This guide is meant for owners and finance heads of manufacturing units that have received a GST notice. Such notices are issued on the common portal under the CGST Act 2017 and its rules, and an email alert is often sent as well. The form decides the time allowed: seven days for DRC-01B and DRC-01C, 30 days for ASMT-10, and the period stated in the document for DRC-01A and a show cause notice.
The response in the first seven days frequently determines the outcome, and the difference is measured in money. A complete reply can close the matter with a short letter. A weak one may lead, two years later, to a demand with interest and penalty.
The method follows in order. The document is identified first, then the section that governs any demand. Over the first week the records are collected and reconciled, and the reply is filed item by item on the portal. A worked example from an Ambad unit and a list of mistakes to avoid are given at the end.
1. First, identify the document
GST "notices" are issued in several forms. Each one has its own purpose and deadline, and the risk differs from form to form.
| Form | What it is | Usual reply | Time to reply |
|---|---|---|---|
| DRC-01B | System intimation: tax in GSTR-1 is higher than tax paid in GSTR-3B (rule 88C) | Pay with DRC-03, or explain, in Part B | 7 days |
| DRC-01C | System intimation: credit in GSTR-3B is higher than credit in GSTR-2B (rule 88D) | Pay with DRC-03, or explain, in Part B | 7 days |
| ASMT-10 | Scrutiny of returns: the officer lists discrepancies (section 61, rule 99) | Explanation in ASMT-11 | 30 days, or a longer period the officer allows |
| DRC-01A | Optional intimation before a show cause notice: tax, interest and penalty the officer has worked out (rule 142(1A) says the officer "may" issue it) | Pay with DRC-03, or submit in Part B | As stated in the intimation |
| DRC-01 | Summary of a show cause notice under section 73, 74 or 74A (rule 142(1)) | Reply in DRC-06 and attend the hearing | As stated in the notice, commonly 30 days |
| ADT-01 | Intimation of audit by the department (section 65) | Produce records | As stated |
| Summons | Under section 70, to give evidence or produce documents | Attend in person | On the date given |
DRC-01B and DRC-01C have the shortest time limit. If you neither pay nor explain within seven days, the portal can block the filing of your next GSTR-1. A factory that invoices an OEM should note the consequence: when GSTR-1 is blocked, the customer's credit is delayed, and the customer is likely to notice before the department does.
A summons is a separate category. Appearance is a legal requirement, and the provision carries criminal consequences. Advice should be taken on the same day.
2. Which law decides the demand: sections 73, 74 and 74A
Where the officer moves towards a demand, three sections matter. The financial year of the dispute decides which applies.
| Section 73 (no fraud) | Section 74 (fraud, suppression) | Section 74A (both) | |
|---|---|---|---|
| Applies to | Up to FY 2023-24 | Up to FY 2023-24 | FY 2024-25 onward |
| Show cause notice | At least 3 months before the order deadline | At least 6 months before the order deadline | Within 42 months of the due date of the annual return |
| Order | Within 3 years of the due date of the annual return | Within 5 years | Within 12 months of the notice, extendable by up to 6 months |
| Penalty (no fraud) | 10% of tax or ₹10,000, if higher | — | 10% of tax or ₹10,000, if higher |
| Penalty avoided if tax and interest paid | Before notice, or within 30 days of it | — | Before notice, or within 60 days of it |
| Penalty in fraud cases | — | 15% before notice; 25% within 30 days; 50% within 30 days of order; otherwise 100% | 15% before notice; 25% within 60 days; 50% within 60 days of order; otherwise 100% |
Section 74A also says no notice is to be issued where the tax involved for the year is less than ₹1,000.
What the dates mean today. The annual return for 2023-24 was due on 31 December 2024. A non-fraud order for that year must therefore be issued by 31 December 2027, with the notice by 30 September 2027. The annual return for 2024-25 was due on 31 December 2025. Under section 74A, a notice for that year can be issued up to 30 June 2029.
As a result, a scrutiny query on 2024-25 that receives a poor reply in 2026 can still lead to a notice in 2029.
3. Day by day: the first seven days
Day 1: log it and verify it.
- Download the notice and its attachments from the portal. Note the date of issue, the date of communication (the date it was made available on the portal), the section, the period, the officer and office (central or state), and the reply date.
- If it came from outside the portal, check the Document Identification Number on the CBIC website, or confirm with the office.
