GST assessments, audit, refunds and e-invoicing

Chartered Accountancy (CA (ICAI)) · Taxation · free study notes for exams, placements and interviews

In short

After a taxpayer self-assesses and files returns, the GST law gives officers a graded set of tools - scrutiny, provisional, best-judgment and summary assessment, departmental and special audit, and demand notices under sections 73, 74 and 74A - to test that self-assessment. Running the other way, section 54 lets a taxpayer recover tax that was never meant to stick: export/zero-rated refunds, inverted-duty refunds and excess cash-ledger balances. E-invoicing under Rule 48(4) is the compliance backbone that feeds all of this, because an Invoice Reference Number (IRN) is what makes a B2B invoice valid at all. This is core CA Final/Inter Taxation (GST) territory, and it is the single most practical area in indirect-tax interviews at the Big Four, mid-size GST practices, and in-house tax teams.

Explained

Assessment: the five routes beyond self-assessment

Self-assessment (s.59): every registered person assesses their own tax and files GSTR-1/3B. Everything below is a response to that.
Provisional assessment (s.60): where the taxpayer cannot determine value or rate, they apply (ASMT-01); the officer may permit provisional payment on a bond with security (max 25% of bond amount). Final assessment within 6 months, extendable by the Joint/Additional Commissioner by 6 months and by the Commissioner by up to 4 years. Interest payable on short payment; refund with interest if excess.
Scrutiny of returns (s.61): officer compares returns with available data (GSTR-1 vs 3B vs 2B vs e-way bills) and issues ASMT-10; taxpayer replies in ASMT-11 within 30 days (extendable). If explanation is accepted, ASMT-12 closes it; if not, the officer moves to s.65/66/67 or a demand under s.73/74/74A. Scrutiny is a *discrepancy intimation*, not a demand.
Best-judgment assessment of non-filers (s.62): where a return is not filed even after a s.46 notice (GSTR-3A), the officer assesses on best judgment in ASMT-13 within 5 years from the due date of the annual return. Key relief: if the taxpayer files the valid return within 60 days of the ASMT-13 order (or within a further 60 days with late fee and interest), the order is deemed withdrawn - but interest and late fee survive.
Assessment of unregistered persons (s.63): a person liable to register but unregistered, or whose registration is cancelled yet was liable to pay tax - best-judgment assessment within 5 years of the due date of the annual return, after a show-cause notice (ASMT-14 → ASMT-15).
Summary assessment (s.64): with the Additional/Joint Commissioner's prior permission, where there is evidence of tax liability and delay would prejudice revenue - order in ASMT-16. The taxpayer may apply in ASMT-17 within 30 days for withdrawal; withdrawal order in ASMT-18.

Audit: annual return, departmental audit and special audit

GSTR-9 (annual return): due 31 December following the financial year. Optional for taxpayers with aggregate turnover up to ₹2 crore. Composition dealers file GSTR-9A; e-commerce operators collecting TCS file GSTR-9B.
GSTR-9C (reconciliation statement): required where aggregate turnover exceeds ₹5 crore, reconciling the annual return with the audited financial statements. Since FY 2020-21 it is self-certified: the earlier mandatory audit and certification by a Chartered Accountant or Cost Accountant under s.35(5) was omitted by the Finance Act, 2021. Interviewers still ask this - "GST audit by a CA" as a statutory annual requirement no longer exists.
Departmental audit (s.65): the Commissioner or an authorised officer audits a registered person at their place of business or in the office. Notice in ADT-01 at least 15 working days in advance; audit to be completed within 3 months from commencement (date records are made available), extendable by the Commissioner by up to 6 months. Findings, rights and obligations communicated in ADT-02 within 30 days. Detection of unpaid tax leads to proceedings under s.73/74/74A.
Special audit (s.66): at any stage of scrutiny, inquiry or investigation, an officer not below Assistant Commissioner, with the Commissioner's prior approval, may direct a special audit where value has not been correctly declared or credit wrongly availed. Direction in ADT-03; audit by a CA or Cost Accountant nominated by the Commissioner (not chosen by the taxpayer); report in ADT-04 within 90 days, extendable by a further 90 days. The Commissioner bears the audit fee. Opportunity of being heard is mandatory before using the findings.
Other powers: inspection, search and seizure (s.67), inspection of goods in movement (s.68), power to summon (s.70), access to business premises for audit/verification (s.71), officers to assist (s.72).

