A GST demand notice is a formal show-cause communication. It asks your company to explain why the tax, interest and any applicable penalty identified by the tax officer should not be paid. It is an allegation, not proof that the amount is finally payable. Start by checking the statutory section and financial year, then test the allegation, calculation, documents and response date. Also distinguish the detailed notice from its electronic summary and from a later adjudication order.
What a GST demand notice is—and what it is not
Under the Central Goods and Services Tax Act, 2017, a demand proceeding generally begins with a notice requiring the registered person to show cause why specified tax, interest and penalty should not be paid. Sections 73 and 74 cover periods through financial year (FY) 2023–24. Section 73 concerns tax that is unpaid, short-paid, erroneously refunded or input tax credit (ITC) that was wrongly availed or utilised for reasons other than fraud, wilful misstatement or suppression of facts to evade tax. Section 74 addresses cases in which the officer alleges fraud, wilful misstatement or suppression with that intent.
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For FY 2024–25 onward, section 74A is the relevant demand provision created by the 2024 legislative change. Do not assume that a notice received today uses the same section for every tax period. The period printed on the notice controls which statutory framework you must examine.
A notice does not by itself establish liability. Your company has an opportunity to inspect the allegation, challenge the legal basis or arithmetic, provide records and explain why the proposed amount is not payable or is lower than stated. A final order is a later procedural stage.
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First identify the document and the procedural stage
GST communications can look similar in the portal while having very different consequences. Preserve the complete PDF or electronic record, every annexure and the portal acknowledgement before analysing the figures.
| Document or form | What it represents | How to use it |
|---|---|---|
| Detailed show-cause notice | The officer’s allegations, legal provision, tax period and proposed tax, interest and penalty. | Read this and all annexures; it is not replaced by the portal summary. |
| DRC-01 | Electronic summary accompanying a notice under the applicable demand provisions. | Use it to identify the proceeding and amount, then reconcile it to the detailed notice. |
| DRC-02 | Electronic summary of a qualifying statement under the relevant section 73 or 74 provisions. | Check the underlying statement and the period and allegations it summarises. |
| DRC-01A | Pre-notice communication of ascertained tax, interest and penalty under sections 73 or 74. | Part B allows a submission against the proposed liability before a formal notice is served. |
| DRC-03 | Report of payment in the circumstances described by the rules. | Keep the challan and payment reference with the submission. |
| DRC-04 | Acknowledgement in the described pre-notice or payment circumstances. | Retain it as evidence of the department’s acknowledgement. |
| DRC-06 | Prescribed reply or representation to a notice whose summary is uploaded in DRC-01. | File a point-by-point reply with an index and supporting records. |
| DRC-07 | Electronic summary of an adjudication order stating tax, interest and penalty as applicable. | It is a summary of an order, not the initial show-cause notice. |
| DRC-08 | Summary of a qualifying rectification or withdrawal of an uploaded order. | Check which part of the earlier order has been changed or withdrawn. |
| ASMT-10 | Scrutiny discrepancy communication. | Respond through ASMT-11; do not treat every scrutiny discrepancy as a final demand order. |
Rule 142 requires the electronic summary to accompany the relevant notice or statement. A portal summary can omit the narrative, calculations or annexures needed to understand the case, so downloading only DRC-01 is unsafe.
Check the financial year and statutory section
| Tax period | Provision to verify on the notice | Core allegation framework |
|---|---|---|
| Through FY 2023–24 | Section 73 | Unpaid or short-paid tax, erroneous refund or wrongly availed or utilised ITC, without an allegation of fraud, wilful misstatement or suppression to evade tax. |
| Through FY 2023–24 | Section 74 | The same broad categories, but with an allegation of fraud, wilful misstatement or suppression of facts to evade tax. |
| FY 2024–25 onward | Section 74A | The newer statutory demand framework; read the text of the provision and the notice rather than importing a section 73 or 74 consequence. |
The amendment inserting section 74A and setting the FY boundary is dated 20 December 2024 in the India Code material. The tax period, not the date on which the officer uploads the communication, determines which provision is relevant.
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1. Authenticate and preserve the record
Record the company’s legal name and GSTIN, issuing officer or authority, reference and notice number, date of issue, date and mode of service or communication, and the portal proceeding identifier. Save the original file, annexures, downloadable data and any system acknowledgement. If the company has several GST registrations, confirm that the notice belongs to the correct registration and state or jurisdiction.
