Law stated as on 14 October 2026, under the Central Goods and Services Tax Act, 2017 and the CGST Rules, 2017; section 9 (Appeal) updated to 18 October 2026. The State GST Acts contain corresponding provisions.
A show cause notice (SCN) is the formal start of GST demand proceedings. It sets out what the department alleges, the amount it proposes to demand, and the grounds for doing so. How the notice is read and answered usually shapes everything that follows: the hearing, the order, and any appeal.
1. Which provision governs the notice
The governing section depends on the financial year to which the alleged short payment or wrong input tax credit relates.
| Financial year | Provision | Time limit for the order | Time limit for the notice |
|---|---|---|---|
| Up to 2023-24 — no fraud alleged | Section 73 | Three years from the due date of the annual return for that year, or from the date of erroneous refund (s.73(10)) | At least three months before the order time limit (s.73(2)) |
| Up to 2023-24 — fraud, wilful misstatement or suppression alleged | Section 74 | Five years from the due date of the annual return, or from the date of erroneous refund (s.74(10)) | At least six months before the order time limit (s.74(2)) |
| 2024-25 onwards — all cases | Section 74A | Twelve months from the date of the notice, extendable by up to six months by the Commissioner, or an officer authorised by him not below the rank of Joint Commissioner, for reasons recorded in writing before expiry (s.74A(7)) | Within forty-two months from the due date of the annual return, or from the date of erroneous refund (s.74A(2)) |
Sections 73 and 74 are now confined to periods up to 2023-24 (s.73(12) and s.74(12)). Section 74A applies to 2024-25 onwards (s.74A(12)) and handles both fraud and non-fraud cases within one section, with different penalties. Under s.74A, no notice is issued where the amount for a financial year is less than ₹1,000.
2. Before the notice: Form DRC-01A
Under Rule 142(1A), the proper officer may communicate the tax, interest and penalty he has ascertained in Part A of Form GST DRC-01A before issuing the notice. The rule is worded as discretionary. A response, partial payment or submission can be made in Part B; the officer may then accept it in Part C (Rule 142(2A)).
Tax can also be paid before the notice is served, with interest, on the person’s own ascertainment or as ascertained by the officer, and intimated in Form DRC-03: under s.73(5) or s.74A(8)(i) where fraud is not involved, and under s.74(5) or s.74A(9)(i) where fraud, wilful misstatement or suppression is involved, together with a penalty of 15% of the tax. No notice is then to be served for the amount paid, but if the officer considers the payment short, a notice can be issued for the shortfall (s.73(7), s.74(7), s.74A(10)).
3. The notice and the statement
The notice is served with a summary in Form GST DRC-01 (Rule 142(1)(a)). For other periods on the same grounds, the officer may serve a statement, summarised in Form DRC-02, which is deemed to be a notice provided the grounds are the same (s.73(3)–(4), s.74(3)–(4), s.74A(3)–(4)).
4. Reading the notice
Before drafting a reply, it helps to establish:
- The financial year or years covered, and therefore whether s.73, s.74 or s.74A applies.
- Whether the notice and the eventual order fall within the time limits above.
- Whether fraud, wilful misstatement or suppression is alleged, and on what facts. Explanation 2 to s.74A defines “suppression”.
- How the amount has been quantified, and whether the documents relied upon have been supplied.
- The reply due date stated in the notice.
5. The reply
The reply to a notice whose summary is uploaded in DRC-01 is furnished in Form GST DRC-06 (Rule 142(4)). A reply typically addresses jurisdiction and limitation, then the facts, the legal position and the supporting evidence, and asks for a personal hearing.
6. Concluding early: payment options
| Provision | When paid | Penalty payable |
|---|---|---|
| s.73(8) — up to 2023-24, no fraud | Within 30 days of the notice, with interest | Nil; proceedings deemed concluded |
| s.74(8) — up to 2023-24, fraud alleged | Within 30 days of the notice, with interest | 25% of tax |
| s.74(11) — up to 2023-24, fraud alleged | Within 30 days of communication of the order | 50% of tax |
| s.74A(8)(ii) — 2024-25 onwards, no fraud | Within 60 days of the notice, with interest | Nil; proceedings deemed concluded |
| s.74A(9)(ii) — 2024-25 onwards, fraud alleged | Within 60 days of the notice, with interest | 25% of tax |
| s.74A(9)(iii) — 2024-25 onwards, fraud alleged | Within 60 days of communication of the order | 50% of tax |
Where the order is passed, the penalty otherwise is: under s.73(9), 10% of tax or ₹10,000, whichever is higher; under s.74(1), equal to the tax; under s.74A(5), 10% of tax or ₹10,000 (whichever is higher) in non-fraud cases and equal to the tax in fraud cases.