Demands and recovery

s.73 - short payment/wrong credit not involving fraud, wilful misstatement or suppression; s.74 - where it does. These apply up to FY 2023-24.
s.74A (inserted by the Finance (No.2) Act, 2024, applicable from FY 2024-25): one common provision and one common limitation - notice within 42 months from the due date of the annual return (or from the date of erroneous refund), order within 12 months of the notice, extendable by 6 months. Penalty is 10% of tax or ₹10,000, whichever is higher for non-fraud cases and 100% of tax for fraud cases, with graded reductions for early payment.
Interest (s.50): 18% p.a. on delayed payment of tax; 18% on ITC wrongly availed and utilised (Rule 88B - interest only if utilised). No interest on tax paid through the cash ledger balance already deposited by the due date.
Appeals: Appellate Authority under s.107 - within 3 months of communication of order (condonable by 1 month), pre-deposit of full admitted liability plus 10% of disputed tax, capped at ₹20 crore of CGST (the cap was reduced from ₹25 crore by the Finance (No.2) Act, 2024; the 10% rate is unchanged). Appeal to the GST Appellate Tribunal (GSTAT) under s.112 within 3 months of the appellate order, with an additional 10% of disputed tax, capped at ₹20 crore. Then High Court (s.117, substantial question of law) and Supreme Court (s.118). Advance ruling sits separately under ss.95-106 (AAR → AAAR).

Refunds under section 54

Who can claim what:
1. Zero-rated supplies (exports and supplies to SEZ) - either (a) export with payment of IGST and claim refund of IGST under Rule 96 (the shipping bill is treated as the application), or (b) export under LUT/bond without payment and claim refund of unutilised ITC under Rule 89(4).
2. Inverted duty structure - input tax rate higher than output tax rate (Rule 89(5)); refund of ITC on inputs only, not input services or capital goods.
3. Deemed exports, refund to the supplier or the recipient.
4. Excess balance in the electronic cash ledger - no 2-year limit issue, straightforward.
5. Tax paid on a supply not provided or partly provided, refund of advance where no invoice is issued.
6. Refund arising from a judgment, appeal or revision.
7. Wrong-head payment - IGST paid instead of CGST+SGST or vice versa (s.77 of CGST Act / s.19 of IGST Act); relevant date is the date of correct payment, and no interest is charged.
8. UN bodies, embassies and notified agencies holding a UIN; Canteen Stores Department; refund to international tourists under s.15 of the IGST Act (framework only, not operational).
Process: application in RFD-01 on the portal within 2 years from the relevant date (Explanation 2 to s.54 defines a relevant date for each category - e.g. date the ship/aircraft leaves India for goods exported by sea/air, date of receipt of payment or invoice for services, due date of the return for unutilised ITC). Acknowledgement RFD-02, deficiency memo RFD-03 (a fresh application is then needed), provisional sanction RFD-04, payment order RFD-05, final order RFD-06, withholding/adjustment RFD-07, notice RFD-08, reply RFD-09.
Timelines: order within 60 days of receipt of a complete application. Provisional refund of 90% of the claim for zero-rated supplies within 7 days of acknowledgement, without scrutiny, if the claimant has not been prosecuted for an offence above ₹250 lakh in the preceding 5 years.
Interest on delayed refund (s.56): 6% p.a. after 60 days from receipt of application; 9% p.a. where refund arises from an order in appeal or further proceedings and is delayed beyond 60 days from the application following that order.
Restrictions: minimum refund ₹1,000 (not applicable to excess cash-ledger balance); no refund of unutilised ITC where goods exported are subject to export duty, or where the supplier claims duty drawback of central tax or refund of IGST paid on exports; no refund of ITC on nil-rated or exempt output (credit is simply not available). Unjust enrichment - the claimant must prove incidence was not passed on (a CA/CMA certificate is required if the claim exceeds ₹2 lakh; self-declaration below that); otherwise the amount goes to the Consumer Welfare Fund (s.57/58). Rule 96B: if export proceeds are not realised within the FEMA period, the refund must be repaid within 30 days of the expiry.
Refund may be withheld if the person has not filed returns or has an unpaid demand (s.54(10)-(11)).

