Handling GST Notices and Scrutiny: Types, Replies and Appeals

GST notices have become a routine part of doing business. Most are generated from data: a mismatch between returns, input tax credit claimed beyond what appears in the supplier’s filings, e-way bill data that does not match the returns, or turnover that differs from income tax records. Others arise from audit, inspection or a complaint. Each type of notice has its own form, time limit and consequence, and the right response depends on recognising which one has been received.

This article explains the common GST notices, how to respond, the show cause and adjudication process, and appeals, with reference to taxpayers in Kerala, who deal mainly with the State GST Department, Kerala, or the Central GST commissionerates, depending on the administrative allotment of their GSTIN.

Common GST notices

Notice	Form	Purpose	Reply
Scrutiny of returns (section 61)	ASMT-10	Discrepancies found in returns	ASMT-11, usually within 30 days
Clarification on registration application	REG-03	Additional information or documents for a new registration	REG-04 within the time stated
Show cause notice for cancellation of registration	REG-17	Proposed cancellation, often for non-filing of returns	REG-18 within 7 days
Intimation before show cause notice	DRC-01A	Intimation of tax ascertained, giving an opportunity to pay or object before a formal notice	Part B of DRC-01A
Show cause notice for demand	DRC-01 with the notice	Demand of tax, interest and penalty under section 73, 74 or 74A	DRC-06, usually within 30 days
Audit by the department (section 65)	ADT-01	Intimation of audit of books and records	Produce records as required
Summons (section 70)	Summons	To give evidence or produce documents in an inquiry	Appear on the date

First steps on receiving a notice

• Check the portal: notices are issued on the GST portal and appear under the notices and orders section. Many taxpayers miss notices because they rely on email alone.
• Note the time limit: GST time limits are short, and an order can be passed if no reply is received. Where more time is needed, request an adjournment through the portal before the deadline.
• Identify the provision: whether the notice is a scrutiny notice, a demand notice under section 73 (no fraud), section 74 (fraud or suppression), or section 74A (for periods from 2024-25), determines the time limit, the penalty and the strategy.
• Reconcile: prepare a reconciliation of the figures in question, for example GSTR-1 with GSTR-3B, GSTR-3B with GSTR-2B, or GST turnover with the books and income tax return. Most data-driven notices can be answered with a clear reconciliation.
• Pay where the demand is correct: if part of the demand is admitted, paying it with interest at an early stage reduces or avoids penalty.

Drafting the reply

• Address each issue raised separately, in the order of the notice, with figures.
• Attach the reconciliation, invoices, ledgers, e-way bills, bank statements, supplier confirmations, or other evidence relied on.
• Where input tax credit is questioned, show that the conditions for credit were met: tax invoice, receipt of goods or services, payment to the supplier, and the supplier’s filing.
• Raise legal objections where they exist, such as limitation, lack of jurisdiction, incorrect invocation of the fraud provision, or a notice that does not state the grounds clearly.
• Request a personal hearing. Where an adverse decision is contemplated, a hearing must be given if requested, and the reply should ask for one.

Show cause notices and adjudication

• Under sections 73 and 74 (for periods up to 2023-24), and section 74A (for periods from 2024-25), the officer issues a show cause notice, considers the reply, gives a personal hearing, and passes an order in Form DRC-07.
• Penalty is lower where there is no fraud or suppression, and where tax and interest are paid early, before the notice or within the time allowed after it. In cases involving fraud or suppression, penalty can be equal to the tax.
• The time limits for issuing notices and passing orders are fixed by the law. A notice or order issued after the time limit can be challenged.

Appeals

• An appeal against an order lies to the Appellate Authority within three months of communication of the order, extendable by one month for sufficient cause, on payment of a pre-deposit of a percentage of the disputed tax.
• Further appeal lies to the GST Appellate Tribunal, and thereafter to the High Court on questions of law.
• Where there is a breach of natural justice, a lack of jurisdiction, or a challenge to the validity of a provision, a writ petition before the Kerala High Court may be appropriate.

Audit, inspection and summons

An audit under section 65 is usually preceded by an intimation in Form ADT-01, and the taxpayer must produce books and records. Inspection, search and seizure under section 67, and summons under section 70, are more serious and are often linked to investigations into fake invoices or evasion. In such cases, statements given and documents produced form the basis of later proceedings, and it is advisable to be represented from the outset.

Reducing the risk of notices

• Reconcile GSTR-1, GSTR-3B and GSTR-2B every month, and correct differences in the next return.
• Claim input tax credit only where it appears in GSTR-2B and the supplier has filed returns; follow up with suppliers who default.
• Match e-way bills with invoices and returns.
• File the annual return (GSTR-9) and, where applicable, the reconciliation statement (GSTR-9C) carefully, since they are often the basis of scrutiny.
• Keep the registration details, including address and authorised signatory, up to date. See amending GST registration details.

See also common causes for show cause notices and reactivating a cancelled GST number.

Frequently asked questions

What happens if a GST notice is not answered?

The officer can pass an order on the basis of the material available, including a demand of tax, interest and penalty. Recovery action, such as attachment of bank accounts, can follow.

Can a GST notice be replied to offline?

Replies are generally filed on the GST portal in the specified form. Where documents are voluminous, they are attached to the online reply, and a copy may also be submitted to the officer.

Is a personal hearing mandatory?

A hearing must be given where the taxpayer requests one in writing, or where an adverse decision is contemplated. It is advisable to request a hearing in every reply.

ചുരുക്കം (Summary in Malayalam)

GST നോട്ടീസുകൾ GST പോർട്ടലിലാണ് ലഭിക്കുന്നത്; സമയപരിധിക്കുള്ളിൽ മറുപടി നൽകിയില്ലെങ്കിൽ ഓഫീസർക്ക് ഏകപക്ഷീയമായി ഉത്തരവ് പാസാക്കാം. ASMT-10 (റിട്ടേൺ പരിശോധന), REG-17 (രജിസ്ട്രേഷൻ റദ്ദാക്കൽ), DRC-01 (നികുതി ഡിമാൻഡ്) തുടങ്ങിയവയാണ് സാധാരണ നോട്ടീസുകൾ. GSTR-1, GSTR-3B, GSTR-2B എന്നിവ തമ്മിലുള്ള കൃത്യമായ റീകൺസിലിയേഷനും അനുബന്ധ രേഖകളും മറുപടിയിൽ ഉൾപ്പെടുത്തണം. വ്യക്തിഗത ഹിയറിംഗ് ആവശ്യപ്പെടണം. ഉത്തരവിനെതിരെ മൂന്ന് മാസത്തിനകം അപ്പീൽ നൽകാം.

This article gives a general overview of GST notices and proceedings. Provisions, forms, time limits and procedures are revised frequently; for accurate and current requirements, refer to the GST law as amended and the GST portal. The article is not advice on any particular case.