Receiving a show cause notice from the GST department creates immediate financial and operational exposure. Many businesses rush to deposit contested amounts or submit informal explanations before checking whether the notice complies with statutory standards. A legally tenable reply begins with a systematic audit of the notice itself: verifying whether the proper officer had jurisdiction, whether the notice contains reasoned grounds, and whether statutory limitation periods have expired.
Earlier stages in tax administration, such as an audit query or a scrutiny notice in Form GST ASMT-10 under Section 61, serve an explanatory purpose. In contrast, a show cause notice issued under Section 73, Section 74, or Section 74A initiates formal civil demand proceedings. Every allegation that remains unrebutted can form the foundation of an enforceable demand order.
Statutory framework across Section 73, Section 74, and Section 74A
The Central Goods and Services Tax Act establishes distinct pathways for demanding unpaid tax, short paid tax, erroneous refunds, or wrongly availed or utilised input tax credit. Understanding which provision governs your notice is vital because limitation periods, burden of proof, and penalty liabilities differ substantially across these sections.
For tax periods up to Financial Year 2023-24, demands were bifurcated into non-fraud cases under Section 73 of the CGST Act and fraud cases involving wilful-misstatement or suppression of facts under Section 74 of the CGST Act. For Financial Year 2024-25 onwards, Section 74A of the CGST Act consolidates determination of tax for both non-fraud and fraud situations under a unified limitation schedule.
A common mistake: In practice, treating an allegation of fraud or suppression under Section 74 casually creates unnecessary liability. The department cannot invoke the extended five-year limitation under Section 74 simply by using the word suppression. There must be deliberate concealment with clear intent to evade tax. If all transactions were disclosed in books and statutory returns, the extended period cannot be legally invoked.
Statutory timelines and limitation periods
A show cause notice must be issued strictly within the boundaries fixed by Parliament. When a notice exceeds statutory deadlines, the entire proceeding becomes ultra vires and void ab initio.
| Statutory provision | Governing tax periods | Notice issuance deadline | Adjudication order deadline |
|---|---|---|---|
| Section 73 (Non-fraud) | Up to FY 2023-24 | At least 3 months prior to order deadline (Section 73(2)) | 3 years from annual return due date (Section 73(10)) |
| Section 74 (Fraud / suppression) | Up to FY 2023-24 | At least 6 months prior to order deadline (Section 74(2)) | 5 years from annual return due date (Section 74(10)) |
| Section 74A (Unified framework) | FY 2024-25 onwards | Within 42 months from annual return due date (Section 74A(2)) | Within 12 months from notice date (Section 74A(7)) |
Under Section 75(10) of the CGST Act 2017, the adjudication proceedings are deemed to be concluded if the order is not issued within the period specified in Section 73(10), Section 74(10), or Section 74A(7). If the proper officer fails to pass the final order within the statutorily mandated timeframe, the demand lapses by operation of law.
Evaluating show cause notice reasoning and mandatory elements
A legally enforceable show cause notice is not a standard letter or an unreasoned demand. It must communicate specific charges with sufficient clarity so that the recipient can defend themselves. When evaluating a notice, verify the following mandatory legal elements:
- Pre-notice intimation in Form GST DRC-01A: Under Rule 142(1A) of the CGST Rules, the proper officer may, before service of notice under Section 73(1), Section 74(1), or Section 74A(1), communicate the details of any tax, interest, and penalty in Part A of Form GST DRC-01A. The taxpayer may file submissions against the proposed liability in Part B of Form GST DRC-01A under Rule 142(2A).
- Summary of notice in Form GST DRC-01: Under Rule 142(1)(a) of the CGST Rules, the proper officer must serve, along with the notice issued under Section 73, Section 74, or Section 74A, a summary electronically in Form GST DRC-01. As explained in our guide on Form GST DRC-01 notice meaning, uploading only a bare summary without the detailed written notice violates natural justice.
- Intelligible reasoning and cause of action: A notice must disclose the primary material, documents, or return data relied upon. Unreasoned allegations, such as demanding tax without reconciling differences against GSTR-3B and GSTR-2B, fail the test of reasoned administrative action.
- Clear segregation of heads: Tax, interest, and penalty must be computed and segregated separately under CGST, SGST, and IGST. Lumping separate heads together obscures the cause of action.
- Specific opportunity of personal hearing: Under Section 75(4) of the CGST Act, an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax, or where any adverse decision is contemplated against such person.
Procedure to draft a structured legal reply
Drafting a legal reply requires a systematic, paragraph-by-paragraph structure. An effective reply addresses procedural validity first, presents a factual defence second, and concludes with statutory legal submissions.
1. Preliminary objections on jurisdiction and limitation
Always commence the reply by challenging defects that go to the root of the proceedings. If the notice is issued beyond the period specified in Section 73(2) or Section 74A(2), explicitly state that the demand is time barred and barred by limitation. If the officer lacked territorial or monetary competence, place the objection on record immediately.
2. Factual rebuttal and reconciliation
Address each charge individually using clear tables. Present audited book entries, GSTR-1 filings, GSTR-3B returns, and vendor documentation. Where an input tax credit mismatch is alleged, prove actual receipt of goods or services, possession of valid tax invoices, and timely payment of supplier consideration.