E-invoicing (Rule 48(4)) and the digital chain

What it is: the supplier reports invoice data in schema INV-01 (JSON) to an Invoice Registration Portal (IRP), which validates it, assigns a unique IRN (a 64-character hash of GSTIN + document type + number + FY), digitally signs it and returns a signed QR code. The IRP does not create the invoice; the taxpayer's own system does.
Applicability: mandatory where aggregate turnover exceeds ₹5 crore in any financial year from 2017-18 onwards (threshold reduced in stages: ₹500 cr → ₹100 cr → ₹50 cr → ₹20 cr → ₹10 cr → ₹5 crore from 1 August 2023). Once covered, always covered.
Covered documents: tax invoices, credit notes and debit notes for B2B supplies, supplies to SEZ units/developers, exports and deemed exports, and invoices under RCM where the supplier is registered. Not B2C invoices (a dynamic QR code applies separately to B2C for taxpayers above ₹500 crore), not bills of supply, not delivery challans, not ISD invoices.
Exempt entities (notified, irrespective of turnover): SEZ units (SEZ developers are covered), insurers, banking companies and NBFCs, goods transport agencies, passenger transport services, and multiplex cinema admission services; also government departments and local authorities.
Consequence of non-compliance: Rule 48(5) - an invoice required to be issued with an IRN but issued without one is not a valid invoice, so the recipient cannot claim ITC, and penalty under s.122 follows.
Operational rules: cancellation on the IRP is allowed only within 24 hours of IRN generation (and only if no e-way bill is active); thereafter a credit note is the remedy. Reporting is subject to a 30-day limit from the invoice date for taxpayers with AATO of ₹10 crore and above (effective 1 April 2025; earlier ₹100 crore and above from 1 November 2023).
Why it matters downstream: e-invoice data auto-populates GSTR-1, flows into the recipient's GSTR-2B, and generates Part A of the e-way bill - so scrutiny under s.61 is now largely machine-driven. The Invoice Management System (IMS), live from October 2024, lets a recipient accept, reject or keep pending each inward invoice, which then shapes GSTR-2B and ITC.
Related current features: auto-populated GSTR-3B liability is hard-locked (non-editable, corrections to be made through GSTR-1A), and returns cannot be filed after 3 years from their due date (s.37/39/44/52 bar, operational from 1 July 2025).
Rate context: GST rates are 5%, 18% and 40% since 22 September 2025 (plus nil and the special rates for bullion and specified goods), and the compensation cess ended on 1 February 2026 - refund and demand computations for periods before and after must use the rate in force then.

