Rights of Taxpayers During GST Audit: Notice, Access to Findings, and Hearing
GST law gives taxpayers clear rights during audit, including prior notice, access to findings and a fair hearing and any audit conducted without these safeguards does not sustain in law.
A Goods and Services Tax (GST) audit is a statutory process. It is not a free inspection. The CGST Act grants specific rights to taxpayers during an audit. These rights protect fairness and transparency. These rights also prevent misuse of audit powers.GST authorities must follow the law. Taxpayers are not silent observers. They have enforceable rights at each stage of audit. Courts...
A Goods and Services Tax (GST) audit is a statutory process. It is not a free inspection. The CGST Act grants specific rights to taxpayers during an audit. These rights protect fairness and transparency. These rights also prevent misuse of audit powers.
GST authorities must follow the law. Taxpayers are not silent observers. They have enforceable rights at each stage of audit. Courts have repeatedly protected these rights where authorities ignored procedure.
This article explains the key rights of taxpayers during GST audit, with focus on notice, access to audit findings, and the right to hearing.
Right to Prior Audit Notice
Section 65(3) of the CGST Act requires prior audit notice.
The department must issue audit notice in FORM GST ADT-01.
The notice must reach the taxpayer at least 15 working days before audit begins.
This right allows preparation. The taxpayer can arrange records and staff. Audit without proper notice violates law.
Courts have held that audit without statutory notice lacks validity. Any action based on such audit becomes weak in law.
Right to Know Audit Scope and Period
Audit under Section 65 has a defined scope.
The taxpayer has the right to know:
the audit period, and
the nature of verification.
Authorities cannot expand audit scope without justification. Audit is limited to GST compliance. It is not a fishing inquiry.
Unrestricted audit violates discipline and fairness.
Right to Time-Bound Audit
Section 65(4) fixes audit timelines.
Audit must be completed within 3 months from commencement.
The Commissioner can extend the audit by 6 months with written reasons.
The taxpayer has the right to closure within this period. Prolonged audits create pressure and uncertainty.
Courts have disapproved open-ended audits that ignore statutory limits.
Right to Produce Only Required Records
Section 35 and Rule 56 prescribe records.
The taxpayer must produce records required under GST law. Authorities cannot demand records outside statutory requirement.
This right protects businesses from excessive and irrelevant demands.
Right to Reasonable Time to Produce Records
Audit requires document review and reconciliation.
The taxpayer has the right to reasonable time to:
gather records,
prepare explanations, and
submit reconciliations.
Short deadlines deny fairness. Courts have set aside audit actions where time was denied.
Right to Access Audit Findings
Audit does not end with verification.
Rule 101(5) requires communication of audit findings in FORM GST ADT-02.
The taxpayer has the right to receive:
discrepancies noted, and
issues identified.
Audit findings must be shared before any demand. Hidden findings violate transparency.
Right to Respond to Audit Findings
Audit findings are not final conclusions. The taxpayer has the right to explain audit objections. Authorities must allow written response.
In Simon India Ltd. v. CT & GST Officer (Orissa High Court), the court set aside audit findings where the department issued draft and final audit reports on the same day. The court held that the taxpayer must get time to reply.
In Tinton River Palms v. State of Karnataka (Karnataka High Court), the court quashed audit findings finalised within days of notice and directed a fresh process with proper reply time.
These cases confirm that reply opportunity is mandatory.
Audit Findings Are Not Tax Demand
Audit findings do not create liability. If tax is proposed, the department must issue a show cause notice under Section 73 or Section 74. The taxpayer has the right to receive a notice, file reply and seek hearing.
Demand without notice violates law. Courts have repeatedly held that audit observations cannot replace adjudication.
Right to Personal Hearing
Section 75(4) governs hearing. The taxpayer has the right to hearing when:
hearing is requested, or
an adverse order is proposed.
Hearing allows clarification of facts.
The Gauhati High Court in Shreearihant Logistics Private Limited vs The State of Assam (2025 TAXSCAN (HC) 1431) held that an SCN that does not specify the date and time of personal hearing makes an adverse order unsustainable under Section 75(4).
The Madras High Court in Sri GK Industries vs The Deputy State Tax Officer (2024 TAXSCAN (HC) 2093) set aside a demand order where the department did not consider the taxpayer’s reply and did not grant hearing, even though part of the demand had been recovered. The court remanded the matter and directed a fresh reply, and a 14-day hearing notice before a fresh order.
Right to Know the Basis of Objections
Natural justice requires disclosure.
The taxpayer has the right to know:
data relied upon,
documents used, and
computation method.
Authorities cannot rely on undisclosed material. Courts have held that hidden evidence violates fair process.
Right Against Surprise Grounds
Section 75(7) restricts adjudication scope. The department cannot confirm demand on grounds not stated in notice.
In Vrinda Automation vs State of Uttar Pradesh and another (2025 TAXSCAN (HC) 955), the court said that GST orders were quashed where final orders relied on new grounds beyond the show cause notice. This right prevents surprise demands.
Right to Proper Service of Notices
Section 169 governs service.
Orders and notices must be served through prescribed modes such as:
GST portal, or
registered email.
In a Delhi High Court in Sadhna Kohli Vs Sales Tax Officer Class II (2024 TAXSCAN (HC) 2033) case, a GST demand was set aside where the notice was not accessible on the portal in a manner that allowed response. The court held that service must allow real opportunity.
Right to Appeal
Section 107 grants appeal rights. The taxpayer has 3 months from communication of order to file appeal.
Authorities must ensure proper communication. Denial of appeal access violates statutory protection.
Right Against Coercive Recovery
Section 79 governs recovery.
Recovery can begin only after valid determination.
Recovery cannot start during audit.
Courts have restrained coercive recovery where tax was not adjudicated.
Right to Dignified Treatment
Audit is a compliance process. The taxpayer has the right to dignified conduct. Authorities must avoid repeated summons, unnecessary visits, and pressure tactics. Courts have criticised harassment during audit.
Responsibility to Cooperate
Rights come with responsibility. The taxpayer must cooperate with audit, produce required records, and provide correct information. Obstruction is not protected.