3. Invoking statutory limits on demand under Section 75
Section 75 provides critical statutory safeguards against arbitrary assessment. Ensure your reply cites the following provisions:
Under Section 75(7) of the CGST Act, the adjudicating authority cannot confirm a demand that exceeds the amount specified in the notice, nor confirm a demand on grounds other than those explicitly stated in the notice. Under Section 75(6), the proper officer must set out all relevant facts and the basis of the decision in the final order.
4. Unconditional request for personal hearing
Never conclude a reply without demanding a personal hearing. State explicitly: "In the event that any adverse decision is contemplated or any part of our submissions is not accepted, we respectfully request an opportunity of personal hearing under Section 75(4) of the CGST Act before passing any final order."
Worked example: evaluating an ITC demand notice under Section 73
Consider a registered taxpayer, M/s Dynamic Traders, holding GSTIN 27AAAAA0000A1Z5, facing an ITC disallowance notice under Section 73 for Financial Year 2019-20. The annual return for FY 2019-20 was due on 31 December 2020. The proper officer served a notice alleging excess ITC claimed in GSTR-3B compared to GSTR-2A, demanding tax of ₹2,50,000 plus interest and penalty.
| Invoice number | Supplier GSTIN | Tax invoice value | ITC claimed in GSTR-3B | Taxpayer reconciliation finding | Defensible status |
|---|---|---|---|---|---|
| INV-1082 | 27ABCDE1234F1Z1 | ₹5,00,000 | ₹90,000 | GSTR-1 filed late by supplier in subsequent period | Eligible ITC (Invoice and payment verified) |
| INV-1095 | 27FGHIJ5678K1Z2 | ₹6,00,000 | ₹1,08,000 | B2C reported mistakenly by vendor; B2B amended later | Substantiated with CA vendor certificate |
| INV-1110 | 27LMNOP9012Q1Z3 | ₹2,88,889 | ₹52,000 | Vendor cancelled ab initio; supply unverified | Ineligible ITC (Voluntary reversal in DRC-03) |
In this worked case, for example, total tax demanded is ₹2,50,000 (comprising ₹90,000 + ₹1,08,000 + ₹52,000). The taxpayer demonstrates that ₹1,98,000 (₹90,000 + ₹1,08,000) represents genuine commercial supplies where goods were received, tax was paid, and supplier corrections took place. For the vulnerable ₹52,000 balance, the taxpayer deposits ₹52,000 via Form GST DRC-03 along with applicable interest under Section 50, submitting the proof in the reply.
Under Section 74A(8)(ii) in post-2024 non-fraud cases, paying tax and interest within sixty days of notice service ensures no penalty is payable and proceedings are concluded. For pre-2024 demands under Section 73, taxpayers should also check eligibility under Section 128A for interest and penalty waivers.
Filing your reply on the GST portal
A physical letter delivered to the range office does not satisfy the legal requirement of filing an online reply. Under Rule 142(4) of the CGST Rules, the reply must be submitted electronically in Form GST DRC-06.
- Log in to the GST portal using your corporate credentials.
- On the portal, navigate to Services → User Services → View Additional Notices/Orders.
- Locate the relevant case reference number for the DRC-01 notice and click View.
- Select the Replies tab and click Add Reply.
- Select Form GST DRC-06 from the options, enter your summary comments, and upload your signed legal reply as a PDF attachment along with indexed documentary exhibits.
- Sign electronically using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) and record the generated Application Reference Number (ARN).
Draft legal reply template
Use the following template as a baseline structure for drafting a response in Form GST DRC-06:
Related guides
- GST notice Form DRC-01D: recovery under Rule 142B and how to file reply
- GST notice form DRC-01C Part B reply format: reasons for difference
- GST departmental audit under Section 65 notice Form GST ADT-01 procedure, records checklist, and findings ADT-02
- GST show cause notice time limits under Section 73 and 74: extension notifications and Section 128A amnesty
Frequently asked questions
What is the statutory limitation period for issuing an order under Section 73 versus Section 74A?
Under Section 73(10), the proper officer must issue the adjudication order within three years from the due date of furnishing the annual return for the relevant financial year, and the notice under Section 73(2) must be issued at least three months prior to that order deadline. Under Section 74A(2) for Financial Year 2024-25 onwards, the show cause notice must be issued within forty-two months from the due date for furnishing the annual return.
Can an adjudicating officer confirm a demand on grounds not specified in the show cause notice?
No. Under Section 75(7) of the CGST Act, the amount of tax, interest, and penalty demanded in the order cannot exceed the amount specified in the notice, and the officer cannot confirm a demand on any grounds other than the grounds specified in the notice.
What happens if the adjudication order is not issued within the statutory deadline?
Under Section 75(10) of the CGST Act 2017, the adjudication proceedings are deemed to be concluded if the order is not issued within the period specified in sub-section (10) of Section 73, sub-section (10) of Section 74, or sub-section (7) of Section 74A.
How should a taxpayer submit a formal legal reply to Form GST DRC-01?
Under Rule 142(4) of the CGST Rules, the taxpayer must furnish the legal reply electronically in Form GST DRC-06 through the GST portal by navigating to Services, then User Services, then View Additional Notices/Orders.
Reconcile your inward supplies before audit queries turn into demands
Most GST show cause notices for input tax credit stem from unattended mismatches between your purchase register and supplier filings. gstr2bmatch.in helps you detect missing supplier invoices and timing variances before the tax department initiates demand proceedings. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 21 October 2026. Sources: CBIC CGST Act Section 73, CBIC CGST Act Section 74A, CBIC CGST Rule 142, GSTN View Notices and Orders Guide.