Key points

Self-assessment (s.59) - the default; every other assessment is the department testing it.
ASMT-10/11/12 - scrutiny discrepancy notice, taxpayer reply, acceptance order; scrutiny is not a demand.
s.62 best-judgment - for non-filers; order deemed withdrawn if the return is filed within 60 days (further 60 with late fee).
s.60 provisional assessment - taxpayer-initiated, on bond with security up to 25%; finalise in 6 months.
s.64 summary assessment - needs Additional/Joint Commissioner's permission and evidence of liability with risk to revenue.
Statutory GST audit by a CA is gone - s.35(5) was omitted by the Finance Act, 2021; GSTR-9C is self-certified above ₹5 crore.
s.65 departmental audit - ADT-01 notice 15 working days ahead, 3 months (+6), findings in ADT-02 within 30 days.
s.66 special audit - Commissioner's approval, CA/CMA nominated by the Commissioner, 90+90 days, fee paid by the department.
s.73 / s.74 / s.74A - non-fraud / fraud / common provision from FY 2024-25 (42-month notice, 12-month order).
Appeal pre-deposit - 10% of disputed tax capped at ₹20 crore CGST before the Appellate Authority; a further 10% before the GSTAT.
s.54 refund - RFD-01 within 2 years of the relevant date; order in 60 days; 90% provisional for zero-rated in 7 days.
Inverted duty refund - ITC on inputs only; input services and capital goods are excluded.
No ITC refund where the exported goods bear export duty, or where drawback of central tax / IGST refund is claimed.
Interest - 18% on delayed tax (s.50), 6% on delayed refund, 9% where the refund follows an appellate order (s.56).
Unjust enrichment - CA/CMA certificate if the claim exceeds ₹2 lakh; otherwise to the Consumer Welfare Fund.
E-invoicing - Rule 48(4), AATO above ₹5 crore, IRN + signed QR from the IRP; no IRN means no valid invoice and no ITC.
E-invoice limits - cancel on IRP within 24 hours; report within 30 days of invoice date if AATO is ₹10 crore or more.
Three-year bar - GST returns cannot be filed beyond 3 years from the due date (from 1 July 2025).

Formulas and examples

Rule 89(4) - refund of unutilised ITC on zero-rated supplies made without payment of tax
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover
Net ITC = ITC availed on inputs and input services during the period (capital goods excluded). Adjusted Total Turnover = total turnover excluding exempt supplies (other than zero-rated) and the value of the zero-rated services computed per the rule. The value of zero-rated goods is capped at 1.5 times the like domestic value. All amounts in ₹.

Rule 89(5) - maximum refund in an inverted duty structure
Maximum Refund = {Turnover of inverted-rated supply of goods and services × Net ITC ÷ Adjusted Total Turnover} − {Tax payable on such inverted-rated supply × Net ITC ÷ ITC availed on inputs and input services}
Here Net ITC = ITC availed on inputs only. The second limb (added by Notification 14/2022-CT from 5 July 2022) strips out the credit attributable to input services.

Interest on delayed tax (s.50): Interest = Tax × 18% × (days of delay ÷ 365)
Interest on delayed refund (s.56): Interest = Refund × 6% × (days beyond 60 from the date of application ÷ 365); 9% where the refund arises from an appellate or other order.

Pre-deposit on first appeal (s.107(6)): Pre-deposit = full admitted tax, interest, fine, fee and penalty + 10% of the remaining disputed tax (capped at ₹20 crore CGST).

Example 1 - Inverted duty structure refund. A fabric processor's outputs are taxed at 5%; its chemicals and dyes bear 18%.

Turnover of inverted-rated supply of goods = ₹80,00,000; other taxable supplies = ₹20,00,000 → Adjusted Total Turnover = ₹1,00,00,000.
Net ITC (inputs only) = ₹12,00,000; total ITC availed on inputs and input services = ₹14,00,000.
Tax payable on inverted-rated supply = 5% × 80,00,000 = ₹4,00,000.
First limb = 80,00,000 × 12,00,000 ÷ 1,00,00,000 = ₹9,60,000.
Second limb = 4,00,000 × 12,00,000 ÷ 14,00,000 = ₹3,42,857.
Maximum refund = 9,60,000 − 3,42,857 = ₹6,17,143.

Example 2 - Zero-rated refund and provisional sanction. An exporter supplies under LUT without payment of IGST.

Zero-rated supply of goods (FOB) = ₹60,00,000; domestic taxable supplies = ₹40,00,000 → Adjusted Total Turnover = ₹1,00,00,000; Net ITC = ₹9,00,000.
Refund = 60,00,000 × 9,00,000 ÷ 1,00,00,000 = ₹5,40,000.
Provisional refund (90%) = ₹4,86,000 in RFD-04 within 7 days of the RFD-02 acknowledgement; the balance ₹54,000 on final order in RFD-06.

Example 3 - Interest on a delayed refund. The ₹5,40,000 claim above is acknowledged on 10 April 2026 and paid on 20 August 2026.