The nil-penalty option in non-fraud cases does not extend to self-assessed tax, or an amount collected as tax, that was not paid within 30 days of its due date; penalty remains payable on that amount (s.73(11), s.74A(11)).
7. Personal hearing
A personal hearing must be granted where the person requests it in writing, or where an adverse decision is contemplated (s.75(4)). Adjournments may be granted for sufficient cause, with reasons recorded, but not more than three times to a person during the proceedings (s.75(5)).
8. The order
- The order must set out the relevant facts and the basis of the decision (s.75(6)).
- The tax, interest and penalty demanded cannot exceed the amount in the notice, and no demand can be confirmed on grounds other than those in the notice (s.75(7)).
- A summary of the order is uploaded in Form GST DRC-07, and it is treated as the notice for recovery (Rule 142(5)–(6)).
- If the order is not issued within the time limit in s.73(10), s.74(10) or s.74A(7), the proceedings are deemed concluded (s.75(10)).
9. Appeal
First appeal — section 107
- Filed within three months from communication of the order; the Appellate Authority may allow a further one month for sufficient cause (s.107(1), (4)).
- Pre-deposit: the admitted amount in full, plus 10% of the remaining tax in dispute, subject to a maximum of ₹20 crore under the CGST Act (s.107(6)). For an order demanding penalty without any tax, a proviso inserted by section 129 of the Finance Act, 2025, with effect from 1 October 2025, requires 10% of the penalty. Whether that proviso applies to appeals arising from proceedings initiated before 1 October 2025 is unresolved; reported rulings say it does not, but none binds in Kerala (see the GST Appeals article).
- On payment of the pre-deposit, recovery of the balance is deemed stayed (s.107(7)).
Second appeal — section 112, GST Appellate Tribunal
- Normal period: three months from the date on which the first appellate order is communicated. Section 112(1) also refers to “the date, as may be notified by the Government, on the recommendations of the Council, for filing appeal before the Appellate Tribunal”, whichever is later.
- The notified date: Notification S.O. 3502(E) dated 30 June 2026 notifies 31 July 2026 as the date “upto which” appeals may be filed against orders communicated before 1 May 2026, and departmental applications against orders passed before 1 February 2026. For those orders it is a closing date, not the start of a fresh period. Orders communicated on or after 1 May 2026 follow the normal three-month period (six months from the order for departmental applications).
- Condonation: the Tribunal may admit an appeal within three months after the expiry of the period, if satisfied that there was sufficient cause (s.112(6)). Admission is discretionary. For the orders covered by the notified date, the period ended on 31 July 2026, so the condonation window ends on 31 October 2026; this is not an extension of the filing date.
- Pre-deposit: a further 10% of the remaining tax in dispute, in addition to the s.107(6) amount, subject to a maximum of ₹20 crore (s.112(8)). For penalty-only orders, a further 10% of the penalty under the proviso inserted by section 130 of the Finance Act, 2025, with effect from 1 October 2025; the same question about earlier proceedings arises.
- Recovery of the balance is deemed stayed until the appeal is disposed of (s.112(9)).
- Filing arrangements and any notified dates should be checked on the GST Appellate Tribunal portal at the time of filing.
For the detail on limitation, condonation of delay, pre-deposit and the GSTAT filing dates, see time limits and pre-deposit for appealing a GST order.
Related on this site
- GST Appeals under Sections 107 and 112 — the next stage after the order
- Practice areas — GST and income-tax proceedings
- You just received a GST show cause notice: what to do in the next 7 days (LinkedIn, 23 May 2026)
- Media & Insights — short videos on GST and income-tax procedure
Sources
- CGST Act, 2017 — section 73, section 74, section 74A, section 75 (CBIC Tax Information Portal).
- CGST Act, 2017 — section 107, section 112 (CBIC Tax Information Portal).
- CGST Rules, 2017 — rule 142 (CBIC Tax Information Portal).
- Sections 73(12), 74(12) and 74A inserted by the Finance (No. 2) Act, 2024 (No. 15 of 2024).
This article is for general information and education. It is not professional advice, and it does not create a professional relationship. Provisions change; verify the current text before relying on it.