.

Discrepancy	Common genuine reasons	What to attach
Tax in GSTR-1 more than GSTR-3B	Invoices reported in one month and paid in the next; duplicate entry in GSTR-1 amended later; credit note timing	Month-wise reconciliation, GSTR-1 amendments, challans
ITC in GSTR-3B more than GSTR-2B	IGST on imports; ISD credit; RCM credit; supplier filed GSTR-1 late (next month 2B)	Bills of entry, RCM challans, supplier-wise 2B of later months
E-way bill value more than GSTR-1	Stock transfers within a State, job work movement, cancelled bills not cancelled on portal	E-way bill register with reasons, delivery challans
Turnover lower than income-tax data	Non-GST income (interest, dividend), capital receipts	Books to GST turnover reconciliation

Illustration 177: Replying to ASMT-10 for FY 2023-24

Kaveri Engineering Works (machinery parts, 18%) received ASMT-10 showing two gaps for FY 2023-24: (a) outward taxable value in GSTR-1 exceeds GSTR-3B by Rs. 6,60,000, tax Rs. 1,18,800 (CGST Rs. 59,400 and SGST Rs. 59,400); (b) ITC in GSTR-3B exceeds GSTR-2B by Rs. 1,50,000.

Step 1: Break up gap (a). Rs. 4,20,000 relates to invoices of 30 and 31 March 2024 reported in GSTR-1 for March 2024 but offered in GSTR-3B for April 2024. Tax Rs. 75,600. Rs. 2,40,000 is a credit note of March 2024 that reduced GSTR-3B in March but was reported in GSTR-1 of April 2024. Tax Rs. 43,200. Rs. 75,600 + Rs. 43,200 = Rs. 1,18,800.

Step 2: For the March invoices, tax was paid 30 days late (due 20 April 2024, paid 20 May 2024). Interest = Rs. 75,600 x 18% x 30 / 365 = Rs. 1,118. Pay through DRC-03 and attach the challan.

Step 3: For the credit note, no tax is short. Show that April's GSTR-3B did not reduce tax a second time.

Step 4: Gap (b): Rs. 90,000 is IGST on imports (bills of entry attached). Rs. 60,000 relates to March 2024 invoices that suppliers reported in April 2024, so credit was taken a month early. The credit ledger balance never fell below Rs. 60,000, so the credit was not utilised and no interest arises under section 50(3) and rule 88B.

Result: the reply accepts interest of Rs. 1,118, explains both gaps in full, and asks for ASMT-12.

Practice note

Reply to every ASMT-10 in writing and within time, even if the reply is "no discrepancy". A silent taxpayer gets a show cause notice.

Give the reconciliation table first, then documents. Pay only what is truly short, through DRC-03 quoting the ASMT-10 reference.

If ASMT-12 is not issued after a satisfactory reply, write again asking for closure.

35.4 Best Judgement Assessment of Non-filers (Section 62)

If a registered person does not file GSTR-3B or the final return even after a notice under section 46 (GSTR-3A), the proper officer can assess the tax to the best of his judgement using available material. The order is in ASMT-13 and must be passed within five years from the due date of the annual return for the year concerned.

The order is meant to push the taxpayer to file, not to replace the return. Under section 62(2), as amended from 1 October 2023, if the taxpayer files a valid return within 60 days of service of the order, the order is deemed withdrawn. If the return is filed in a further 60 days, the order is still withdrawn, but an additional late fee of Rs. 100 per day beyond the first 60 days applies. Interest under section 50 and late fee under section 47 remain payable in all cases.

Illustration 178: Withdrawal of a best judgement order

Rohan Traders did not file GSTR-3B for January to March 2025. After GSTR-3A notices, the officer served an ASMT-13 order on 10 July 2025 assessing tax of Rs. 4,50,000. The actual tax, as per books, was Rs. 2,10,000.

