Tuesday, 10:45 am. Rajesh is checking the morning's GST 2B reconciliation when three people in plain clothes walk in. The senior officer flashes an ID. "Mr. Rajesh? We're from the GST department. We need to inspect your books and stock." He hands over a printed form. Rajesh sees "ADT-01" at the top and his GSTIN.
Rajesh's mind racing through three questions simultaneously:
- What kind of visit is this?
- Can I refuse / delay?
- What do I do in the next 60 minutes?
- GST gives the department three distinct powers to visit your premises: Sec 65 audit (routine / risk-based, advance notice), Sec 66 special audit (department asks a CA to audit you), and Sec 67 inspection / search / seizure (surprise, only with "reasons to believe").
- Each starts with a different form. ADT-01 = Sec 65 notice. ADT-04 = Sec 66 special audit direction. INS-01 = Sec 67 search authorisation (must be signed by an officer not below Joint Commissioner).
- Audit is calendared and polite. Search is surprise and can seize goods, books, electronic records. You can't refuse access for either — but you can verify the officer's identity and authority before letting them past the front desk.
- Arrest under Sec 69 is rare and reserved for evasion above ₹5cr that's "fraud" in nature (Sec 132(1)(a)–(d) offences). Below that — civil penalties.
- The single most useful move: call your CA / advocate before signing anything. You have the right to representation. You don't have a right to refuse access.
The three powers — side by side
Sec 65 — Audit
ADT-01
Routine or risk-based audit. 15 days advance notice (ADT-01). Conducted at your premises or at the officer's office. Scope: any FY or part. Timeline: 3 months (+3 extension). Goods cannot be seized. Findings issued in ADT-02. This is most common.
Sec 66 — Special audit
ADT-04
Department directs you (after officer's opinion on complexity) to get accounts audited by a nominated CA / Cost Accountant. Cost borne by department. 90 days (+90 extension). Triggered when the regular audit officer feels they need a specialist's view.
Sec 67 — Search
INS-01
"Reasons to believe" evasion. Authorisation signed by Joint Commissioner or above. No advance notice. Can search business or residence. Can seize books, documents, goods, electronic devices. Goods released on bond / bank guarantee under Sec 67(6). This is the serious one.
How to tell which one you're in — the first 5 minutes
Every officer visit starts with a paper form. ADT-01 (audit), ADT-04 (special audit direction), or INS-01 (search authorisation). The form name is the headline. If they refuse to show it — that's already wrong.
Note: officer name, designation, GST area code, contact number. For a search (INS-01), check the authorising officer's signature is at Joint Commissioner level or above (or specifically authorised). Anyone junior signing INS-01 is invalid authority.
The authorisation document names specific premises and a specific scope. They can't extend beyond what's authorised. If INS-01 says "office at Lamington Road", they can't insist on entering your residence the same day.
You are not in detention. You can call. You have a right to have your representative present. Most officers will give you 30-60 minutes. If they refuse — note it down, comply, and raise it on review.
For Sec 67 search, the officers must conduct it in the presence of two independent witnesses ("panchas"). The panchnama (the search record) needs their signatures. If your area has a market association office nearby, that's where to call.
Don't run, don't shred / delete anything visible (that's a separate offence and the officers will see it), don't sign blank pages or pre-prepared statements without reading them, don't volunteer information beyond what's asked. Stay calm, be polite, document everything.
Sec 65 audit — what to expect over the next 3 months
If the form was ADT-01 (Sec 65), you're in the friendliest of the three flavours.
- 15-day prep window. The notice gives you the scope (FY 23-24, 22-23, etc.) and a list of records to keep ready: GSTR-1, 3B, 9, 9C, books of accounts, invoices, e-way bills, ITC ledger.
- Audit itself. Officer visits your premises or you visit theirs. Typical duration: 2-5 days spread over a week. They check sales register, purchase register, ITC matching with GSTR-2B, e-way bills, RCM compliance, blocked credit (Sec 17(5)) reversal.
- Discussion of preliminary findings. You get a chance to respond before the formal audit report. Use this — it's your last cheap chance to fix things.
- Final audit report — Form ADT-02. Lists findings. If tax / interest / penalty is proposed, a notice under Sec 73 (no fraud — penalty up to 10%) or Sec 74 (fraud alleged — up to 100%) follows.
- You then have 30 days to either accept and pay, or contest via reply, appeal, and through the appellate hierarchy (CIT(A) → ITAT → HC → SC).
Sec 67 search — the serious flavour
If the form is INS-01, the visit is qualitatively different.
- Search authorised in writing by an officer not below Joint Commissioner. The written authorisation specifies premises and scope.
- Conducted between sunrise and sunset (by default; exceptions for goods in movement).
- Two independent witnesses present throughout.
- Books / documents / electronic devices can be seized — but seized items must be inventoried in a panchnama signed by witnesses and the officer. You get a copy.
- Goods can be seized if officer has reason to believe they are liable for confiscation under Sec 130. Goods released on:
- Bond + bank guarantee for the value, OR
- Payment of applicable tax + penalty
- Statements recorded under Sec 70 — anyone present can be summoned to give a statement on oath. These are admissible as evidence. Be careful what you say.
