A GST show-cause notice (SCN) is a proposal, not a final tax demand. It states the tax department’s allegations and the amount it proposes to recover, then gives you an opportunity to explain. A demand order is the adjudicating officer’s decision after considering the notice and any response. It determines liability and can trigger recovery and appeal deadlines.
The document name, tax period, statutory section, service date and electronic form matter. Treat an SCN as a deadline-driven defence exercise; treat a demand order as an immediately actionable decision. The guidance below follows the Indian CGST framework and corresponding state or Union territory provisions, checked against the law in force through October 2026. It is general information, not a determination of any individual case.
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SCN and demand order: the difference in one view
| Point of comparison | Show-cause notice (SCN) | Demand order |
|---|---|---|
| Procedural stage | Before adjudication; the officer proposes a liability and invites an explanation. | After adjudication; the officer records findings and determines the liability. |
| What it asks you to do | Explain why the proposed tax, interest or penalty should not be confirmed, and provide evidence. | Comply with, challenge or otherwise address an already determined liability through payment, appeal, rectification or another available route. |
| Typical electronic summary | FORM GST DRC-01 for covered notices. | FORM GST DRC-07, which summarizes the order. |
| Legal effect | It does not by itself finally adjudicate the demand. | The DRC-07 order summary is treated as the notice for recovery under rule 142(6). |
| Key date | The response date and any hearing date stated in the notice, read with the applicable section. | The date the decision or order is communicated, because the appeal period runs from communication. |
| Available response | Reply and evidence, request a hearing, make a permitted payment, and correct factual or procedural errors before the order. | Appeal, payment, stay-related relief, rectification or another procedure that fits the facts and current law. |
Do not use the terms interchangeably. Calling an SCN a “final demand” can lead to premature payment or a missed opportunity to contest the allegations. Calling a demand order “just a notice” can cause a missed appeal period and expose the amount to recovery action.
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The tax period is a threshold issue. The 2024 amendment provides that sections 73 and 74 apply to determinations for periods up to financial year (FY) 2023-24, while section 74A applies to matters pertaining to FY 2024-25 onward. Read the section and the period printed in the actual notice; do not assume that the newest provision governs an earlier period.
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Section 73: cases other than fraud allegations
Section 73 covers tax that was not paid, was short-paid, was erroneously refunded, or input tax credit that was wrongly availed or utilised in cases other than fraud, wilful misstatement or suppression of facts to evade tax. The officer must still establish the statutory basis and calculation in the notice.
Section 74: fraud, wilful misstatement or suppression
Section 74 is used where the notice alleges fraud, wilful misstatement or suppression of facts to evade tax. That allegation affects the statutory treatment, potential penalty and the way the notice should be defended. Ask the officer to identify the facts said to constitute the allegation rather than responding only to the amount.
Section 74A: FY 2024-25 onward
Section 74A addresses unpaid or short-paid tax, erroneous refunds and wrongly availed or utilised input tax credit for the later periods covered by the amendment. Check whether the notice expressly identifies FY 2024-25 or a later year and whether its reasoning matches the wording of section 74A.
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- Separate each financial year and tax period in your reconciliation.
- Check whether the same invoice, credit note or credit entry appears in more than one period.
- Compare the section in the notice with the period stated in its heading, annexures and DRC-01 summary.
- If the section and period appear inconsistent, raise that issue clearly in the reply instead of silently assuming the officer will correct it.
How to identify what you received
Read the document title and the portal record
Download the complete communication from the GST portal, including every annexure, computation sheet and attachment. Save a PDF copy and screenshots showing the portal path, document number and download date. A message in email or SMS may alert you to a notice, but the operative content is the document served through the statutory channel and any service evidence attached to it.
Check the DRC form sequence
| Form | Role in the process | What it does not mean |
|---|---|---|
| DRC-01A | A pre-notice communication in the specified section 73/74 process; Part B can be used for a submission before the formal notice. | It is not the final adjudication order. |
| DRC-01 | Electronic summary accompanying covered show-cause notices. | It is not, by itself, proof that the proposed amount has been finally confirmed. |
| DRC-06 | Reply or representation to the notice in covered proceedings. | Filing it does not guarantee acceptance of the defence or stop every statutory consequence. |
| DRC-03 | Payment intimation where the applicable rule and section permit that route. | Payment does not automatically settle every issue or erase a separate penalty or procedural requirement. |
| DRC-04 | Acknowledgement in circumstances covered by rule 142. | It should not be treated as a universal discharge certificate. |
| DRC-05 | Conclusion of proceedings in circumstances covered by rule 142. | Its availability and effect depend on the provision and facts. |
| DRC-07 | Summary of the adjudication order. | It is not merely another invitation to make an initial explanation; under rule 142(6), it is treated as the notice for recovery. |
Portal labels and workflows can change. If a form number, attachment or menu differs from the version described here, preserve what the portal displays and compare it with the current CGST Rules and the notice’s statutory section.
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What to do immediately after an SCN
- Secure the record. Download the full notice, DRC-01 summary, annexures, relied-on documents, portal acknowledgement and proof of service. Record when and how you received it, the response date, the hearing date (if any) and the officer’s contact or designation.