Case A: Returns filed on 5 September 2025. Days from service: 57. This is within 60 days. The ASMT-13 order is deemed withdrawn. Rohan pays Rs. 2,10,000 with interest and normal late fee.

Case B: Returns filed on 20 October 2025. Days from service: 102, which is 42 days beyond 60 but within the further 60 days. The order is withdrawn, but an additional late fee of 42 x Rs. 100 = Rs. 4,200 is payable along with interest and normal late fee.

Case C: Returns not filed by 120 days (7 November 2025). The order for Rs. 4,50,000 stands and can be recovered. The remedy is appeal under section 107, or filing the return and seeking relief under general law, which is uncertain.

35.5 Assessment of Unregistered Persons (Section 63)

Where a person liable to register has not registered, or whose registration was cancelled under section 29(2) but who remained liable to pay tax, the proper officer can assess tax to the best of his judgement for the relevant periods. The notice is in ASMT-14 and the order in ASMT-15. The order must be passed within five years from the due date of the annual return for the year concerned, and only after giving an opportunity of hearing. The Finance (No. 2) Act, 2024 aligned the cross-references with section 74A; check the current text for FY 2024-25 onwards.

Section 63 is used against persons traced through inspections or third-party data. The defence usually turns on whether aggregate turnover actually crossed the threshold and whether the supplies were exempt.

35.6 Summary Assessment (Section 64)

Summary assessment is an emergency tool. Where the proper officer has evidence of a tax liability and believes that delay will harm the revenue, he may, with the prior permission of the Additional or Joint Commissioner, assess the tax and issue an order in ASMT-16 without the usual notice. Where the taxable person cannot be identified and the liability relates to goods, the person in charge of the goods is treated as the taxable person.

The taxpayer may apply for withdrawal within 30 days of receiving the order, in ASMT-17, to the Additional or Joint Commissioner. That officer may withdraw the order and direct proceedings under section 73, 74 or 74A, which gives the taxpayer a full hearing. The decision is in ASMT-18. The officer can also withdraw on his own if he finds the order erroneous.

35.7 Departmental Audit (Section 65)

An audit under section 65 is a detailed examination of records and returns for a financial year, part of it or several years, at the taxpayer's premises or in the officer's office. Units are selected on risk parameters such as refunds, ITC ratios and exempt turnover.

Stage	Requirement	Reference
Notice	ADT-01 at least 15 working days before the audit	Section 65(3), rule 101(2)
Period covered	A financial year, part of it, or multiples	Rule 101(1)
Completion	Within 3 months from commencement; Commissioner may extend by up to 6 months with reasons	Section 65(4)
Commencement	Earlier of the date records are made available or the actual start at the premises	Explanation to section 65(4)
Findings	ADT-02 within 30 days of conclusion, with reasons and rights	Section 65(6), rule 101(5)
Follow-up	Demand under section 73, 74 or 74A for unpaid amounts	Section 65(7)

Audit officers look for paras that recur across units. The table shows the common ones and a sound line of response.

Typical audit para	Line of response
ITC on items blocked under section 17(5) (motor vehicles, food, club membership, group insurance)	Check the exceptions: vehicles used for transport of goods, insurance obligatory under law, same line of business. Accept and pay where no exception applies.
Short reversal under rules 42 and 43	Recompute with the correct exempt turnover; interest on deposits and loans is excluded for non-banking businesses.
RCM not paid on legal fees, GTA, director fees, import of services	Check whether GTA charged tax under forward charge. Pay with interest and take credit in the same period.
Cross charge not raised by head office to branches	Where each branch is eligible for full credit, the value declared (including nil) is accepted under the second proviso to rule 28(1); after 1 April 2025 common input services go through ISD.

Illustration 179: Handling audit paras for FY 2023-24

Audit of Sharma Textiles Pvt. Ltd. raised three paras.

Para 1: ITC of Rs. 2,70,000 on a group health insurance policy for staff. No law made the insurance obligatory for this employer. Section 17(5)(b) blocks the credit. The company accepted the para and paid Rs. 2,70,000 with interest through DRC-03 before the notice, so no penalty under section 73.