- Put the reply date, and the date five working days before it, in the diaries of two people.
- Inform the person who signs GST returns, so that the notice is known to more than one inbox.
Day 1–2: read it closely, and decide nothing yet.
- List each discrepancy as a separate line, with the amount and the officer's basis (GSTR-1 against GSTR-3B, GSTR-2B against GSTR-3B, e-way bills against GSTR-1, annual return figures, a supplier's cancelled registration).
- Note what the officer has not said. A notice that does not allege fraud should be answered as a non-fraud matter.
- Do not reply, pay or call the officer on the first day.
Day 2–4: collect the documents.
- GSTR-1, GSTR-3B, GSTR-2A/2B and GSTR-9 (and GSTR-9C, if filed) for the period.
- Sales and purchase registers, and the trial balance.
- E-way bill registers, including cancelled bills.
- Job work challans and Form ITC-04, if goods went to job workers.
- Credit notes, debit notes and their GST treatment.
- Supplier ledgers and payment proofs for any disputed credit.
- Earlier correspondence and any DRC-03 payments already made.
Day 3–5: reconcile, and sort each item into three piles.
- Accept. An error you have confirmed. Work out the tax and the interest under section 50.
- Explain. A difference with a reason the law accepts: job work challans in the e-way bill data, a supplier who filed late, an amendment made in a later month.
- Contest. Where you disagree with the officer on the law or the facts.
Day 5–6: draft the reply and make any payment.
- Write the reply item by item, in the officer's order, with a reconciliation for each and a list of enclosures.
- Pay accepted items with interest through DRC-03, quoting the notice. Where a demand order is already on the portal, file DRC-03A to set that DRC-03 payment against the demand (rule 142(2B)). A payment that sits unlinked can leave the demand open.
- If you need more time for some items, say so and file what you have.
Day 7: file, and keep the proof.
- File on the portal in the right form: Part B of DRC-01B or DRC-01C, ASMT-11, Part B of DRC-01A, or DRC-06.
- Download the acknowledgement. Keep the reply, every enclosure and the payment challans together.
- For a show cause notice, ask for a personal hearing. Section 75(4) requires one where you ask in writing or where an adverse decision is contemplated.
Seven days is the legal limit for a DRC-01B or DRC-01C. The same steps apply to an ASMT-10 or a show cause notice, although the period is longer. Start early, because replies drafted on the last evening are the ones most likely to concede a point by accident.
4. A worked example: a scrutiny query at an Ambad unit
The figures are illustrative. No real business is described.
An auto-components company in Ambad MIDC receives an ASMT-10 dated 22 September 2026 for FY 2024-25. It lists two discrepancies.
Item 1: credit in GSTR-3B higher than in GSTR-2B by ₹6,40,000. The reconciliation shows:
- ₹4,90,000 relates to a Gonde supplier who uploaded March 2025 invoices only in May 2025. The invoices appear in the company's GSTR-2B for May 2025, the credit was claimed in the GSTR-3B for May 2025, within the section 16(4) limit, and it was reported as 2024-25 credit in the annual return. Explain, with the invoices, the May 2B and the annual return.
- ₹1,50,000 relates to a supplier whose registration was cancelled and who never reported the invoices. Accept. The credit was used against output tax from November 2024, so interest at 18% a year runs on it. Paid on 28 September 2026, that is about ₹50,000 of interest. The company pays ₹1,50,000 plus interest through DRC-03, quoting the ASMT-10, and pursues the supplier separately.
Item 2: e-way bills higher than GSTR-1 by ₹28,00,000.
- ₹26,00,000 is e-way bills for castings sent to a Sinnar machining job worker under challans. These are not supplies. Explain, with the challans and the ITC-04 for the period.
- ₹2,00,000 is an e-way bill for a load that never left the factory. It was not cancelled within the time allowed, and the invoice was cancelled. Explain, with the cancelled invoice and gate records.
The company files ASMT-11 on day 7 with three reconciliations and 14 enclosures. If the officer accepts the reply, the matter closes with ASMT-12.
The cost of no reply. Both items could then have moved to a section 74A notice. Confirmation of both would have meant tax of ₹6,40,000 on item 1 and ₹5,04,000 (18% of ₹28,00,000) on item 2, with interest on each. A non-fraud penalty of ₹1,14,400 (10% of ₹11,44,000) would have been added. The actual cost was ₹1,50,000 of tax that was genuinely due and about ₹50,000 of interest. No penalty arose.