2. Classify the stage
Mark whether the communication is a pre-notice proposal, a show-cause notice, a statement, an adjudication order or a recovery-related communication. A DRC-01 summary points to a notice; DRC-07 points to an order. Do not use an appeal deadline for an initial notice or assume that a notice has already become a recoverable demand.
3. Read the legal basis and period
Write down every section cited, each FY or month covered and the tax head involved. Check that sections 73 or 74 are being used only for periods through FY 2023–24 and that a FY 2024–25 or later period is analysed under section 74A. If multiple years or provisions appear, separate them in your working paper instead of treating the document as one undifferentiated claim.
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4. Convert the allegation into a testable statement
Rewrite each allegation in plain language. Examples include: a particular return understated taxable turnover; a classification or rate was wrong; an invoice was treated as eligible for ITC when the officer says it was not; an amount was refunded incorrectly; or tax was not paid for identified transactions. Note the return, invoice range, ledger, e-way bill, supplier, customer, product code or other population the officer used. An allegation that cannot be matched to a period and source record needs clarification in the reply.
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Separate the proposed principal tax, interest and penalty. Reperform the arithmetic from the officer’s annexure and identify the rate, base, dates and adjustments used. Compare every line with filed returns, sales and purchase registers, general ledger, invoice files, credit-note records, ITC reconciliations, payment challans and earlier correspondence. The portal summary may show only a total; the detailed notice and annexures should support the underlying computation.
6. Calendar the actual response date
Use the date stated in the notice and verify when it was served or communicated in the portal. There is no single reply deadline that applies to every GST demand communication. The applicable period depends on the provision and proceeding. If the date is close, disputed or already missed, obtain qualified tax advice immediately and document the reason for any request or response concerning delay.
7. Prepare a reasoned reply
For a notice whose summary is uploaded in DRC-01, Rule 142 provides DRC-06 for the reply. Address each numbered allegation separately. State whether the company accepts, partly accepts or disputes it; show the company’s calculation; explain any difference; and identify the evidence supporting the position. Use an indexed annexure with consistent file names and page numbers. If a document is unavailable, say what was searched for, why it is unavailable and what substitute evidence is enclosed, rather than leaving the issue unanswered.
8. Submit and retain proof
File through the designated GST portal process, download the acknowledgement and preserve the submitted reply exactly as filed. Keep a calendar entry for any subsequent hearing, clarification request or order. A successful upload without a retained acknowledgement is difficult to prove later.
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How to analyse the allegation itself
Unpaid or short-paid tax
Reconcile the officer’s turnover population to the company’s outward-supply returns, books and invoices. Check whether the alleged difference is a timing issue, a credit note, an exempt or zero-rated transaction, a duplicate, a supply attributed to another registration or an amount already paid through a return or challan. Show the reconciliation by period and invoice or document range so the officer can trace each adjustment.
Erroneous refund
Identify the refund application, supporting statement and amount released. Compare the officer’s proposed reversal with the invoices, export or supply evidence, tax payment trail and any earlier deficiency memo or sanction order. Separate the amount said to be refundable from interest and any penalty proposed.
Wrongly availed or utilised ITC
Trace each disputed credit to the purchase register, tax invoice, supplier details, receipt of goods or services, accounting entry and return in which it was claimed. Reconcile the population to the company’s electronic credit ledger and any reversal already made. If the notice groups invoices, request or provide a line-level schedule rather than responding only with a percentage or aggregate.
Fraud, wilful misstatement or suppression allegation
Section 74 involves a more serious allegation than an ordinary error. Identify the specific conduct the notice says was intentional and the facts offered to support that conclusion. A bare label is not the same as an explained factual case; respond to the alleged acts, dates, documents and responsible transactions directly. Do not casually concede the classification in a covering letter if the underlying facts do not support it.
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Keep tax, interest and penalty separate
| Component | Questions to ask | Evidence to attach |
|---|---|---|
| Tax | What transaction, return or ITC line creates the principal amount? Has any part already been paid or reversed? | Returns, invoices, ledgers, reconciliations, challans and payment references. |
| Interest | What base, start date, end date and payment history did the calculation use? | Return filing dates, liability ledger, payment dates and an independent recalculation. |
| Penalty | Which statutory provision authorises it, and does the notice explain the facts and stage that trigger it? | The notice’s factual allegations, prior correspondence and records rebutting intent or other asserted grounds. |
Never answer a combined figure with a combined denial. A company may dispute the tax but accept a mathematical correction, or dispute the tax while pointing out that interest has been calculated for the wrong period. State the position on each component and each tax period.
