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How to Reply to GST DRC-01 Notice – Complete Step-by-Step Guide (2024–25)

By a Practicing Chartered Accountant | Updated: June 2025

Got a GST DRC-01 notice in your inbox and panicking? Take a deep breath. You’re not alone — thousands of taxpayers and businesses receive this notice every month. In this guide, I’m going to walk you through exactly what this notice means, why you received it, and — most importantly — how to reply to it step by step, without making costly mistakes.

1. What Is a GST DRC-01 Notice? {#what-is-gst-drc-01}

GST DRC-01 stands for Demand and Recovery Certificate – Form 01. It is a Summary of Show Cause Notice (SCN) issued under Section 73 or Section 74 of the CGST Act, 2017.

In plain language? The GST department is telling you:

“We think you owe us tax, interest, and/or penalty. Here’s why. Tell us your side of the story.”

This is not a final demand — it’s the beginning of an adjudication process. You have a fair opportunity to present your case, submit documents, and contest the demand before any final order is passed.

Think of it as a legal summons. Ignoring it is the worst thing you can do.

DRC-01 at a Glance

Feature	Details
Full Form	Demand and Recovery Certificate – Form 01
Issued Under	Section 73 / Section 74, CGST Act, 2017
Nature	Summary of Show Cause Notice (SCN)
Reply Form	DRC-06
Reply Deadline	As specified in the notice (usually 30 days from service)
Consequence of Non-Reply	Ex-parte order, best judgment assessment

2. Why Did You Receive a GST DRC-01 Notice? {#why-did-you-receive-it}

There are several reasons the GST department issues a DRC-01. Based on my experience handling hundreds of such cases, here are the most common triggers:

✅ Tax Discrepancies

Mismatch between GSTR-1 (outward supplies) and GSTR-3B (tax paid) — if your GSTR-3B shows less tax paid than what GSTR-1 reflects.
Mismatch between GSTR-2A/2B and the ITC claimed in GSTR-3B — excess Input Tax Credit (ITC) claimed.

✅ ITC-Related Issues

ITC claimed on ineligible items (Section 17(5) blocked credits — motor vehicles, club memberships, personal expenses, etc.)
ITC availed beyond the time limit under Section 16(4)
ITC availed from cancelled or non-existent suppliers
Fake ITC claims (this triggers Section 74 — fraud/wilful misstatement)

✅ Non-Filing or Delayed Filing

Non-payment or short payment of GST for certain return periods
Reverse charge mechanism (RCM) liability not discharged properly

✅ Annual Return vs. Audit Discrepancies

Differences in GSTR-9 (Annual Return) and GSTR-9C (Reconciliation Statement) compared to books of accounts

✅ Departmental Audits / Scrutiny

During GST audit under Section 65, if officers find irregularities
Post GST investigation under Section 67 (search/seizure)

Pro tip from my practice: The most frequent DRC-01 notices I see in 2024-25 relate to ITC mismatch (GSTR-2B vs GSTR-3B) and Section 16(4) ITC reversals. If yours is one of these, scroll to the real-life example section — I’ve covered it there in detail.

3. Is DRC-01 a Show Cause Notice or a Demand Notice? {#drc-01-scn-or-demand}

This is a question I get from clients almost every week, so let me clear it up once and for all.

DRC-01 is technically a Summary of the Show Cause Notice — not the final demand.

Here’s how the process works:

Audit / Scrutiny / Detection
         ↓
Show Cause Notice (SCN) – Detailed
         ↓
DRC-01 – Summary of SCN served on taxpayer
         ↓
Taxpayer files DRC-06 (Reply/Response)
         ↓
Personal Hearing (if requested)
         ↓
Final Order in DRC-07

The actual detailed SCN is attached along with the DRC-01. Always read both carefully — the DRC-01 is just the cover summary; the SCN is where all the specific allegations, figures, and legal grounds are laid out.

4. What Happens If You Ignore a GST DRC-01 Notice? {#what-happens-if-you-ignore}

I’ll be direct with you — ignoring this notice is financial suicide.