Para 2: Short reversal under rule 42. Audit treated fixed deposit interest of Rs. 60,00,000 as exempt turnover. Total turnover Rs. 40,00,00,000 (including the interest); common credit Rs. 15,00,000. Audit's reversal: Rs. 15,00,000 x 60,00,000 / 40,00,00,000 = Rs. 22,500. The company showed that for a non-banking business the value of deposits and loans where consideration is interest is excluded from exempt supplies. The para was dropped.

Para 3: RCM on legal fees of Rs. 3,00,000. Tax Rs. 54,000 (CGST Rs. 27,000 and SGST Rs. 27,000) was paid in cash with interest and credit of Rs. 54,000 taken in the same month. The net cost was only the interest.

Judicial view: Audit objections resting on an invalid rule

BirlaNu Ltd. v. Union of India (Telangana High Court, 2025): An input service distributor had accumulated credit during the year and distributed it in March. Audit objected under rule 39(1)(a) of the CGST Rules, which required credit to be distributed in the same month, and a large penalty was proposed although eligibility of the credit was not disputed. The High Court held rule 39(1)(a), to the extent it required same-month distribution, beyond section 20 of the CGST Act (as it stood before 1 April 2025), and quashed the audit report and the show cause notice. It also found that the audit had not given the taxpayer a proper chance to respond. The Union has challenged the judgment and the Supreme Court has issued notice; the matter is pending.

Practical point: an audit para is only as good as the provision behind it. Test the rule against the section before accepting a para built on a procedural lapse.

Practice note

Before the audit, run your own check on blocked credits, rules 42 and 43, RCM and the books to GSTR-9 reconciliation. Keep a log of every document handed over.

Where a para is accepted, pay tax and interest before the show cause notice; under section 73 and section 74A (non-fraud) this removes penalty.

35.8 Special Audit (Section 66)

Where, at any stage of scrutiny, inquiry, investigation or other proceedings, an officer not below the rank of Assistant Commissioner considers that the value has not been correctly declared or the credit availed is not within normal limits, having regard to the nature and complexity of the case and the interest of revenue, he may, with the prior approval of the Commissioner, direct a special audit. The audit is done by a chartered accountant or cost accountant nominated by the Commissioner. The direction is in ADT-03.

The auditor reports within 90 days, extendable by 90 days on application (section 66(2)).
The special audit can be ordered even if the accounts have already been audited under any other law (section 66(3)).
The taxpayer must be given an opportunity of being heard on the findings before they are used (section 66(4)). The findings are communicated in ADT-04.
The expenses of the audit, including the auditor's fee, are determined and paid by the Commissioner (section 66(5)).
Demands follow under section 73, 74 or 74A (section 66(6)).

Key point

A special audit report is not an order. It is evidence. The taxpayer can challenge the auditor's method and figures at the hearing under section 66(4) and again in reply to any show cause notice that follows.

Chapter summary

• GST is self-assessed; the return is the assessment, and unpaid self-assessed tax can be recovered directly under section 75(12).

• Provisional assessment under section 60 allows tax at a provisional rate or value on a bond with security up to 25%; interest runs on the final differential.

• Scrutiny under section 61 starts with ASMT-10; reply in ASMT-11 within 30 days with a reconciliation and pay only true shortfalls to get ASMT-12.

• A best judgement order under section 62 is withdrawn if a valid return is filed within 60 days, or within a further 60 days with Rs. 100 per day additional late fee.

• Section 63 covers persons liable but unregistered; section 64 summary assessment needs prior approval and can be withdrawn on an application within 30 days.

• Departmental audit needs 15 working days' notice in ADT-01, is completed in 3 months (extendable by 6), and findings come in ADT-02.

• Special audit by a CA or cost accountant is directed with the Commissioner's approval; the report is due in 90 days (plus 90) and must be put to the taxpayer.