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Reply to GST Notice DRC-01 DRC-01A, Common Grounds, Legal Precedents Guide

Replying to GST Demand Notices: DRC-01, DRC-01A and DRC-06

Identify the notice and deadline, verify DIN or RFN, and prepare evidence for the GST period and demand provision that apply.

By Team assureOffice9 min read

Reviewed by CA Manoj Mittal · Chartered Accountant | 30+ years in GST & Indirect Taxation

GST consultant working on a laptop

Identify what has been served

Download the complete notice, every annexure, the portal summary and proof of service. A return query, audit report or pre-notice intimation can precede adjudication, but it does not itself establish a demand. Identify the tax period and applicable provision: sections 73 and 74 concern periods up to FY 2023–24, and section 74A applies from FY 2024–25. Check the correct Central or State law and any transition provision.

DocumentPurposeResponse
DRC-01A, Part AThe proper officer may communicate an ascertained liability before service of the notice under Rule 142(1A).Reconcile the proposed amount; decide whether to pay a supported amount or respond.
DRC-01A, Part BPre-notice submissions, including when the person disputes the ascertainment or has paid only part.File evidence and keep the acknowledgment. Use DRC-03 where applicable to intimate payment.
Statutory notice and DRC-01DRC-01 is the electronic summary under Rule 142. The underlying notice identifies the allegation, legal basis and amount.Obtain both and request missing documents or workings. Preserve the date of issue and date and method of service.
DRC-06Electronic representation to the notice under Rule 142(4).Use the stated reply deadline and applicable law. Request an extension if needed, and do not assume it has been granted.
Reasoned order and DRC-07DRC-07 summarises the order and is treated as a notice for recovery under Rule 142(6).Read the full order. Check hearing, computation, recovery timing and the applicable appeal procedure independently.

Five preliminary checks

  1. Notice and particulars. Check the proper officer and whether the statutory notice, grounds, worksheets and relied-on documents are available. NKAS Services and Sidhi Vinayak Enterprises distinguish a summary from the required notice. Raise defects promptly and address the merits where possible. A procedural defect does not necessarily prevent fresh action within the law.
  2. Verify DIN or RFN. The 2019 CBIC circulars set the DIN framework for central officers, with stated exceptions. Circular 249/06/2025-GST modifies them for communications served via the common GST portal that have a verifiable Reference Number (RFN); a separate DIN is not required in that case. Pradeep Goyal directed an advisory to States to implement electronic identification. Check the relevant Central or State instructions, date and mode, rather than treating absence of a DIN as universally fatal.
  3. Test allegations of intent. For section 74 and the fraud-related consequences under section 74A, identify the alleged fraud, wilful misstatement or suppression to evade tax. A mismatch or interpretive dispute alone does not establish the allegation. Cosmic Dye Chemical and Uniworth Textiles addressed earlier indirect-tax enactments and can inform the analysis by analogy. Apply the GST wording, definition and facts. For section 74, also consider section 75(2) if the fraud-related ground fails.
  4. Request a hearing. Under section 75(4), grant of an opportunity is required where requested in writing or an adverse decision is contemplated. Bharat Mint and Graziano Trasmissioni apply the statutory safeguard. Keep the written request, portal response and hearing record. Section 75(6) requires a reasoned order, and subsection (7) restricts the amount and grounds to those specified in the notice.
  5. Calculate the relevant limitation. Sections 73 and 74 ordinarily use order limits of three and five years respectively from the applicable annual-return due date, or the date of erroneous refund where relevant. The notice must precede the order limit by at least three or six months respectively. Section 74A generally provides a 42-month notice period from the applicable annual-return due date or erroneous refund and a 12-month order period from issuance of the notice, extendable by up to six months under its conditions. Check the actual dates, extensions, exclusions and court rulings.

Section 74A’s statutory proviso uses a separate threshold below ₹1,000 for the financial year in the circumstances specified. CBIC Instruction 02/2026-GST, paragraph 3.3, directs central field formations on notices below ₹10,000 pending legislative change; it is an administrative direction, not a statutory substitution. Verify the scope and aggregation of the amount for the issuing authority.

Prepare the factual response to a credit dispute

Identify the period, applicable section 16 conditions, the issue in each invoice and the credit history. For eligible FY 2017–18 or FY 2018–19 cases, Circular 183 addresses specified GSTR-2A mismatches and requires checks, including a CA or CMA certificate with UDIN when the supplier-wise annual difference exceeds ₹5 lakh, or a supplier certificate in the applicable lower band. Apply the law for the year; later periods can have different matching restrictions, including section 16(2)(aa) where applicable.

The Calcutta High Court’s Suncraft Energy ruling concerned particular historical facts. The Supreme Court declined to interfere having regard to the facts and low demand; it did not decide the issue on merits or establish a universal supplier-first rule. The Madras High Court in D.Y. Beathel Enterprises remanded after identifying defects in the inquiry, including failure to examine the supplier. In LGW Industries, the Calcutta High Court directed factual verification of genuineness and eligibility. Prior active registration, an invoice and bank payment are relevant evidence, but none alone establishes admissibility. Section 155 places the credit burden on the claimant.

