The Classic Partners LLP

GST Demand & SCN Handling

Specialised GST Show Cause Notice (SCN) and demand handling under Sections 73 and 74 of the CGST Act. Our Chartered Accountants draft strong replies to DRC-01A, DRC-01, and DRC-02 notices, defend personal hearings, and protect your business from inflated demands, interest, and penalty exposure.

Reply to My GST SCN

What is a GST Show Cause Notice?

A Show Cause Notice (SCN) under GST is a formal notice issued by the proper officer calling upon a taxpayer to explain why a specified demand of tax, interest, or penalty should not be raised against them. SCNs are typically issued under Section 73 (non-fraud cases) or Section 74 (cases involving fraud, wilful misstatement, or suppression of facts) of the CGST Act, in Form DRC-01.

Before issuing a formal SCN, the department often issues a pre-SCN intimation in Form DRC-01A informing the taxpayer of the ascertained tax liability and inviting voluntary payment. Replying carefully at the DRC-01A stage can prevent the matter from escalating into a full demand proceeding and substantially reduce penalty exposure.

Section 73 vs Section 74 — Key Differences

Section 73 — non-fraud cases (short-payment, wrong availment, etc.). Time limit: 3 years from due date of annual return; SCN at least 3 months before that.
Section 74 — fraud, wilful misstatement, or suppression of facts. Time limit: 5 years; SCN at least 6 months before that.
Penalty under Section 73: Nil if tax + interest paid before SCN; 10% (or ₹10,000, whichever higher) after SCN; 10% of tax after order.
Penalty under Section 74: 15% if paid before SCN; 25% within 30 days of SCN; 50% within 30 days of order; 100% otherwise.
Note: The Finance Act has introduced Section 74A applicable from FY 2024-25 onwards, providing a common framework with a 42-month limitation.

Our GST SCN & Demand Handling Services

DRC-01A Pre-SCN Reply

Early-stage representation to prevent escalation and reduce penalty exposure under Sections 73(5) / 74(5).

DRC-06 Reply to SCN

Comprehensive legal reply with reconciliations, case-law support, and supporting documentation.

Personal Hearing

Senior CA representation at personal hearings under Section 75 with structured submissions.

DRC-07 Order Defence

Strategic decisions on payment, appeal, or rectification on receipt of the final adjudication order.

Section 74A Coverage

Advisory and defence under the new common framework for FY 2024-25 onwards.

Continuity to Appeal

Seamless transition to GST appeals and tribunal stages.

SCN Lifecycle & Forms

DRC-01A — pre-SCN intimation of ascertained tax liability; reply in DRC-01A Part B.
DRC-01 — Show Cause Notice issued under Section 73 / 74 / 74A.
DRC-02 — statement of details for additional periods (continuation of an existing SCN).
DRC-03 — voluntary payment of tax, interest, and penalty.
DRC-06 — reply to the SCN by the taxpayer.
DRC-07 — summary of the adjudication order quantifying demand.

Typical Triggers for GST SCNs

Mismatches detected during scrutiny of GST returns.
Audit findings under Section 65 / 66. See GST Audit & Assessment Support.
ITC mismatch between books, GSTR-3B, and GSTR-2B.
Wrong availment of ITC under Section 17(5) — blocked credits.
Non-payment of GST under reverse charge mechanism (RCM).
Classification disputes — HSN-wise tax rate disagreements.
Allegations of fake invoicing or circular trading (Section 74).

Why Choose The Classic Partners

Drafting expertise — replies grounded in statute, rules, circulars, and case law.
Strategic decisions on voluntary payment vs litigation to minimise penalty.
Personal-hearing strength with senior CA representation and structured submissions.
Continuity — same team takes the matter through adjudication and appeals.

Frequently Asked Questions

What is the difference between DRC-01A and DRC-01?

DRC-01A is a pre-SCN intimation informing the taxpayer of the ascertained liability and inviting voluntary payment. DRC-01 is the formal Show Cause Notice itself, requiring the taxpayer to show cause why the proposed demand should not be confirmed. Replying carefully at the DRC-01A stage can avoid a full SCN.

What is the time limit to reply to a Show Cause Notice?

The reply (in Form DRC-06) is normally to be filed within the time specified in the SCN, typically 30 days. The proper officer may extend the period on a reasoned request. Section 75 mandates that an opportunity of personal hearing must be granted before any adverse order is passed.

Can I pay the tax voluntarily and avoid penalty?

Yes. In non-fraud cases under Section 73, payment of tax and interest before issuance of the SCN attracts no penalty (Section 73(5)). In fraud cases under Section 74, voluntary payment before SCN attracts a reduced penalty of 15% (Section 74(5)). Voluntary payment is made through Form DRC-03.

What is the limitation period under Sections 73 and 74?

Section 73 requires the SCN to be issued at least 3 months before the expiry of 3 years from the due date of the annual return for the relevant FY. Section 74 (fraud) allows 5 years, with SCN at least 6 months before expiry. The new Section 74A (from FY 2024-25) prescribes a common 42-month limitation.

What if the final order in DRC-07 is adverse?

An adverse DRC-07 order can be challenged by filing an appeal under Section 107 within 3 months from communication of the order, along with a 10% pre-deposit of the disputed tax (capped as notified). See GST Appeal Services for the full appellate ladder.

Is a personal hearing mandatory before passing an order?

Yes. Section 75(4) of the CGST Act mandates that an opportunity of personal hearing must be granted before any adverse order is passed against the taxpayer. Denial of personal hearing is a strong ground of challenge in higher forums.

Don't Face a GST SCN Alone

Get experienced CA representation for every stage of demand, SCN, and adjudication.