- Make a requirement sheet. Write down the tax period, section, alleged conduct, tax amount, interest, penalty, cess or other components, documents cited and the precise relief or explanation requested.
- Test the summary against the notice. Check that the DRC-01 figures, period, registration number, issue description and annexures match the full SCN. Flag missing pages, arithmetic differences and allegations appearing only in an attachment.
- Build a transaction reconciliation. For every disputed item, match returns, invoices, e-invoices where relevant, books, electronic liability and credit ledgers, payment challans, credit notes, contracts, delivery records and correspondence. Mark each line as admitted, partly admitted or disputed.
- Separate facts from law. Prepare one section addressing what happened and another explaining why the proposed legal treatment is incorrect. If the department relies on fraud, wilful misstatement or suppression, answer the factual basis for that allegation directly.
- Prepare an indexed evidence bundle. Use a numbered index and cross-reference each document to the paragraph or table in your reply. This lets the officer locate a source without searching through an unstructured upload.
- File the prescribed response. Where rule 142 applies, use FORM GST DRC-06 for the reply or representation and retain the portal acknowledgement, ARN or other filing proof.
- Request a hearing when useful. Section 75 includes a hearing safeguard where a hearing is requested in writing or an adverse decision is contemplated, subject to the Act’s terms. State the issues that require oral clarification and keep a copy of the written request.
- Deal with payment deliberately. If you accept all or part of the amount, confirm the applicable statutory route and consequence before paying. Where permitted, DRC-03 may be used for payment intimation, with DRC-04 or DRC-05 potentially relevant in the covered circumstances. Record exactly which period and issue the payment addresses.
- Obtain advice early for high-risk cases. Prompt advice from a qualified GST practitioner, chartered accountant or tax lawyer is particularly sensible where the amount is material, fraud or suppression is alleged, records are complex, or service and limitation are uncertain.
Reply deadlines and the hearing opportunity
There is no single reply-day number that applies to every GST notice. Use the date and instructions printed on your specific SCN, then read the governing section and any amendment applicable to its tax period. Do not substitute a deadline from an unrelated notice or an internet checklist.
If the deadline is close
- File a substantive response with the documents already available rather than waiting for a perfect bundle.
- Explain which records are being gathered and request reasonable time if the governing procedure allows it.
- Submit a written hearing request and preserve the acknowledgement.
- Document portal outages, failed uploads or service problems with screenshots, timestamps and help-desk references.
If service is disputed
Do not simply ignore the notice. State the service objection, explain when you actually became aware of the communication, and file a protective response if possible. Whether service was legally effective and whether an extension is available depends on the facts and applicable law.
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How to write a persuasive SCN reply
Start with a short position statement
Identify the notice number, registration, period and your overall position: admitted, partly admitted or denied. State the relief sought, such as dropping the proposal, correcting an arithmetic error or limiting the amount to a specific undisputed figure.
Use a point-by-point format
- Quote or accurately paraphrase the allegation and identify its page or annexure.
- Give the factual answer with the corresponding invoice, return, ledger or contract reference.
- Explain the legal reason the allegation does not establish the proposed liability.
- State the corrected computation, if one is necessary.
- List the evidence supporting that paragraph.
Check the computation independently
Recalculate tax, interest and penalty by period and tax head. Reconcile the proposed amount to returns and payments. Identify duplicate invoices, credit notes, reversals already made, wrong tax heads, input credit entries belonging to another registration and amounts that were paid earlier. Show the calculation in a table so the officer can see the disputed difference.
Answer procedural defects without relying on them alone
If the notice omits a relied-on document, uses an inconsistent period or introduces a new ground in an annexure, identify the defect and request the missing material or correction. Also answer the underlying allegation where records permit; a purely technical reply can leave the merits unanswered.
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What a demand order changes
A demand order is the adjudicating decision. Obtain both the full speaking order and its DRC-07 summary. Note the communication date, tax, interest and penalty split, findings on each issue, payment instructions and the mode of service.
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Section 75 limits the order to the amount specified in the notice and bars confirmation on grounds other than those specified in that notice. Create a three-column comparison: allegation in the SCN, response and evidence, finding in the order. Highlight any amount above the notice, new legal ground, unaddressed evidence or finding that does not explain the calculation.
Understand the recovery consequence
Rule 142(6) states: “The order referred to in sub-rule (5) shall be treated as the notice for recovery.” Therefore, a DRC-07 summary is not a harmless status update. Once the order is communicated, obtain advice promptly on payment, appeal, stay-related relief, rectification or another route that applies to the facts.
Appealing a GST demand order
- Record the communication date. Section 107(1) ordinarily allows three months from communication of the decision or order to appeal to the Appellate Authority.
- Check whether delay can be condoned. Section 107(4) permits a further period of up to one month where sufficient cause prevented filing within the ordinary period. It is not an automatic extra month; document the cause and file as soon as possible.
- Verify the current filing mechanics. Confirm the applicable appeal form, portal route, pre-deposit, mandatory payment components, document format and any case-specific extension or special relief in force when you file.
