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A GST demand notice in India is a formal allegation that a business has an unpaid tax shortfall, received an erroneous refund, or wrongly availed or utilised input tax credit. The notice may also propose interest and a penalty. It is not, by itself, proof that the amount is payable. Your immediate priorities are to identify the exact statutory section and tax period, verify the notice and its calculations against your records, file a point-by-point response through the prescribed process, request a hearing when appropriate, and obtain advice quickly if an order or appeal deadline is involved.
This guide covers proceedings under the central GST framework. State GST (SGST), integrated GST (IGST), the issuing authority, amendments in force and the facts in your notice can change the analysis. Treat the notice-specific instructions and the law applicable to the relevant tax period as controlling. The official Central Goods and Services Tax Act, 2017 and CGST Rules, 2017 (Chapter XVIII, amended compilation dated 1 January 2022) are the starting points, but later amendments and commencement dates must be checked.
What a GST demand notice means
A demand proceeding asks why a specified amount should not be recovered or determined as tax, together with applicable interest and any penalty. The alleged issue can be an underpayment in a return, an erroneous refund, or input tax credit (ITC) that the department says was wrongly taken or used. The notice should identify the legal provision, period, facts, calculation and response route. Read the full notice and its attachments, not only the electronic summary shown on the GST portal.
Under the CGST Act, section 73 addresses tax, erroneous-refund or ITC allegations for reasons other than fraud, wilful misstatement or suppression of facts to evade tax. Section 74 concerns the same broad liabilities where the notice alleges those circumstances. The Act text also contains section 74A; therefore, a current-period matter cannot automatically be classified as either a section 73 or section 74 case. Which provision applies depends on the tax period, the commencement of amendments and what the notice actually alleges. An allegation in a notice is not the same as a finding that fraud or suppression has been proved. Review the wording and legal basis before admitting anything.
A notice can involve CGST, SGST, IGST or a combination. The authority, tax period, registration details and transaction facts determine which legislation and forms apply. If the communication is only a message or summary, obtain the underlying notice and documents through the official portal or other channel identified by the authority.
First response: secure the notice and identify the route
- Save every version. Download the complete notice, annexures, calculation sheets, portal copy, email or SMS alerts, service details and any earlier correspondence. Keep the original file names and a dated copy in a secure location.
- Confirm identity and scope. Check the GSTIN, legal name, issuing officer, notice number, statutory section, financial year or tax period, tax heads, and the transactions or returns mentioned.
- Separate the notice from its summary. Rule 142 uses electronic summaries for specified notices and orders. A DRC-01 summary does not replace the underlying notice or evidence relied upon. Match each summary figure to the detailed document.
- Record the response instructions. Note the exact date and time, filing channel, signature or digital-authentication requirement, hearing instructions and any address for physical submissions. Do not assume that a deadline used for another type of notice applies here.
The official CGST Rules describe the forms and electronic summaries in rule 142. Because the publicly available compilation linked above is dated 1 January 2022, verify the current rule text and portal workflow before filing.
How to check whether the figures and allegations are correct
Do not treat a portal mismatch as conclusive without testing the underlying transaction and the law applicable to it. Build a working schedule that allows another person to trace every amount in the notice.
Reconcile returns and books
- Compare the notice with the relevant GSTR filings, amendments, payment challans and electronic liability or credit ledgers.
- Map each disputed output-tax figure to invoices, credit notes, debit notes, place-of-supply records and the tax actually reported.
- For ITC allegations, trace the credit to purchase invoices, receipt of goods or services, accounting entries, payment records and the return in which it was claimed. Check the statutory conditions and any time limits applicable to the period.
- For an alleged erroneous refund, identify the refund application, supporting statement, sanction order, bank receipt and the transaction or export documents used.
- Recalculate tax, interest and penalty independently. Flag rounding, duplicate entries, wrong tax heads, cancelled invoices and periods outside the notice.
Classify what is agreed and disputed
Mark each allegation as accepted, partly accepted, factually incorrect, legally disputed or impossible to verify because a document is missing. List the evidence that proves each position and the document you still need. This prevents a general denial from obscuring a valid correction and prevents an unnecessary admission of a contested point.