5. What not to do
- Do not disregard it because the amount is small or the period is old. Section 74A gives the department 42 months from the annual return due date.
- Do not reply by email or letter alone when the portal has a reply form. A reply outside the system may never reach the file.
- Do not pay without reconciling. A payment concedes the point. Early payment of the correct amount with interest is sensible. Payment of the officer's figure only to close the matter is a mistake.
- Do not pay without linking the payment to the notice or demand.
- Do not volunteer periods, issues or documents the notice has not asked about. Answer the question asked, completely.
- Do not concede facts in the covering letter that the reconciliation does not support. Words like "inadvertently omitted" can later be read as an admission.
- Do not miss the hearing. If the date does not suit, ask for an adjournment in writing before the date.
- Do not let the job worker or supplier reply for you. The notice is to you, and section 143 puts the job work records on the principal.
What this means for a manufacturer
- Name one person who checks the GST portal's notices tab every week, including the additional notices section.
- Run GSTR-1 against GSTR-3B and GSTR-2B against GSTR-3B every month, so that DRC-01B and DRC-01C never arrive.
- Reconcile e-way bills with GSTR-1 and job work challans quarterly.
- Keep a notice register: form, period, amount, reply date, status, payments and outcome.
- File every reply on the portal, item by item, with reconciliations and documents.
- Keep each year's returns, registers, challans and reconciliations retrievable until the section 74A limit for that year has passed.
This article is general information on the law as at 1 October 2026 and is not advice on any particular case. Each notice depends on its own facts, so read the notice and the current law before replying.
Common questions
The notice came by email from an officer. Is it valid?
Notices under the CGST Act are normally issued through the GST portal, where they appear under the notices and orders section of your login. A communication from a CBIC officer must carry a Document Identification Number, which you can check on the CBIC website. If you cannot find the notice on the portal or verify its number, ask the office that sent it before replying. Do not ignore it on that ground alone.
Should we just pay the amount in a DRC-01A to close the matter?
Only the part you have checked and accept. Payment through DRC-03 with interest before a show cause notice usually ends that part with no penalty in non-fraud cases. Paying an amount you have not reconciled concedes it, and makes it harder to recover. Reply to the rest in Part B of DRC-01A, with reasons.
Can we ask for more time to reply?
Yes, in writing, through the portal where the form allows it, with a brief reason. For a show cause notice, section 75(5) allows adjournment of a hearing up to three times on sufficient cause. More time is not an entitlement, so file a reply on the documents you have by the due date and say what will follow.
Which law applies to a notice for 2023-24?
Sections 73 and 74. Section 74A applies to demands for FY 2024-25 onward. For 2023-24, the non-fraud order must be issued within three years of the due date of the annual return, with the notice at least three months before that. In fraud cases the order limit is five years, with the notice at least six months before it.
What if the order goes against us?
An appeal to the Appellate Authority under section 107 must be filed within three months of the order being communicated. Before filing, you pay in full the part of the demand you admit, and 10% of the tax still in dispute, up to ₹20 crore under the CGST Act (section 107(6)), with the same under the State Act. Where the order demands only a penalty, the pre-deposit is 10% of the penalty. The appellate authority can allow a further month for sufficient cause. The reply you file in the first week becomes the record the appeal is decided on, so it should be complete.
Sources
- Section 61, Central Goods and Services Tax Act 2017, and rule 99, CGST Rules 2017 — scrutiny of returns; Forms ASMT-10, ASMT-11 and ASMT-12
- Sections 73, 74 and 74A, CGST Act 2017 — determination of tax; section 74A inserted by the Finance (No. 2) Act 2024 for FY 2024-25 onward
- Rule 142, CGST Rules 2017 — Forms DRC-01, DRC-01A, DRC-03 and DRC-03A
- Rules 88C and 88D, CGST Rules 2017 — Forms DRC-01B and DRC-01C
- Section 75, CGST Act 2017 — personal hearing and adjournments
- Circular No. 122/41/2019-GST dated 5 November 2019 — Document Identification Number on communications by CBIC officers
- Section 107, CGST Act 2017 — appeal to the Appellate Authority
This article is general information on the law as at 1 October 2026. It is not advice on any particular case. See the disclaimer.
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