If you don’t respond within the stipulated time:

Ex-parte order: The adjudicating officer will pass an order against you without hearing your side — this is called a best judgment assessment.
Demand becomes final: The tax, interest (18% p.a. under Section 50), and penalty (up to 100% of tax under Section 74 — fraud cases) get confirmed as a final demand.
Recovery action: The department can initiate recovery under Section 79, which includes:
- Attachment of your bank accounts
- Attachment of property
- Recovery from debtors
Impact on future compliance: Non-compliance history can trigger more scrutiny, possible suspension of GSTIN, etc.

Bottom line: Always reply, even if you think the demand is wrong. Filing a reply preserves your legal rights and buys you time to contest the matter properly.

5. Time Limit to Reply to GST DRC-01 Notice {#time-limit}

The time limit to reply to a DRC-01 is generally 30 days from the date of service of the notice — but always check the specific date mentioned in the notice itself, because it can vary.

Scenario	Time Limit
Standard reply to DRC-01	30 days from date of notice (as specified)
Section 73 cases (non-fraud)	Up to 3 years from the due date of annual return
Section 74 cases (fraud/suppression)	Up to 5 years from the due date of annual return
Extension of time	Can be requested in writing; subject to officer’s discretion

Important: If you need more time to gather documents, write to the adjudicating officer requesting an extension. Don’t just let the deadline pass silently.

6. Step-by-Step Guide to Reply to GST DRC-01 {#step-by-step-guide}

Let me walk you through this process exactly the way I do it for my clients.

Step 1: Read the Notice Carefully — All of It

Don’t panic when you see the notice. Sit down with a cup of tea and read:

The DRC-01 summary — it tells you the tax period, the amount in dispute, and the section invoked (73 or 74)
The attached SCN — this has the detailed allegations, specific transactions, and the department’s legal reasoning
The deadline — note the exact date by which you need to file a reply

Make a note of:

Amount of tax alleged
Interest charged
Penalty proposed
Section under which notice is issued (73 = non-fraud; 74 = fraud)

Step 2: Identify the Exact Issue

This is where you need to do your homework. The department has raised a specific allegation — your job is to:

Pull up the relevant GST returns (GSTR-1, GSTR-3B, GSTR-2A/2B) for the period mentioned
Cross-check with your books of accounts
Identify whether the department’s computation is correct, partially correct, or completely wrong

Common findings at this stage:

The mismatch might be due to a timing difference (invoice reported in later period)
ITC might have been availed but subsequently reversed in a later return
The department may have used wrong figures from their system (it happens!)
You may have already paid the tax in question but it’s not reflecting correctly

Step 3: Gather Your Evidence and Documents

Depending on the nature of the notice, collect the relevant documents:

For ITC-related notices:

Purchase invoices corresponding to ITC claimed
GSTR-2A / GSTR-2B auto-populated data
Payment proof showing supplier has filed their returns
Bank statements reflecting actual payments made to suppliers

For output tax mismatch:

Sales invoices for the disputed period
Reconciliation between books and GSTR-1
Reasons for any differences (credit notes, return of goods, etc.)

For RCM-related notices:

Import of services invoices
RCM liability computation
Payment challans (DRC-03) if tax has already been paid

Always keep:

Copies of all GST returns filed
Acknowledgements and filing records
Any correspondence already made with the department

Step 4: Prepare Your Legal Reply

The reply needs to address every single allegation in the SCN — point by point. A vague reply like “the demand is not tenable” will get you nowhere.

Structure your reply like this:

Section 1 – Introductory Paragraph Brief introduction about your business, registration, and the notice received.

Section 2 – Background and Facts State the facts from your side — what transactions are involved, how they were reported, and the period in question.

Section 3 – Submissions (Point-by-Point) Address each allegation raised in the SCN with:

Your counter-argument
Supporting legal provisions (cite the CGST Act / Rules / Circulars)
Relevant case laws (if applicable)
Exhibits/annexures to back your stand

Section 4 – Relief Sought Clearly state what you want: “In view of the above submissions and documents, it is humbly prayed that the proceedings be dropped and no demand be confirmed.”

