What If You Get a GST Notice? ASMT-10, DRC-01 and What Each One Means

A GST notice arrives on the portal and by email, and the first task is simply to work out which notice it is. The forms look alike and the consequences are wildly different. A scrutiny query answered properly costs an afternoon. The same query ignored becomes an order, and an order becomes a recovery proceeding.

Identify what you have received

Two of those matter most in volume: ASMT-10, which is a question, and DRC-01, which is an allegation.

ASMT-10: a question, not a demand

Section 61 lets the proper officer scrutinise your returns and seek an explanation for discrepancies. It is largely automated at the selection stage, and the triggers are consistent:

• input tax credit in GSTR-3B exceeding the credit available in GSTR-2B;
• outward supplies in GSTR-3B not matching GSTR-1;
• turnover in GST returns not matching the turnover in your income tax return or audited accounts;
• credit claimed against a supplier whose registration was cancelled retrospectively;
• e-way bill data not matching declared outward supplies;
• liability under reverse charge not discharged.

Reply in ASMT-11, within the period stated — usually thirty days. The reply is won on reconciliation papers, not on argument. What works:

1. A tabular reconciliation for each discrepancy: the figure the officer has, the figure in your records, the difference, and the reason for it.
2. The underlying documents for each explained difference — invoices, credit notes, the supplier's filed return, the e-way bill.
3. A clear statement where a difference is timing rather than substance: an invoice reported by the supplier in the next month, credit availed in a later period, a credit note issued after the return was filed.
4. Where part of the discrepancy is genuinely yours, say so, pay it in DRC-03 with interest, and attach the challan. An officer who sees the undisputed part paid and the rest explained tends to drop the proceedings.

If the reply satisfies the officer, you get ASMT-12 and it is over. If it does not, or you do not reply, the matter moves to Section 73 or 74 — which is a different order of problem.

DRC-01A and DRC-01: the demand route

DRC-01A is a pre-notice intimation: the officer tells you the tax they have ascertained and invites you to pay before a formal notice issues. Respond in Part B of DRC-01A. This stage is worth taking seriously, because paying at this point under Section 73 avoids penalty altogether.

DRC-01 is the show cause notice. Reply in DRC-06 within the stated period. Then:

• a personal hearing — ask for one expressly, and attend;
• an order in DRC-06/DRC-07, with the demand summarised in DRC-07.

Section 73 versus Section 74 — why the label matters

Section 73 — tax not paid, short paid, erroneously refunded, or credit wrongly availed, for any reason other than fraud, wilful misstatement or suppression of facts.

• pay tax and interest before the show cause notice: no penalty;
• pay within 30 days of the notice: no penalty;
• penalty otherwise: 10% of the tax or ₹10,000, whichever is higher.

Section 74 — the same shortfall, but with fraud, wilful misstatement or suppression of facts alleged.

• penalty before notice: 15%;
• within 30 days of the notice: 25%;
• within 30 days of the order: 50%;
• otherwise: 100% of the tax.

Section 74 also gives the officer a longer period to act than Section 73.

So the characterisation is often worth more than the tax. If a notice invokes Section 74 for what is on its face a reconciliation difference or an interpretational position, contest the invocation specifically — the allegation of fraud or suppression has to be made out, not merely asserted, and a reply that answers only the figures while leaving the Section 74 label unchallenged has conceded the expensive part.

REG-17: cancellation of registration

A different animal, and the most urgent. Seven working days, and the consequence is that you cannot issue a tax invoice. The sequence and the reply are covered in our post on GST cancellation and revocation.

What if you have already received an order in DRC-07?

1. Check the limitation for an appeal under Section 107 — three months from communication of the order, extendable by one month on sufficient cause.
2. File APL-01 with the pre-deposit: the admitted amount in full, plus 10% of the disputed tax, subject to the ceiling in the section.
3. Where limitation has expired, look at rectification under Section 161 for an error apparent on the face of the record, or a writ petition where there has been a breach of natural justice — notably where no hearing was given.
4. Do not let recovery start before you act. Section 79 allows recovery by attaching bank accounts and garnishing receivables, and unwinding an attachment takes far longer than filing an appeal in time.

How to make notices rarer

Nearly every notice we answer was predictable from the taxpayer's own data a year earlier.

• Reconcile GSTR-2B to the purchase register monthly, and chase missing invoices in the month they are missing.
• Reconcile GSTR-1 to GSTR-3B before filing 3B, not at year end.
• Reconcile GST turnover to the books and the income tax return quarterly, and keep a written note of the reasons for the difference. That note is your ASMT-11 reply, written a year in advance.
• Check the portal and the registered email weekly. Notices are served there, and the reply clocks run from service, not from the day you happen to look.
• Keep the authorised signatory's contact details current in REG-14. A notice sent to a former accountant's email is still properly served.
• Keep proof of movement — e-way bills, transport documents, gate entries — because the moment a supplier is questioned, your credit depends on showing the supply was real.