Published 13 October 2026
A special audit usually starts in the middle of something else. A scrutiny, an inquiry or an investigation is already running when a letter arrives directing the business to have its books audited by a named chartered accountant or cost accountant. The business did not choose that auditor and does not pay the fee. It has ninety days of work ahead of it and a report at the end that it has not yet seen. That report can become the basis of a demand.
This guide covers section 66 of the CGST Act and rule 102 of the CGST Rules. It covers who may order a special audit, the forms, the time limits, the hearing on the findings and what follows. The departmental audit under section 65, which officers carry out themselves, is in Departmental Audit: Section 65.
What a special audit is, and how it differs from a departmental audit
Under section 65, the Commissioner’s own officers audit a registered person, after notice in FORM GST ADT-01 and with findings in ADT-02 (rule 101). Section 66 is different in three ways:
- Who audits. A chartered accountant or cost accountant “as may be nominated by the Commissioner” does the work, not a team of officers.
- When. It can only be ordered “at any stage of scrutiny, inquiry, investigation or any other proceedings” already before the officer. It is not a stand-alone selection.
- Who pays. Under section 66(5), the expenses, “including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final”.
Section 66(3) adds that a special audit may be ordered “notwithstanding that the accounts of the registered person have been audited under any other provisions of this Act or any other law”. A statutory audit under company law, a tax audit, or an earlier section 65 audit does not prevent it.
The conditions in section 66(1)
The power has four conditions, each written into the sub-section:
- Rank. The officer must be “not below the rank of Assistant Commissioner”.
- Grounds. The officer 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 the credit availed is not within the normal limits”.
- Approval. The direction requires “the prior approval of the Commissioner”.
- Form. The direction is given “by a communication in writing”, to have the records “including books of account examined and audited” by the nominated accountant.
Scrutiny under section 61 is one of the proceedings from which a special audit can start. Section 61(3) lists it among the actions open to the officer where an explanation is not accepted. The scrutiny procedure is in Scrutiny of Returns: ASMT-10, ASMT-11 and ASMT-12.
The forms
| Form | Rule | Issued by | What it does |
|---|---|---|---|
| ADT-03 | 102(1) | The officer under section 66 | Directs the registered person to get the records audited by the accountant named in it |
| ADT-04 | 102(2) | The officer | Informs the registered person of the findings of the special audit |
| DRC-03 | 142(2) | The registered person | Intimates any payment made on the findings |
| DRC-04 | 142(2) | The portal | Acknowledges that payment |
ADT-03 states the tax period by financial year. It recites that “the proceedings of scrutiny of return /enquiry/investigation/……… are going on”. It names the chartered accountant or cost accountant “nominated by the Commissioner”, and directs the person “to get your books of account and records audited by the said chartered accountant / cost accountant”.
ADT-04 is headed “Information of Findings upon Special Audit”. It states that the report “is prepared on the basis of information available / documents furnished by you”. It sets out short payment of integrated, central, State or Union territory tax and cess, with interest and “any amount other”, and attaches the audit observations. It directs the person “to discharge your statutory liabilities … failing which proceedings as deemed fit may be initiated”.
ADT-04 is not an order determining tax. The findings become a demand only through a show cause notice and an order under section 73, 74 or 74A, as described below.
What to have ready
A special audit examines the same records a departmental audit does, so the preparation in Keeping the Records an Audit Will Ask For applies. Particular to section 66:
| Item | Where it comes from |
|---|---|
| The ADT-03 and the proceeding it refers to (scrutiny notice, inquiry letter, summons or investigation file) | Portal, NOTICES tab; departmental correspondence |
| The financial years named in ADT-03 | ADT-03 |
| Books of account, ledgers, stock records, invoices, debit and credit notes | The books (section 35) |
| Returns for the years: GSTR-1, GSTR-3B, GSTR-9 and GSTR-9C where filed | Portal |
| Reconciliations of turnover and of credit for the years (books to returns; GSTR-2B to GSTR-3B) | The books and the portal |
| Earlier audit reports for the same years, under any law | The books |
| Any DRC-03 payments already made for the years | Portal |
The issues the officer had in mind usually appear in the underlying proceeding. Those are the figures the accountant will test.
Time limits
Section 66(2) requires the accountant, “within the period of ninety days”, to submit a report “duly signed and certified by him to the said Assistant Commissioner”. The proviso allows the Assistant Commissioner to extend that “by a further period of ninety days”. The extension may be granted “on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason”. The Act does not state the date from which the ninety days run.
A special audit does not extend the time for a demand. The limits in section 73(10), section 74(10) and section 74A(2) and (7) run from the annual return’s due date and from the notice, whatever the audit stage. In Koenig Solutions Pvt Ltd v Assistant Commissioner, Audit Branch, State GST, GNCTD (Delhi High Court, W.P.© 11410/2024, 9 July 2026), an ADT-03 for 2018-19 was issued on 24 August 2023. A two-page special audit report followed on 6 December 2023, and a DRC-01 on 1 August 2024. The department admitted that no order had been passed by 30 April 2024. That was the date to which Notification No. 56/2023-Central Tax had extended the section 73 limit for 2018-19. The Court quashed both the ADT-03 and the DRC-01.
Portal steps
The GST portal handles special audit cases in the same case-details screen as departmental audits. Its audit manual, at tutorial.gst.gov.in, describes the following. The flow for replying to an audit show cause notice “is similar for Special Audit and General Audit both”.
- The notice appears under Services > User Services > View Notices and Orders. The View link opens the Case Details page, with NOTICES, REPLIES, PAYMENT DETAILS, ACKNOWLEDGEMENT (GST DRC-04), REPORT and REQUESTS tabs.