Section 5 – Request for Personal Hearing Always request a personal hearing — it gives you another opportunity to present your case before an order is passed.

Step 5: File the Reply Online via DRC-06

Once your reply is ready, you need to file it on the GST portal through Form DRC-06. I’ve explained this in detail in the next section.

Step 6: Attend the Personal Hearing

After you file DRC-06, the officer will schedule a personal hearing. Take this seriously:

Appear in person or through your authorized representative (CA/Advocate with Form GST PCT-5/VAPT)
Carry hard copies of all documents
Be prepared to explain your position clearly
Take notes of what the officer says
If needed, submit additional documents after the hearing

Step 7: Await the Final Order (DRC-07)

After the hearing, the officer will issue a final order in Form DRC-07. This can be:

Dropping the proceedings (best outcome — means you won!)
Partial confirmation of demand
Full confirmation of demand

If you disagree with DRC-07, you can appeal before the Appellate Authority under Section 107 of the CGST Act within 3 months of the order.

7. How to File DRC-06 (Reply Form) on the GST Portal {#file-drc-06}

Here’s the exact navigation on the GST portal to file your reply:

Step 1: Log in to www.gst.gov.in with your GSTIN credentials

Step 2: Go to Services → User Services → My Applications

Step 3: Under “Application Type”, select “Reply to Show Cause Notice”

Step 4: You’ll see a list of all SCNs/DRC-01 notices issued to you. Click on the relevant one.

Step 5: Click “Proceed” — this will open the DRC-06 filing screen

Step 6: In the DRC-06 form:

Part A – Pre-filled with details from the SCN (verify accuracy)
Part B – Enter your response/explanation in the text box
Attachments – Upload supporting documents (PDF format, max 5 MB per file, up to 10 files typically)

Step 7: Review everything carefully, then digitally sign using DSC (Digital Signature Certificate) or e-verify using EVC (OTP on registered mobile)

Step 8: Submit. You’ll receive an ARN (Acknowledgement Reference Number) — save this carefully.

Technical tip: The GST portal can be slow. File at least 2-3 days before the deadline so you’re not scrambling on the last day if the portal acts up. Keep a screenshot of successful submission.

8. What to Include in Your Reply {#what-to-include}

Here’s a quick checklist for what your DRC-06 reply must cover:

[ ] Reference to the SCN/DRC-01 notice number and date
[ ] Brief facts of your business and the period involved
[ ] Point-by-point response to each allegation
[ ] Legal provisions supporting your position (CGST Act sections, Rules, Circulars, Notifications)
[ ] Relevant judicial precedents (High Court / Supreme Court judgments, if available)
[ ] Supporting documents as annexures (invoices, returns, bank statements, etc.)
[ ] Reconciliation statements (if mismatch-related)
[ ] Request for dropping proceedings
[ ] Request for personal hearing

9. What If You Agree with the Demand? {#if-you-agree}

If you agree — either fully or partially — with the demand raised in the DRC-01, here’s what to do:

If You Agree Fully (Section 73 cases — Non-Fraud):

Pay the tax + interest (no penalty if paid before SCN or within 30 days of SCN)
File DRC-03 (voluntary payment form) to make the payment
Inform the officer by filing DRC-06 mentioning that payment has been made
The officer should drop the proceedings after verifying payment

If You Agree Fully (Section 74 cases — Fraud):

Pay tax + interest + 15% penalty if paid within 30 days of DRC-01
Penalty reduces from 100% to 25% if paid within 30 days of SCN order

If You Agree Partially:

Pay the undisputed amount using DRC-03
Contest the balance through DRC-06

CA’s advice: Even if you think you owe the money, always verify the computation independently before paying. I’ve seen many cases where the department’s figures were wrong. Pay what is clearly due; contest the rest.

10. Common Mistakes to Avoid {#common-mistakes}

After handling hundreds of DRC-01 replies, here are the mistakes I see taxpayers make repeatedly:

❌ Missing the Deadline

The #1 mistake. Set a calendar reminder the moment you receive the notice. Missing the deadline = ex-parte order against you.