60 days from 10 April 2026 expire on 9 June 2026; delay = 21 days (June) + 31 (July) + 20 (August) = 72 days.
Interest = 5,40,000 × 6% × 72 ÷ 365 = 32,400 × 0.19726 = ₹6,391 (payable under s.56 without a separate claim).

Example 4 - Penalty exposure on the same demand, s.73 vs s.74. ITC of ₹5,00,000 was wrongly availed and utilised for FY 2022-23; tax is paid 400 days after the due date.

Interest = 5,00,000 × 18% × 400 ÷ 365 = 90,000 × 1.09589 = ₹98,630.

Stage of payment	s.73 (no fraud)	s.74 (fraud/suppression)
Before any notice (voluntary, DRC-03)	Nil penalty	15% = ₹75,000
Within 30 days of the show-cause notice	Nil penalty	25% = ₹1,25,000
Within 30 days of the order	10% of tax or ₹10,000, higher = ₹50,000	50% = ₹2,50,000
Beyond that	₹50,000	100% = ₹5,00,000

For FY 2024-25 onwards the same facts fall under s.74A, with penalty of 10% of tax or ₹10,000 (higher) for non-fraud and 100% for fraud; the non-fraud nil-penalty window on payment after notice is 60 days.

Example 5 - Pre-deposit for appeals. An order confirms tax ₹40,00,000, interest ₹7,00,000 and penalty ₹4,00,000. The taxpayer admits ₹10,00,000 of the tax and disputes ₹30,00,000.

Before the Appellate Authority: admitted ₹10,00,000 + 10% × 30,00,000 = ₹3,00,000 → ₹13,00,000.
Before the GSTAT: a further 10% × 30,00,000 = ₹3,00,000 (each 10% capped at ₹20 crore of CGST). Recovery of the balance stays stayed once the pre-deposit is made.

Assessment	Section	Form	Trigger	Time limit
Provisional	60	ASMT-01/04	Value or rate uncertain	Final in 6 months (+6, +4 years)
Scrutiny	61	ASMT-10/11/12	Discrepancy in returns	Reply in 30 days
Best judgment (non-filer)	62	ASMT-13	Return not filed after s.46 notice	5 years from annual return due date
Unregistered person	63	ASMT-14/15	Liable but unregistered	5 years from annual return due date
Summary	64	ASMT-16/17/18	Evidence of liability, risk to revenue	Withdrawal application in 30 days

Where it is used

Big Four and mid-tier indirect-tax practices (Deloitte, PwC, EY, KPMG, BDO, Lakshmikumaran & Sridharan): drafting ASMT-11 replies, DRC-06 submissions, refund applications and appeals with pre-deposit computations.
Exporters and SEZ suppliers - textiles in Tiruppur, pharma in Hyderabad, engineering goods in Pune, IT/ITeS services exporters: monthly LUT-based Rule 89(4) refund claims are a continuous working-capital function.
Inverted-duty industries - fertilisers, textiles and job work, railway parts, LPG, edible oils, EV components: Rule 89(5) claims are a recurring revenue item.
In-house tax and ERP teams at manufacturers and retailers: e-invoicing integration (SAP/Oracle/Tally to IRP via GSP or API), the 30-day reporting clock, IMS actions and GSTR-2B reconciliation.
Job roles: GST Executive/Assistant Manager - Indirect Tax, litigation and refunds specialist, GST audit support for departmental s.65 audits, GST reconciliation analyst, and GSP/ASP product roles (ClearTax, Zoho, Cygnet, Masters India).
Statutory and internal auditors use GSTR-9/9C reconciliations and ITC-vs-2B differences as standard audit procedures, and disclose GST demands as contingent liabilities.

