The short answer
A GST show cause notice proposes a demand for tax not paid, short paid or wrongly claimed as credit. Sections 73 and 74 of the CGST Act, 2017 govern periods up to financial year 2023-24, and Section 74A governs 2024-25 onwards. The taxpayer replies in Form GST DRC-06, may ask for a personal hearing, and can appeal an adverse order within three months.
- Notice form
- Form GST DRC-01
- Reply form
- Form GST DRC-06
- Appeal
- Section 107, within 3 months of the order
- Pre-deposit
- 10% of the disputed tax, plus the admitted amount in full
Which section applies and what are the time limits?
| Provision | Applies to | Notice by | Order by |
|---|---|---|---|
| Section 73 | Up to FY 2023-24, no fraud | 3 months before the order deadline | 3 years from the annual return due date |
| Section 74 | Up to FY 2023-24, fraud or suppression | 6 months before the order deadline | 5 years from the annual return due date |
| Section 74A | FY 2024-25 onwards, all cases | 42 months from the annual return due date | 12 months from the notice, extendable by 6 months |
A notice issued after its deadline is open to challenge on limitation alone, so the first check is the date.
How much is the penalty?
- Section 73: 10 per cent of the tax or ten thousand rupees, whichever is higher. No penalty if tax and interest are paid before the notice or within 30 days of it.
- Section 74: equal to the tax. This reduces to 15 per cent if paid before the notice, 25 per cent within 30 days of the notice, and 50 per cent within 30 days of the order.
- Section 74A: the same two tiers, depending on whether the notice alleges fraud, wilful misstatement or suppression of facts.
How should the reply be prepared?
- Read the allegation against the returns. Reconcile GSTR-1, GSTR-3B, GSTR-2B and the books for the period.
- Check jurisdiction and limitation. Confirm the officer, the section invoked and the dates.
- Answer each ground separately with documents: invoices, e-way bills, payment proof, supplier confirmations.
- Contest the allegation of fraud where the notice invokes it without particulars.
- Ask for a personal hearing. Section 75(4) requires one where it is requested in writing or an adverse decision is contemplated.
- File Form GST DRC-06 on the portal within the time given, or seek an adjournment in writing.
What is the appeal route?
An appeal lies to the Appellate Authority under Section 107 within three months of the order being communicated, and the authority may condone a further one month. The appellant pays the admitted amount in full and 10 per cent of the remaining disputed tax. A further appeal lies to the GST Appellate Tribunal under Section 112, and then to the High Court on a substantial question of law.
Sources
- Central Goods and Services Tax Act, 2017, Sections 73, 74, 74A, 75, 107 and 112
- Finance (No. 2) Act, 2024 (insertion of Section 74A)
- Central Goods and Services Tax Rules, 2017, Rule 142
This guide states the general legal position in India as on 14 November 2026. It is not legal advice. Time limits and outcomes depend on the facts and on later amendments and judgments. See the disclaimer, and read more on the firm's Taxation practice.