❌ Filing a Vague or Generic Reply

“The demand is not sustainable in law” is not a reply. Every allegation needs a specific, evidence-backed response.

❌ Not Reading the SCN Fully

The DRC-01 is a summary. The real substance is in the SCN. Many taxpayers reply to what they think the notice says, not what it actually says.

❌ Not Attaching Supporting Documents

Your words are not enough. Every claim in your reply needs documentary evidence.

❌ Ignoring Section 74 Implications

If the notice is under Section 74 (fraud/suppression), the penalty exposure is massive (up to 100% of tax). Get a CA/advocate involved immediately.

❌ Not Requesting a Personal Hearing

This is a free opportunity to present your case verbally. Always request it — it significantly improves outcomes.

❌ Paying Under Pressure Without Verification

Some taxpayers pay the entire demand just to “make it go away.” Don’t. Verify the computation first; you may be paying more than you owe.

11. DRC-01 vs DRC-01A vs DRC-01B – Know the Difference {#drc-types}

The GST department uses several DRC forms — here’s a quick breakdown so you don’t confuse them:

Form	Purpose	When Issued
DRC-01	Summary of Show Cause Notice	When department detects unpaid/short-paid tax; starts adjudication
DRC-01A	Intimation of tax ascertained	Before issuing formal SCN (pre-SCN stage under Section 73/74); informal opportunity to pay
DRC-01B	Difference in ITC (auto-generated)	When GSTR-2B ITC > ITC availed in GSTR-3B; taxpayer must accept difference or explain
DRC-01C	Difference in output tax liability	When GSTR-1 liability > GSTR-3B paid amount; system-generated mismatch notice

Key insight: If you receive a DRC-01A, it’s actually a good thing — it means the department is giving you a chance to pay up voluntarily before a formal SCN is issued. Paying at DRC-01A stage usually means no penalty under Section 73.

12. Real-Life Example: How to Draft a Strong Reply {#real-life-example}

Let me give you a practical example based on the most common scenario I encounter.

Situation: You receive DRC-01 for ₹5,00,000 of ITC reversal demand because the department says you claimed ITC on invoices that don’t appear in GSTR-2B for FY 2022-23.

Your Position: You have valid tax invoices from suppliers who filed their returns late, but did ultimately file. The ITC is legitimate.

How to Structure Your Reply:

[DRAFT REPLY STRUCTURE — FOR REFERENCE ONLY]

To, The Adjudicating Officer, [Office Name and Address]

Subject: Reply to Show Cause Notice No. [XXX] dated [date] issued in Form DRC-01

Reference: SCN No. [XXX] for the period April 2022 to March 2023

Sir/Madam,

This is in response to the Show Cause Notice (SCN) dated [date] issued to us in Form DRC-01 proposing a demand of ₹5,00,000 towards alleged excess ITC availed during FY 2022-23.

Facts of the Case: The undersigned is a registered taxpayer under GST bearing GSTIN [XXXXXXXXX], engaged in [nature of business]. The department has alleged that ITC of ₹5,00,000 was claimed on certain invoices that do not appear in GSTR-2B.

Submissions:

Regarding ITC eligibility: The ITC in question was availed on the basis of valid tax invoices received from registered suppliers. The invoices fulfilled all conditions of Section 16(2) of the CGST Act — the goods/services were received, tax was charged separately, payment was made to the supplier within 180 days, and returns were filed.
Regarding GSTR-2B non-reflection: The said suppliers, while delayed in filing, have subsequently filed their GSTR-1/IFF, and the invoices now reflect in the updated GSTR-2A. A reconciliation statement showing the same is enclosed as Annexure A.
Legal Position: As per Circular No. 183/15/2022-GST dated 27.12.2022, ITC cannot be denied solely on the basis of non-reflection in GSTR-2B if the taxpayer has a valid invoice and can demonstrate that the supplier has paid the tax. Further, the Hon’ble [High Court] in [Case Name] held that…
Supporting Documents: We enclose the following:
- Annexure A: Reconciliation of ITC claimed vs. GSTR-2B
- Annexure B: Copies of tax invoices (supplier-wise)
- Annexure C: Bank statements confirming payment to suppliers
- Annexure D: Updated GSTR-2A showing reflection of invoices

Prayer:

In view of the above, it is most respectfully prayed that this Hon’ble officer may be pleased to: (a) Drop the proposed demand of ₹5,00,000; and (b) Grant the applicant an opportunity of personal hearing.