- Replies and documents are filed from the REPLIES tab. The manual allows up to four PDF or JPEG files of 5 MB each per upload.
- The report in ADT-04 appears in the REPORT tab. The manual lists “Audit Report u/s 66 (GST ADT-04)” among the reports against which payment can be made from the REPLIES tab, through a button that opens DRC-03 with the details filled in.
- In DRC-03 itself, selecting “Audit” as the cause of payment lists the reference numbers of ADT-01 and ADT-03 communications issued to the person, according to the portal’s DRC-03 manual.
The portal’s FAQ adds that the tax officer may send up to three reminders where a notice is not answered.
Who signs
Replies and DRC-03 are filed by the authorised signatory. The manual says submission is with DSC or EVC. The accountant’s report is “signed and certified” by the accountant under section 66(2). The registered person does not sign it.
The hearing on the findings
Section 66(4) states the safeguard:
The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit under sub-section (1) which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.
The hearing attaches to the use of the material, not only to its collection. Where the findings are carried into a show cause notice, section 75(4) separately requires a hearing on request or where an adverse decision is contemplated.
Two Delhi High Court decisions show how the courts have read these provisions together.
Avik Televentures Private Limited v Office of the GST Officer, Ward 71 (Delhi High Court, W.P.© 2339/2026, 30 March 2026). A special auditor was appointed in December 2024 for 2021-22 and reported on 27 March 2025. The petitioner replied to the auditor’s observations in April 2025. A show cause notice dated 24 September 2025 proposed a demand of over Rs 58 crore. The petitioner replied in October 2025. At 5.20 pm on 27 December 2025, a Saturday, the officer issued a “Reminder-1” asking for further documents, including certified bank statements, by 29 December, with a hearing on 30 December. A request for seven days was not shown to have been considered. The order was passed on 31 December 2025, the last day of limitation, confirming about Rs 26.7 crore. The Court held that the opportunity “contemplated under Sections 66(4) and 75(4) … is not a mere formality but must be real, reasonable and effective”. Attendance at the hearing did not cure the defect. It set the order aside and remanded the matter.
Tata Motors Limited v Goods and Service Tax Officer (GSTO), Ward 203 (Delhi High Court, W.P.© 8105/2024, 29 May 2024). The show cause notice for 2018-19 had “simply enclosed the findings of the Special Audit” and gave no further reasons. The petitioner answered each head with documents. The order said only that the reply was “not satisfactory”. The Court held that the officer “had to at least consider the reply on merits and then form an opinion”. The order was set aside and the notice remitted for fresh adjudication.
What follows the findings
Section 66(6) provides that where the special audit “results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74 or section 74A”. The choice depends on the financial year. Sections 73 and 74 cover years up to 2023-24, and section 74A covers 2024-25 onwards.
Between ADT-04 and any show cause notice, the person may pay before the notice:
| Provision | Case | Amount paid before notice | Effect |
|---|---|---|---|
| 73(5), (6) | Up to 2023-24, no fraud | Tax and interest | No notice for the tax so paid “or any penalty” |
| 74(5), (6) | Up to 2023-24, fraud or suppression | Tax, interest and 15 per cent penalty | No notice for the tax so paid |
| 74A(8)(i) | 2024-25 on, no fraud | Tax and interest | No notice, and no penalty |
| 74A(9)(i) | 2024-25 on, fraud or suppression | Tax, interest and 15 per cent penalty | No notice for the tax so paid |
If the officer thinks the payment is short, a notice issues for the balance under section 73(7), 74(7) or 74A(10). Penalty relief does not apply where self-assessed tax or tax collected was not paid within thirty days of its due date (sections 73(11) and 74A(11)). The payment procedure, and the DRC-01A intimation that may come before a notice, are in Before a Notice: DRC-01A and Paying Voluntarily.
Rights and duties at each step
- On ADT-03. The person must have the records audited by the named accountant. The person is entitled to a direction in writing from an officer of at least Assistant Commissioner rank, given with the Commissioner’s prior approval. The person bears no audit fee.
- During the audit. The person, like the accountant, may apply to the Assistant Commissioner to extend the ninety days.
- On ADT-04. The person is entitled to be heard on any material “proposed to be used” against him. He may pay, wholly or in part, through DRC-03 and receive DRC-04, or contest the findings.
- On a show cause notice. The ordinary procedure applies: a reply in DRC-06, a hearing under section 75(4), and an order giving reasons. See Replying to a Show Cause Notice, and the Hearing.
What can still be put right
- Before the report. Records the auditor lacks can be produced, and errors the person finds can be corrected or paid through DRC-03 with interest.
- After ADT-04. Findings that rest on incomplete information can be answered with documents and a reconciliation in the hearing under section 66(4). ADT-04 itself records that the report was prepared “on the basis of information available / documents furnished”.
- After an order. The remedies are rectification and appeal, described in The Order, Rectification, and the Clock for Appeal.
The steps in order
- On receiving ADT-03, identify the proceeding it arises from, the financial years and the nominated accountant.
- Assemble books, returns, reconciliations and earlier audit reports for those years.
- Give the accountant the records. If ninety days will not be enough, apply to the Assistant Commissioner for the further period.
- On ADT-04, read the attached observations against the books and the returns.
- Pay any amount accepted through DRC-03, selecting “Audit” as the cause of payment, and keep the DRC-04.
- For the rest, seek the hearing under section 66(4) and file a reasoned reply with documents.
- If a show cause notice follows, check its time limit for the year, and reply in DRC-06.
The next guide covers the stage before a show cause notice: the DRC-01A intimation, and voluntary payment through DRC-03.