Interview questions

Q: Is a GST audit by a Chartered Accountant still mandatory? A: No - section 35(5) was omitted by the Finance Act, 2021; from FY 2020-21 the taxpayer files a self-certified GSTR-9C where turnover exceeds ₹5 crore. Departmental audit (s.65) and special audit (s.66) continue.
Q: Difference between a departmental audit and a special audit? A: A s.65 audit is conducted by departmental officers after ADT-01 notice; a s.66 special audit is done by a CA/CMA nominated by the Commissioner, with the Commissioner's prior approval and the fee borne by the department.
Q: A client ignored notices and got a best-judgment order under s.62. Any remedy short of appeal? A: Yes - filing the valid return within 60 days of the order (or a further 60 days with late fee and interest) makes the order deemed withdrawn, though interest and late fee remain payable.
Q: Why is input service credit excluded from an inverted-duty refund? A: Section 54(3) read with Rule 89(5) restricts the refund to credit on inputs; the Supreme Court upheld this in *Union of India v. VKC Footsteps India (P) Ltd.* (2021), and the formula's second limb removes the input-service share.
Q: What are the two routes for exporting, and which is better? A: Export with payment of IGST and claim an IGST refund (shipping bill as the application, faster and automatic), or export under LUT/bond without payment and claim unutilised ITC under Rule 89(4) - better where you have no IGST liability to fund but a large credit pool.
Q: Can a refund claim be rejected for being late if filed on day 731? A: Yes - the two-year limit from the relevant date under s.54(1) is statutory; a deficiency memo in RFD-03 requires a fresh application, so a deficiency near the limit can be fatal.
Q: What is the relevant date for a refund of excess cash-ledger balance? A: It is the date of payment of tax, but the limitation is practically not restrictive - such refunds are claimed under s.49(6)/54(1) and are not subject to the unjust-enrichment test.
Q: Interest rates to remember on refunds? A: 6% p.a. for delay beyond 60 days from the refund application (s.56), and 9% p.a. where the refund arises from an appellate or court order and is delayed beyond 60 days.
Q: Who is exempt from e-invoicing even above the turnover threshold? A: SEZ units, insurers, banks and NBFCs, goods transport agencies, passenger transport operators and multiplex cinema admission services; SEZ developers are not exempt.
Q: A supplier above ₹5 crore issues a B2B invoice without an IRN - what happens to the buyer's ITC? A: Rule 48(5) makes the document not a valid invoice, so ITC is not available to the recipient and the supplier faces penalty under s.122; the fix is to cancel/re-issue with an IRN within the permitted window.
Q: Can an e-invoice be amended? A: Not on the IRP - it can only be cancelled within 24 hours (if no active e-way bill); otherwise corrections are made through a credit/debit note with its own IRN, and in GSTR-1/1A.
Q: What is the pre-deposit for a first appeal now? A: Full admitted liability plus 10% of the disputed tax, capped at ₹20 crore of CGST - the cap was cut from ₹25 crore by the Finance (No.2) Act, 2024 (it is the GSTAT pre-deposit that fell from 20%/₹50 crore to 10%/₹20 crore).
Q: Why was s.74A introduced? A: To give one common limitation and procedure for demands from FY 2024-25 onwards - 42 months from the annual-return due date for the notice and 12 months for the order - removing the different timelines of ss.73 and 74.

Common mistakes

Treating an ASMT-10 scrutiny notice as a demand and paying with penalty, instead of replying in ASMT-11 and seeking closure in ASMT-12.
Saying "GST audit must be done by a CA above ₹2 crore" - the statutory audit was removed; the GSTR-9 threshold (₹2 crore, optional below) is confused with the GSTR-9C threshold (₹5 crore).
Including input services or capital goods in Net ITC for a Rule 89(5) inverted-duty claim, or forgetting the second limb of the formula.
Using total turnover instead of adjusted total turnover in Rule 89(4), or ignoring the 1.5× like-domestic-value cap on exported goods.
Computing interest on delayed refund from the date of the refund order rather than from the 61st day after the application.
Claiming both duty drawback of central tax and an ITC/IGST refund on the same export - expressly barred, and a common notice trigger.
Missing that the s.62 order is withdrawable by filing the return and going straight to an appeal with a 10% pre-deposit.
Assuming the special auditor can be the company's own statutory auditor or that the company pays the fee - the Commissioner nominates and pays.
Overlooking the 30-day e-invoice reporting limit (AATO ₹10 crore and above) and the 3-year bar on filing returns, both of which are hard portal validations.