Section 73: the specific 30-day payment route
For a section 73 show-cause notice, the Act describes a route in which payment of tax with interest within 30 days of issue of the notice results in no penalty and conclusion of proceedings in respect of that notice, subject to the statutory wording and facts. This is not a universal settlement rule and should not be carried over automatically to section 74, section 74A, another proceeding or a later order.
The rules refer to DRC-03 for reporting the payment and DRC-05 for the described order or conclusion step. Before using this route, reconcile the amount to the notice, confirm that the period and provision are section 73, obtain appropriate advice on the company’s facts and preserve the payment and closure records. If only part of the amount is paid or the notice covers multiple issues, explain precisely what the payment addresses.
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When a notice becomes an order
If the officer later issues an adjudication order, read the order itself and its DRC-07 summary. Rule 142(6) states: "The order referred to in sub-rule (5) shall be treated as the notice for recovery." In practical terms, the order summary is a recovery landmark, unlike the initial show-cause notice.
Compare the final order with the notice and your reply. Check whether the officer dealt with each defence, changed the tax or interest arithmetic, added or removed a penalty, or relied on a new ground. Record the communication date because it controls the appeal timetable described in the GST Portal guidance.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Appeal: deadline, pre-deposit and company signing
The GST Portal FAQ for filing an appeal against a demand order states that an aggrieved taxpayer or unregistered person may appeal within three months from communication of the decision or order. It describes a 10% pre-deposit of disputed tax and says a digital signature certificate is mandatory for companies and limited liability partnerships. The FAQ lists demand proceedings under sections 73, 74, 74A and 76 among appealable order categories.
Those figures concern an appeal from an order, not a universal deadline for replying to every notice. Verify the order date, the governing statute, the current portal conditions and whether the appeal has been admitted. Filing an appeal alone should not be described as automatically resolving recovery; the portal guidance discusses the balance being flagged non-recoverable if an appeal is admitted, so the order, admission status and current law must be checked.
A working-paper checklist for the finance team
- Notice number, GSTIN, legal entity and issuing authority verified.
- Issue date, service or communication date and response date entered in a shared calendar.
- Financial year and statutory section matched, including the FY 2023–24 and FY 2024–25 boundary.
- Every allegation mapped to a return, invoice, ledger, supplier, customer or refund record.
- Tax, interest and penalty recalculated independently.
- Prior DRC-01A, ASMT-10, replies, hearings, payments and orders collected.
- Annexures indexed and cross-referenced to numbered paragraphs in the DRC-06 reply.
- Portal submission acknowledgement, filed PDF and payment references archived.
- Escalation made to a qualified GST professional where fraud is alleged, the deadline is disputed, records are missing or an order has been served.
Common mistakes and how to correct them
Treating DRC-01 as the complete notice
DRC-01 is an electronic summary. Download the detailed notice and annexures, then reconcile the summary total to the underlying schedules.
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Using one deadline for every case
Demand notices, scrutiny communications and appeals have different procedural settings. Use the date and provision in the actual document; the three-month period belongs to the appeal guidance for an order.
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Assuming a notice proves the debt
A notice presents allegations requiring a response. Liability and recovery consequences follow later procedural steps, including an order.
Ignoring the period when selecting the section
Sections 73 and 74 apply through FY 2023–24, while section 74A applies from FY 2024–25. Separate mixed-period claims and apply the provision printed for each period.
Replying with a narrative but no reconciliation
Give the officer a traceable schedule from allegation to invoice or ledger to return and payment. Unsupported statements such as the amount is already paid are less useful than a line-level proof.
Confusing scrutiny with demand adjudication
ASMT-10 is a scrutiny discrepancy communication and ASMT-11 is the corresponding explanation. Neither should automatically be treated as a DRC-07 order.
Central and state GST considerations
The principal materials described above are the Central Goods and Services Tax Act, CGST Rules and GST Portal guidance. A company should also check the applicable State GST enactment, the issuing jurisdiction and the exact tax head in its notice. The response strategy may need separate treatment where the communication concerns state tax, integrated tax or multiple registrations.
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