Section 66 – Special Audit
Section 66 of CGST Act, 2017 – Special Audit
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Objective and Scope of Section 66
Section 66 empowers the tax authorities to order a special audit by an independent professional in cases involving:
- Complexity of transactions
- Doubtful valuation
- Questionable ITC availment
- Revenue risk
This provision is invoked when regular audit or scrutiny is insufficient.
2. Statutory Provision – Section 66
Section 66(1):
If at any stage of scrutiny, inquiry, investigation or any other proceedings,
the Assistant Commissioner or any officer of higher rank
is of the opinion that:
- Value of supply has not been correctly declared, or
- ITC availed is not within normal limits
he may, with the prior approval of the Commissioner, direct the registered person to get his records examined and audited by a Chartered Accountant or Cost Accountant as may be nominated by the Commissioner.
Section 66(2):
The special audit shall be completed
within a period of 90 days
from the date of communication of the direction,
which may be extended by a further period of 90 days.
Section 66(3):
The registered person shall be given
an opportunity of being heard
in respect of any material gathered during the special audit
which is proposed to be used against him.
Section 66(4):
The expenses of the special audit,
including remuneration of the auditor,
shall be determined and paid by the Government.
3. When Can Special Audit Be Ordered?
Special audit can be ordered:
- During scrutiny under Section 61
- During audit under Section 65
- During investigation or inquiry
It is not limited to audit proceedings only.
4. Authority Empowered to Order Special Audit
Special audit can be ordered by:
- Assistant Commissioner or above
- Only with prior approval of the Commissioner
This approval acts as a safeguard against arbitrary use.
5. Auditor for Special Audit
The auditor:
- Is nominated by the Commissioner
- Must be a Chartered Accountant or Cost Accountant
- Is independent of the taxpayer
The taxpayer cannot choose the auditor.
6. Time Limit for Completion of Special Audit
Special audit must be completed:
- Within 90 days from direction date
- Extendable by another 90 days on request
Failure to complete within time may weaken subsequent proceedings.
7. Rights of Taxpayer during Special Audit
The registered person has the right to:
- Be heard before adverse material is used
- Receive a copy of the audit report
- Explain discrepancies identified
Principles of natural justice apply fully.
8. Consequences of Special Audit
Based on special audit findings:
- No action, if no discrepancy is found
- Voluntary payment may be made
- Demand proceedings under Section 73 or 74 may be initiated
Special audit itself does not create tax liability.
9. Special Audit vs Departmental Audit
- Section 65: Audit by tax authorities
- Section 66: Audit by independent professional
Section 66 is invoked only in exceptional situations.
10. Practical Scenarios of Section 66 Invocation
- Complex valuation under related party transactions
- Huge ITC claims compared to turnover
- Multi-location or cross-charge structures
- Long-pending disputes involving technical accounting issues
11. Related Provisions
- Section 61 – Scrutiny of returns
- Section 65 – Audit by tax authorities
- Section 73 – Demand (non-fraud)
- Section 74 – Demand (fraud cases)
12. Professional Insight
Special audit under Section 66 is a red-flag stage. While the audit cost is borne by the Government, the findings can shape high-value demands. Strong documentation and expert handling are essential at this stage.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Special audit is discretionary and invoked only in complex cases.
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