- Assemble the appeal record. Include the order, DRC-07, SCN and DRC-01, your DRC-06 reply, hearing request and proof, relied-on evidence, computation and service documents.
- Frame grounds against the actual findings. Address jurisdiction, limitation, section selection, factual errors, calculation, breach of hearing or natural-justice safeguards, and the statutory limit on the order’s grounds and amount where applicable.
- Plan recovery risk separately. Filing an appeal and obtaining protection from recovery are related but distinct questions. Confirm what payment or stay steps are required under the current procedure.
Payment, settlement and partial admission
Payment can be sensible where liability is accepted or a statutory payment route reduces exposure, but the legal effect depends on the section, timing and facts. Before using DRC-03, identify the exact tax period, tax head and issue being paid. Ask whether interest and penalty remain, whether the payment concludes proceedings, and whether an acknowledgement or conclusion form is available.
For a partly disputed notice, separate the admitted amount from the defended amount in both the computation and the covering explanation. Preserve challans and portal acknowledgements. Never describe a payment as “full and final” unless the applicable provision and written departmental record support that characterization.
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Common mistakes and how to correct them
Mistake: treating DRC-01 as the final demand
Correction: Treat it as the electronic summary of a covered SCN, prepare the reply and evidence, and wait for the adjudication process unless a separate statutory payment or other step is appropriate.
Mistake: treating DRC-07 as another request for explanation
Correction: Obtain the speaking order, record the communication date and assess appeal and recovery immediately.
Mistake: applying section 74A to an earlier year automatically
Correction: Read the tax period and section together. The 2024 transition places sections 73 and 74 on periods through FY 2023-24 and section 74A on FY 2024-25 onward.
Mistake: sending an unindexed document dump
Correction: Use an index, document numbers and paragraph cross-references. Explain what each record proves.
Mistake: missing the hearing request
Correction: Request a hearing in writing when clarification is needed and retain proof of the request.
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Mistake: assuming a generic reply deadline
Correction: Follow the date in the individual notice and check the governing section and amendments for that period.
Mistake: paying without identifying the consequence
Correction: Confirm whether the payment is voluntary, pre-adjudication, linked to a specific statutory option, or merely an intimation, and whether it addresses tax, interest, penalty or all of them.
Mistake: waiting until the appeal period is almost over
Correction: Calendar three months from communication on the day the order is received, investigate pre-deposit and filing requirements immediately, and treat the possible one-month condonation window as exceptional rather than routine.
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Practical document checklists
SCN file
- Full SCN and every annexure
- DRC-01 and, where applicable, DRC-01A Part B communication
- Portal download record, screenshots and service proof
- Returns, invoices, e-invoice records where relevant, books and electronic ledgers
- Payment challans, credit notes, contracts and correspondence
- Issue-by-issue reconciliation and corrected computation
- DRC-06 reply, hearing request and filing acknowledgements
Demand-order and appeal file
- Speaking order and DRC-07
- Communication and service evidence
- SCN, DRC-01, reply and hearing record
- Order-versus-notice comparison
- Tax, interest and penalty computation
- Payment and pre-deposit records, if applicable
- Appeal form, grounds, annexures and filing acknowledgement
When professional help is especially important
Case-specific advice is prudent when the proposed amount could affect cash flow, the notice alleges fraud, wilful misstatement or suppression, several registrations or years are involved, input-credit matching requires reconstruction, the order adds a new ground, or service and limitation are contested. A professional can also verify the current rule text and portal process, which may have changed after the CBIC rules text dated 1 January 2022.
Professional advice is a practical safeguard, not a statement that hiring an adviser is legally mandatory in every GST matter. Keep control of the factual record: the adviser’s submission should still be checked against your returns, books and source documents.
Quick Recap
A decision path you can follow
- Document says SCN or DRC-01: preserve service proof, identify section and period, reconcile the allegations, prepare DRC-06, request a hearing if needed and calendar the stated response date.
- Document says DRC-01A: determine whether it is the pre-notice communication described in the applicable section 73/74 process; respond through the available Part B route if appropriate, but do not treat it as the final order.
- Document says order or DRC-07: obtain the speaking order, compare it with the SCN and reply, record the communication date and assess recovery, payment, rectification and appeal options.
- Amount already paid: map the payment to the exact period, tax head and issue, retain the acknowledgement and verify whether any remaining interest, penalty or proceeding survives.
- Deadline or service uncertain: file protectively where possible, explain the uncertainty, request a hearing or extension under the applicable procedure and obtain qualified advice immediately.
What to remember
- An SCN proposes liability and invites an explanation; a demand order records the adjudicated determination.
- DRC-01 summarizes a covered notice, DRC-06 is used for the reply, and DRC-07 summarizes the order.
- A DRC-07 summary is treated as the notice for recovery.
- The relevant section follows the tax period: sections 73 and 74 cover periods through FY 2023-24 under the 2024 amendment, while section 74A applies to FY 2024-25 onward matters.
- The ordinary first-appeal period is three months from communication, with a possible further month only for sufficient cause; verify current pre-deposit and filing rules.
- Preserve every notice, service record, calculation, submission, payment and acknowledgement, and act on the date printed in the document.
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