We remain committed to full cooperation with the department.

Yours faithfully, [Authorized Signatory] [GSTIN / PAN] [Date]

This is a sample structure — every reply must be tailored to the specific facts of your case.

13. Frequently Asked Questions (FAQs) on GST DRC-01 {#faqs}

Q1. Can I withdraw my reply after filing DRC-06? No, once DRC-06 is submitted, it cannot be withdrawn. However, you can file a revised reply by submitting a fresh DRC-06 before the deadline, referencing the earlier submission.

Q2. Is there any fee for filing DRC-06? No, there is no fee for filing a reply to DRC-01 on the GST portal.

Q3. Can someone else file the reply on my behalf? Yes — your CA, CMA, or GST Practitioner who is authorized on the GST portal under your GSTIN can file the reply on your behalf.

Q4. What is the difference between Section 73 and Section 74 notices? Section 73 covers cases of non-fraud (simple tax shortfall, ITC mismatch). Section 74 is for cases involving fraud, suppression of facts, or wilful misstatement — the scrutiny is stricter and penalty exposure is much higher.

Q5. Can I settle the matter through GST Amnesty Scheme? If such a scheme is in force (check for current notifications), yes — eligible taxpayers can settle pending demands by paying reduced amounts. The GST Council has periodically announced amnesty schemes; consult a CA for the latest status.

Q6. What if the demand amount is very small? Should I still reply? Absolutely yes. Any uncontested demand becomes a final order, which affects your compliance record and can be used in future assessments.

Q7. How long does it take for the officer to pass a final order after I reply? There’s no fixed timeline, but under Section 73/74, the adjudication must be completed within the prescribed limitation period. Personal hearings are typically scheduled within 30-60 days of reply.

Q8. Can I appeal if the DRC-07 order goes against me? Yes. You can appeal before the Appellate Authority (Commissioner Appeals) under Section 107, CGST Act within 3 months of DRC-07. Pre-deposit of 10% of the disputed tax is required to file an appeal.

Wrapping Up — What You Should Do Right Now

Receiving a GST DRC-01 notice feels stressful, but it’s manageable if you act promptly and respond intelligently. Here’s a quick recap:

Don’t ignore it — ever.
Read the DRC-01 AND the detailed SCN carefully.
Identify the exact issue and gather your documents.
File a specific, evidence-backed reply in Form DRC-06 well before the deadline.
Request a personal hearing.
If the order goes against you, appeal within 3 months.

The GST system gives you a fair opportunity to contest demands — but you have to use it. A well-prepared reply, backed by solid documentation and the right legal arguments, can result in proceedings being fully dropped.

🔔 Need Help Replying to Your GST DRC-01 Notice?

Handling a DRC-01 notice incorrectly can cost you lakhs in unnecessary taxes, penalties, and interest. As a practicing Chartered Accountant with hands-on experience in GST litigation and advisory, I help businesses:

Analyze the notice and identify the real issue
Draft a strong, customized reply with the right legal arguments
Represent you during personal hearings
File appeals if the order goes against you

👉 Book a Free 30-Minute Consultation

Whether it’s a ₹10,000 demand or a ₹1 crore notice — don’t face it alone.

If you found this guide helpful, share it with a fellow business owner who might need it. And if you have questions specific to your situation, drop them in the comments below — I read and respond to every query.

Disclaimer: This article is written for general informational and educational purposes only. It does not constitute legal or professional advice. Tax laws are subject to change; always consult a qualified Chartered Accountant or GST practitioner for advice specific to your situation.