Check service and chronology
Make a timeline showing the return date, refund or credit event, departmental communication, service of the notice and every payment or reply. Limitation and available payment options can depend on the tax period and the date of the relevant act. If service is unclear or the notice appears to concern a different period or GSTIN, raise that specifically and obtain professional advice.
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Choosing and understanding the legal provision
| Issue | Section 73 route | Section 74 route | What the business should do |
|---|---|---|---|
| Stated basis | Alleged short-paid or unpaid tax, erroneous refund, or wrongly availed or utilised ITC for reasons other than fraud, wilful misstatement or suppression to evade tax. | Alleged liability said to result from fraud, wilful misstatement or suppression of facts to evade tax. | Quote the notice’s allegation accurately; do not write as if the allegation has already been established. |
| Financial consequences | Payment and penalty provisions depend on the stage, tax period and version of the Act. | Different statutory payment and penalty provisions apply, with consequences that can change by timing and amendment. | Use the period-specific Act and notice. Do not apply a single percentage or “settlement” formula to every case. |
| Current-period caution | May govern periods covered by the provision and applicable amendments. | The Act text also contains section 74A, so the older 73/74 split is not a complete description of all current-period treatment. | Confirm commencement, amendments and the relevant financial year before taking a position. |
This is orientation, not a decision about your case. A notice can contain an incorrect section, an unsupported allegation or a calculation error; those issues should be addressed in the reply rather than silently accepted.
How to reply to a GST notice
1. Calendar the actual deadline
Use the date and time written in the notice and check the governing provision and current rules. There is no reliable universal deadline for every GST demand because notice type, tax period, service details and amendments differ. If the deadline is close, ask a qualified GST practitioner, chartered accountant or tax lawyer to review the matter immediately. Keep proof of when and how the notice was served.
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2. Prepare a notice-to-evidence index
Create a table with one row for every paragraph, annexure or demand line. Record the allegation, amount, your response, supporting document, file name and any legal question. This index makes it harder to omit a small invoice or answer a compound allegation with an ambiguous paragraph.
3. Draft a point-by-point representation
For notices covered by rule 142, DRC-06 is the form for the representation or reply. Follow the current portal path and the instructions in the notice; labels and authentication steps can change. A useful reply normally contains:
- the GSTIN, notice number, period and authority;
- a short statement of the relief sought;
- a numbered response matching each allegation;
- the factual explanation, reconciliation and calculation for each disputed amount;
- the legal basis, including why the cited provision or penalty is not applicable where that is your position;
- a list of attachments with page references; and
- a written request for a hearing where you need to explain evidence or contest an adverse decision.
Use clear headings and disclose any amount you genuinely accept separately from amounts you dispute. Do not make a broad admission merely to make the portal submission shorter. Attach readable records and explain how a large ledger or spreadsheet supports the particular line in dispute.
4. File, authenticate and preserve proof
Submit DRC-06 or the form specified by the notice before the stated deadline. Complete the required digital signature or electronic verification, check that every attachment uploaded successfully and save the acknowledgement, reference number, submitted PDF and final attachment set. A draft saved on the portal is not proof of filing. If the portal fails, capture the error, time and attempted submission and use the official escalation or alternative method identified in the notice, while continuing to protect the deadline.
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When payment may be considered
Payment is a legal decision, not merely an administrative shortcut. Rule 142 describes DRC-03 payment intimation and related acknowledgements or closure forms for specified situations, but the available route and consequences differ by statutory section, timing and type of demand. DRC-03 does not automatically end every proceeding, and a payment can affect later arguments or appeal rights.
Before paying or admitting liability, verify the exact subsection, tax period, interest calculation, penalty rule and whether the notice offers a time-limited statutory consequence. Ask for written, case-specific advice when the amount is material, the allegation includes fraud or suppression, or the payment would require borrowing or accepting a disputed fact. If you make a payment, identify the tax, interest and penalty components accurately, submit the required intimation and retain the challan and acknowledgement.
Requesting and attending a hearing
Section 75 provides an opportunity of hearing when the person chargeable with tax or penalty requests it in writing or when an adverse decision is contemplated. If oral clarification, disputed documents or a complex reconciliation matters, request the hearing in the reply and retain proof of that request. State the issues you need to address and bring the indexed evidence.
At the hearing, focus on the notice grounds. Explain the chronology, point to the exact page supporting each fact and identify any calculation that remains unresolved. Ask that your written submissions and documents be taken on record. The officer’s order should set out relevant facts and the basis for the decision, so compare the final order with the issues you raised and note any point that was not considered.
