Filing Mistakes, Notices and Sources
GST notices explained: DRC-01B, DRC-01C, ASMT-10 and show cause notices, and how to reply
The common GST intimations and notices small businesses receive, what triggers them, response time limits, documents to prepare, how to check a notice is genuine and when to involve a professional.
Most GST notices to small businesses start as system intimations about mismatches: DRC-01B when GSTR-1 liability exceeds GSTR-3B, DRC-01C when ITC claimed exceeds GSTR-2B, and ASMT-10 when an officer scrutinising your returns finds discrepancies. If these are ignored, they can turn into a show cause notice (DRC-01) and a demand order (DRC-07). Every notice should be checked on the GST portal (and, for central tax communications, its DIN verified on CBIC's website), answered within the time given, with reconciliations and documents. This guide explains each type and how to respond.
It belongs to the guide to common GST filing mistakes. It is general information; for a demand involving significant tax, fraud allegations or penalties, consult a professional, and see working with a CA or GST practitioner.
The notices you are most likely to see
| Form | What it is | Typical trigger | What you do |
|---|---|---|---|
| DRC-01B | Intimation of difference in liability | GSTR-1/IFF liability higher than GSTR-3B beyond a tolerance | Pay the difference via DRC-03 or explain in Part B |
| DRC-01C | Intimation of difference in ITC | ITC in GSTR-3B higher than GSTR-2B beyond a tolerance | Reverse/pay, or explain in Part B |
| ASMT-10 | Scrutiny notice on returns | Officer finds discrepancies after reviewing returns | Reply in ASMT-11 with explanation and documents |
| REG-03 / REG-17 / REG-31 | Registration queries, cancellation notice, suspension intimation | Incomplete application; non-filing; data mismatch | Reply on the portal within the time given |
| DRC-01A | Pre-show cause intimation (where used) | Officer's proposed demand | Reply in Part B or pay |
| DRC-01 | Show cause notice | Tax short paid, wrong ITC, etc., under sections 73/74 or 74A | Reply in DRC-06 with evidence; seek personal hearing |
| DRC-07 | Demand order | After adjudication | Pay, or appeal within the time limit |
Since 2025 the liability in GSTR-3B is locked to GSTR-1/1A, so new DRC-01B cases arise less often from simple keying differences, but they still arise from missed invoices and amendments. See GST portal changes 2025–2026.
Is the notice genuine?
Fraudsters send fake GST notices by email and post, often with a payment link. Before acting:
- Log in to the GST portal yourself (type the address, do not click links) and look under the notices and orders section. Genuine notices are generally available there.
- For central tax communications, verify the Document Identification Number (DIN) on the CBIC website. State tax authorities follow their own systems; check with the jurisdictional office if unsure.
- Never pay through a link in an email. GST is paid only through a challan generated on the GST portal.
- Check the officer's name and jurisdiction against your registration certificate.
How to reply: a step-by-step method
- Note the deadline. ASMT-10 usually allows 30 days; show cause notices state a date. Diarise it immediately.
- Understand the claim. Identify the period, the tax head (CGST/SGST/IGST), the amount and the reason.
- Reconcile. Pull your books, GSTR-1, GSTR-3B, GSTR-2B and e-way bill data for the period and find the cause.
- Classify the difference as: genuine error (pay with interest), timing difference (show where it was reported), or not an error (explain with evidence).
- Pay what is due voluntarily using DRC-03 before the matter escalates; voluntary payment generally reduces or removes penalty for non-fraud cases.
- Reply on the portal in the right form, attach documents (invoices, ledgers, reconciliation statements, supplier confirmations) and keep the acknowledgement.
- Ask for a personal hearing for a show cause notice if you need to explain in person.
Worked example (illustrative)
A Kolkata trader receives an ASMT-10 for FY 2024-25 saying ITC in GSTR-3B exceeds GSTR-2B by ₹1,84,000. Reconciliation shows:
| Reason | Amount | Response |
|---|---|---|
| Supplier filed GSTR-1 late; invoice in GSTR-2B of the next year within the section 16(4) time limit | ₹1,20,000 | Explain with GSTR-2B copy; no reversal |
| ITC claimed twice on one invoice | ₹38,000 | Pay ₹38,000 with interest by DRC-03 |
| Supplier never filed; registration cancelled | ₹26,000 | Reverse ₹26,000 with interest; pursue the supplier commercially |
Interest on ₹64,000 (₹38,000 + ₹26,000) at 18% for, say, 400 days of utilisation = ₹64,000 × 18% × 400 ÷ 365 ≈ ₹12,625. The trader pays ₹64,000 + ₹12,625 by DRC-03 and replies in ASMT-11 with the reconciliation. A prompt, documented reply often closes scrutiny without a show cause notice.
Show cause notices and time limits
For tax periods up to FY 2023-24, demands were issued under section 73 (non-fraud) or section 74 (fraud, wilful misstatement, suppression). From FY 2024-25 onwards, section 74A provides a single procedure with the same time limit for both, and different penalty levels for fraud and non-fraud cases. Check the time limits and penalty rates in the current CGST Act with your adviser.
The 57th GST Council meeting (8 October 2026) recommended a ₹10,000 minimum threshold for issuing show cause notices, a reduced 5% penalty in non-fraud cases paid within 30 or 60 days of the order, and standards on the quality of notices and orders. These require amendments; until then, current provisions apply.
Appeals
A demand order can be appealed to the Appellate Authority (APL-01), generally within three months, with a pre-deposit of a percentage of the disputed tax. Further appeal lies to the GST Appellate Tribunal (GSTAT), which began functioning after the 56th GST Council meeting set timelines in 2025. Appeal procedure and pre-deposit rules are technical; a professional is strongly advised.
What it costs to respond
| Situation | Illustrative professional fee |
|---|---|
| DRC-01B / DRC-01C explanation with reconciliation | ₹2,000–₹10,000 |
| ASMT-10 reply for one year | ₹5,000–₹30,000 |
| Show cause notice reply and hearing | ₹15,000–₹1,00,000+ |
| First appeal | Depends on amount and complexity |
These are illustrative. Good monthly reconciliation is the cheapest way to avoid most of them; see ITC reconciliation with GSTR-2B. If non-filing is the issue, see registration cancellation for non-filing.
Frequently asked questions
What happens if I ignore a DRC-01C intimation?
If you neither pay nor explain, the system can restrict you from filing GSTR-1 for the next period until you respond, and the officer can start proceedings.
Can I reply to a notice after the deadline?
Ask for an extension on the portal or in writing before the deadline if you need time. Replies after the deadline may not be considered.
Do I need a professional for a DRC-01B?
Not always. If the cause is simple (an invoice reported in GSTR-1 but missed in GSTR-3B), you can pay or explain yourself. Show cause notices and appeals are different.
Can the department attach my bank account?
In specified cases, provisional attachment is possible under section 83 to protect revenue. Seek professional help immediately if this happens.
Sources
- GST portal — notices and orders, replies, DRC-03 payments
- CBIC GST — CGST Act sections 61, 73, 74, 74A, 107; DIN verification
- GST Council — 57th meeting recommendations on notices and penalties
