Section 66 of CGST Act - Special Audit
Section 66 of the Central Goods and Services Tax Act, 2017 empowers a qualifying GST officer, with prior approval of the Commissioner, to direct a registered person to have specified records examined and audited by a Chartered Accountant or Cost Accountant nominated by the Commissioner.
What is a special audit under Section 66?
A special audit is a statutory examination of the records and books of account of a registered person by an independent Chartered Accountant or Cost Accountant nominated by the Commissioner. It is distinct from an audit by tax authorities under Section 65.
The power can be considered at any stage of scrutiny, inquiry, investigation or other proceedings before the officer. The officer must be not below the rank of Assistant Commissioner and must form the opinion, having regard to the nature and complexity of the case and the interest of revenue, that the value has not been correctly declared or that credit availed is not within normal limits. Prior approval of the Commissioner is mandatory.
Section 66 - Special Audit: provision explained
Section 66(1): When special audit may be directed
An officer not below the rank of Assistant Commissioner may, at any stage of scrutiny, inquiry, investigation or other proceedings before that officer, direct a registered person in writing to have records, including books of account, examined and audited by a Chartered Accountant or Cost Accountant nominated by the Commissioner. The statutory conditions include the nature and complexity of the case, the interest of revenue, an opinion regarding incorrect declaration of value or abnormal credit, and prior approval of the Commissioner.
Section 66(2): Audit report and time limit
The nominated professional must submit the duly signed and certified special audit report to the Assistant Commissioner within 90 days. On an application by the registered person or the auditor, or for a material and sufficient reason, the Assistant Commissioner may extend the period by a further period of up to 90 days.
Section 66(3): Audit under another law is no bar
The special-audit power applies notwithstanding that the registered person's accounts have already been audited under another provision of the CGST Act or under another law.
Section 66(4): Opportunity of being heard
If material gathered on the basis of the special audit is proposed to be used in proceedings against the registered person under the Act or Rules, the registered person must be given an opportunity of being heard in respect of that material.
Section 66(5): Who bears the audit cost?
The expenses of examination and audit, including remuneration of the nominated Chartered Accountant or Cost Accountant, are determined and paid by the Commissioner. The Commissioner's determination is final.
Section 66(6): Action after special audit
If the special audit detects tax not paid or short paid, tax erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate the applicable demand proceedings. The provision now also refers to Section 74A, in addition to Sections 73 and 74.
Rule 102 of CGST Rules - procedure for special audit
Rule 102 of the CGST Rules, 2017 prescribes the procedural forms for Section 66. Where a special audit is required, the officer referred to in Section 66 issues the direction to the registered person in FORM GST ADT-03, specifying the Chartered Accountant or Cost Accountant who will conduct the audit. After conclusion of the special audit, the registered person is informed of the findings in FORM GST ADT-04.
Forms used for Section 66 special audit
| Form | Purpose | Legal basis |
|---|---|---|
| GST ADT-03 | Direction to the registered person to get records audited by the nominated Chartered Accountant or Cost Accountant. | Section 66 read with Rule 102(1) |
| GST ADT-04 | Communication of the findings of the special audit to the registered person. | Rule 102(2) |
Important rights and safeguards for a registered person
A direction under Section 66 is not an unrestricted audit power. The statute specifies the minimum rank of the officer, the circumstances relevant to formation of opinion, prior approval of the Commissioner, a written communication, and nomination of the auditor by the Commissioner. Further, Section 66(4) protects the right to be heard before material gathered through the special audit is used against the registered person.
The registered person does not bear the professional fee of the nominated auditor; Section 66(5) places the examination and audit expenses, including remuneration, on the Commissioner.
What happens after the special audit?
A special audit report does not by itself replace the statutory demand process. If the audit reveals a tax shortfall, erroneous refund or wrongly availed or utilised input tax credit, the proper officer may initiate proceedings under the demand provision applicable to the relevant tax period and circumstances.
Section 65 audit vs Section 66 special audit
| Point | Section 65 | Section 66 |
|---|---|---|
| Nature | Audit by tax authorities. | Special audit by a nominated Chartered Accountant or Cost Accountant. |
| Authority | Commissioner or authorised officer under Section 65. | Direction by officer not below Assistant Commissioner, with prior Commissioner approval. |
| Trigger | Audit undertaken under the statutory audit framework. | Nature/complexity, revenue interest and opinion concerning declared value or credit limits. |
| Forms | GST ADT-01 and GST ADT-02 under Rule 101. | GST ADT-03 and GST ADT-04 under Rule 102. |
Official GST references
For the current statutory text, rules, notifications and departmental material, refer to the official CBIC GST Acts, CBIC GST Rules, and India Code.
This article is intended as a general legal-information guide. Applicability of demand provisions and procedural consequences should be checked with reference to the relevant tax period, facts, amendments and notifications.