Structure the reply

PartIncludeCheck before filing
Preliminary pointsJurisdiction, notice, identifiers and limitation.Specify the exact procedural defect and relief sought.
FactsChronology, period, registrations and documents.Keep dates tied to records.
Allegation-by-allegation responseLegal and factual response with an independent computation.Separate principal, interest and penalty and avoid duplicate periods or credits.
AnnexuresInvoices, bank payments, delivery and return evidence as applicable.Index each item against the allegation and keep the filed set.
RequestState the proposed resolution, request the hearing in writing and reserve any evidence issue.Retain the upload acknowledgment and record any supplementary submissions.

Seven worked illustrations

Figures and outcomes are hypothetical. A proposed amount is not an independently established liability.

1. Summary proposes ₹42 lakh without the underlying notice

Verify whether the full notice was separately served. If the summary is the only document located, identify the omission in DRC-06, request the notice and invoice-level computation, and preserve the filing deadline and objection. The ₹42 lakh remains a proposal without supporting particulars; there is no reliable basis to recalculate it yet.

2. FY 2018–19: ₹18.50 lakh GSTR-2A difference

Assume the difference concerns one supplier. If Circular 183 applies, ₹18.50 lakh exceeds ₹5 lakh, so test the CA/CMA certificate route and independently document receipt, payments and other ITC conditions. A hypothetical section 73 penalty at 10% or ₹10,000, whichever is greater, would be ₹1.85 lakh if the full tax and that penalty were sustained. For a separate illustration, 90 days of full wrongful utilisation at an assumed applicable annual rate of 18% gives approximately ₹82,110 interest on a 365-day basis. Use actual utilisation and applicable interest law rather than charging a flat percentage of the claimed credit.

3. December 2023 notice for FY 2017–18

A notice cites section 74 and alleges that ₹1.20 crore of disclosed export-service value was wrongly zero-rated. At an assumed 18% domestic rate, the potential principal before other issues is ₹21.60 lakh. If Notification 09/2023 governs the corresponding section 73 route, the extended order date was 31 December 2023 and a December notice would not satisfy the three-month minimum lead time. Check the applicable extension, any order or exclusion, and section 75(2) separately. Provide returns, contracts, place-of-supply analysis, receipt evidence and LUT, where applicable. A disclosed classification dispute does not itself prove fraud.

4. ₹28 lakh order without a hearing

Obtain the full order and service record. If no opportunity was given before an adverse decision, raise section 75(4) and the applicable authorities. Use the proper remedy and check appeal timing and pre-deposit separately; a remand does not itself cancel the underlying tax on the merits.

5. Supplier registration cancelled retrospectively

Assume steel purchases of ₹50 lakh in August 2021, with ₹9 lakh tax at an illustrative 18%, and retrospective cancellation later. Corroborate the transaction using the invoice, movement and receipt, supplier and bank records, and statutory eligibility for that period. Apply LGW Industries as a fact-verification authority rather than assuming a registration screenshot alone preserves the credit.

6. ₹6.50 lakh reverse-charge proposal for cloud hosting

At an assumed 18%, the proposed tax implies approximately ₹36,11,111 of taxable base before rounding. Reconcile invoice by invoice and identify the contracting and invoicing entity, supplier location, recipient and place of supply. In Part B of DRC-01A, explain which supplies are domestic forward-charge supplies on the actual facts and which, if any, are imported. The provider’s brand alone does not establish either treatment.

7. Turnover difference of ₹1.10 crore

Assume the variance is fully traced to ₹65 lakh of documented distinct-registration entries, ₹30 lakh of supported cutoff differences and ₹15 lakh of reconciled credit-note timing in the direction of the bridge. These sum to ₹1.10 crore. Attach the GSTIN-wise schedules and explain why each item does or does not affect the demand. Retain evidence of the hearing and actual outcome.

Frequently asked questions

1. Is DRC-06 always due in 30 days?

No universal 30-day reply period follows from Rule 142(4). Check the notice and governing provision. Do not confuse a payment concession with a reply deadline.

2. When is a hearing required?

When requested in writing or where an adverse decision is contemplated under section 75(4). Make a clear written request and preserve proof.

3. Is absence of a DIN enough to invalidate the notice?

Verify the issuing authority’s instructions and any RFN, date and exception. Circular 249 permits a valid verifiable RFN in the portal circumstances it specifies.

4. Does a DRC-03 payment end the matter?

Check the provision and completeness of payment. Section 73 can allow non-fraud closure on qualifying tax and interest payments, with a 30-day post-issue window and statutory exceptions. Section 74 has different penalty conditions; section 74A uses its own pre-notice and 60-day post-issue rules. Obtain and reconcile the applicable acknowledgment or closure record.

5. Does Suncraft override all matching rules?

No. Apply its factual and historical limits and verify statutory conditions and evidence for the period.

6. What can accounting software do?

Build the document trail and recompute each proposed amount. Review the law, unresolved exceptions and actual filing before relying on the result.

Sources

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