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| Form | Purpose in the rule 142 process | Important limitation |
|---|---|---|
| DRC-01 | Electronic summary accompanying specified demand notices. | It is a summary; read the underlying notice and relied-upon material. |
| DRC-02 | Electronic summary of a statement under specified statutory provisions. | Confirm which provision and period the statement concerns. |
| DRC-03 | Payment intimation in specified cases. | Payment does not universally conclude proceedings or produce the same penalty result. |
| DRC-04 | Acknowledgement of payment in specified cases. | Keep it with the challan and check what liability it acknowledges. |
| DRC-05 | Order concluding proceedings in specified timely-payment cases. | Availability depends on the statutory route and conditions. |
| DRC-06 | Representation or reply for covered notices. | Use the current portal workflow and answer the notice itself, not just the summary. |
| DRC-07 | Electronic summary of specified orders, including amounts payable. | Under rule 142, the order is treated as a notice for recovery. |
These forms are not interchangeable. Filing DRC-06 does not settle a demand, and filing DRC-03 is not a universal substitute for a reasoned reply.
If the department issues an adverse order
A DRC-07 summary can communicate a specified demand order and amount payable; rule 142 treats the order as a notice for recovery. Download the signed or otherwise complete order, not only the summary, and compare its findings with your reply and hearing record.
Section 107 generally allows an appeal to the Appellate Authority within three months from communication of the order, subject to statutory conditions and a limited extension for sufficient cause. Pre-deposit, electronic filing, forms and the computation of the communication date must be checked against the current law and the particular order. Do not wait for recovery action or the last week of the possible appeal period. Obtain advice promptly, preserve proof of communication and prepare a grounds-of-appeal schedule that identifies each finding, amount and supporting record.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Evidence checklist tailored to the allegation
The following is a practical starting list, not an exhaustive statutory requirement. Include only material that addresses the notice and label it clearly.
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- Tax invoices, debit and credit notes, e-way or delivery records where relevant, and proof of receipt or supply.
- Purchase and sales ledgers, trial balance extracts, bank or payment records and working papers used for the calculation.
- Contracts, purchase orders, statements of work, correspondence and proof of place of supply when classification or timing is disputed.
- ITC eligibility records, vendor communications and evidence supporting reversal or re-availment where applicable.
- Refund applications, sanction documents, export or supply evidence and bank credit records for an erroneous-refund allegation.
- Earlier replies, audit observations, inspection records, portal acknowledgements and orders covering the same issue or period.
Redact unrelated personal information, keep an unaltered master copy and use a consistent file naming system so the officer can locate the evidence cited in each paragraph.
Common mistakes and how to avoid them
Replying to the summary only
A DRC-01 or portal alert may omit the factual detail needed to understand the case. Obtain the underlying notice and annexures, then answer the stated grounds.
Using the wrong period or section
Tax rules and forms can change. Confirm the financial year, commencement date of amendments and statutory provision before quoting a penalty or payment option.
Sending an unsupported denial
“The demand is wrong” does not show where the calculation fails. Attach a reconciliation and identify the invoice, return line or legal reason for each correction.
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If an explanation depends on documents or oral clarification, request a hearing in writing in the reply and keep the filing proof.
Assuming payment closes the matter
Check whether the particular rule provides acknowledgement or conclusion, what amount must be paid and whether a separate form or order is required.
Waiting after an order
Recovery and appeal timelines run from the relevant communication. Download the order, calculate the possible appeal period and seek advice immediately.
Where to verify the law and obtain help
Use the CBIC CGST Act text for sections 73, 74, 74A, 75 and 107, and the CBIC CGST Rules compilation for rule 142 and the DRC forms. Check notifications, later amendments and commencement dates that apply to the relevant tax period. CBIC also maintains an official GST FAQ page, although a general FAQ cannot replace advice on a particular notice.
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A GST practitioner, chartered accountant or tax lawyer experienced in demand proceedings can test limitation, classification, ITC evidence, penalty exposure, payment choices and appeal strategy. Give the adviser the complete notice, service proof, calculations, records and your draft timeline; a cropped screenshot or DRC-01 summary is rarely enough for a responsible opinion.
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