- Computer / electronic records can be cloned. Originals returned (in theory) within a reasonable time.
What the officers cannot do (even with INS-01)
- Search a residence not named in the authorisation. Each premises needs its own authority.
- Seize personal items not relevant to GST evasion — jewellery, household cash, etc. (Income tax has different rules; GST is narrower.)
- Detain you. Sec 67 is about premises, not people. Arrest is under Sec 69 — separate, narrower power, only for offences under Sec 132(1)(a) to (d) where tax evasion exceeds ₹5 crore.
- Refuse you a copy of the panchnama or the inventory.
- Continue after sunset without recording specific reasons in writing for night search.
The penalty/prosecution arc — what's at stake
Sec 73 — no fraud
Mild outcome
Tax not paid / short paid / ITC wrongly availed — without fraud / willful misstatement. Penalty: 10% of tax (min ₹10K). Pay before adjudication notice → no penalty. Pay within 30 days of notice → 15% penalty cap.
Sec 74 — fraud alleged
Harsh outcome
Fraud / willful misstatement / suppression of facts. Penalty: 100% of tax. Pay before adjudication → 25% (Pay within 30 days of notice → 50%). Plus interest at 18% from due date. Time limit for notice extends from 3 years to 5 years.
Sec 132 — criminal
Arrest possible
Evasion > ₹5cr (non-bailable, up to 5 years). ₹2–5cr bailable, up to 3 years. ₹1–2cr bailable, up to 1 year. Issuing fake invoices, availing fake ITC, suppression of supply value, fraudulent refund claims. Sec 69 arrest power kicks in for >₹5cr fraud.
The 60-minute checklist (any flavour)
- 00:00–05:00 — verify officers' IDs, photograph the authorisation form (or note its number), call your CA / advocate immediately.
- 05:00–15:00 — designate one staff member to liaise (you yourself stay available but don't volunteer). Offer water / chairs (you're being polite, not weak). Get someone to call two independent witnesses if it's Sec 67.
- 15:00–60:00 — produce what's asked for, only what's asked for. Don't open systems / drawers / cupboards not requested. If they ask for "purchase records 2023-24", show them the file marked "Purchase records 2023-24", not your full filing cabinet.
- Statement recording — your CA / advocate should be present. Read every word before signing. You can correct any error before signing. After signing, corrections become an uphill battle.
- End of visit — get a signed inventory of every document / item taken. Get a receipt for each cloned electronic device. Get the panchnama copy. Note officer's parting comments.
- Within 24 hours — type up a contemporaneous note of the visit, what was asked, what was given, what was said. This becomes your primary reference document later.
The funny historical wrinkle
Pre-GST, indirect tax searches were Central Excise / Service Tax department visits — typically focused on factories. Post-GST (since 2017), the same officers visit shops, restaurants, gym chains, dental clinics, software offices — any business with GSTIN. The cultural shift took years. The 2023–2024 "Special Drive" of DGGI verifying 30,000+ GST registrations physically was the biggest such exercise in Indian indirect-tax history. Many small businesses had their GSTINs cancelled overnight because the registered address didn't physically exist or wasn't accessible.
The practical takeaway: keep the registered address real, accessible, and matching what's on the portal. If you've moved, file an amendment. If you operate from a different godown, register that too as additional place of business. Many of the search visits in 2024 happened because the visiting officer couldn't even find the registered address.
Quick answers
No — for both Sec 65 (with notice) and Sec 67 (with authorisation), you cannot refuse access. Refusing to allow inspection is itself an offence under Sec 122. But you absolutely can verify their identity and authority before opening the door / record cabinet, and call your representative.
For Sec 65 audit, yes — you'll have 15 days from ADT-01 notice. Schedule your CA to attend within that window. For Sec 67 search, no — but you can wait for CA / advocate to join during the visit (30-60 mins is reasonable). Cooperate while waiting.
Officers should clone (image) the electronic record, return the original within reasonable time, and access only GST-relevant data. If they take the physical device, get a detailed receipt and note all unique IDs. Personal data abuse can be challenged later. Practically — back up critical data before audit windows.
An Inspector / Superintendent can conduct the search, but the authorisation must be signed by an officer not below Joint Commissioner (Sec 67(2)). If the authorisation isn't at Joint Commissioner level, the search is jurisdictionally weak and challengeable.
Inspection (Sec 67(1)) — officer can enter premises and inspect goods / documents. No seizure. Search (Sec 67(2)) — officer can search and seize. Both require Joint Commissioner level "reasons to believe", but search is the more invasive of the two.
When you might want help
Two situations: (1) You've received an ADT-01 notice — full audit preparation, document organisation, response strategy, accompaniment during the audit. (2) You've had a Sec 67 search — drafting reply to subsequent SCN, panchnama analysis, bond / bank guarantee for seized goods, appeal preparation.
Audit notice or search visit?
We accompany you through audit / inspection / search proceedings. Document organisation, statement support, panchnama review, post-visit SCN response, appeal-grade record keeping.
"Rajesh" and the scenario are composite illustrations. Your rights and the procedure as described follow Sec 65 / 66 / 67 / 69 / 70 of the CGST Act and Rules 101–103.