DRC-01A and DRC-01: GST Show Cause Notice Explained

A yellow envelope appears under "Notices and Orders" on the GST portal, and the document is either FORM GST DRC-01A or FORM GST DRC-01. The first is an intimation: the officer has worked out a figure and is inviting you to settle. The second is a formal show cause notice, and adjudication has begun. The difference matters, because a well-drafted DRC-01A reply filed on time with a reconciliation often ends the matter without penalty, while silence moves you to the next stage by default. This article explains both forms, what the law requires of you at each stage, and where the money actually sits.

What DRC-01A is and why it arrives before DRC-01

FORM GST DRC-01A is issued under Rule 142(1A) of the CGST Rules, 2017. The rule lets the proper officer intimate you in writing of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed, where the amount involved is ascertainable. Part A carries the officer's computation. Part B is your response. Nothing in the rule makes the intimation compulsory before a notice, and nothing in it makes the intimation an order.

The form is a working paper, not a decision. It cannot be appealed, because there is nothing to appeal yet. What it does is fix the department's case on paper early and give you a dated chance to answer it. Officers reach for it where the figure is arithmetic: credit taken twice, credit that never appeared in a supplier's return, a refund computed on the wrong formula.

The formal show cause notice is a different instrument. Under Section 73, 74 or 74A of the CGST Act, 2017, the officer issues a notice, and Rule 142(1)(a) requires a summary of that notice to be uploaded electronically in FORM GST DRC-01. Note the wording: DRC-01 is the summary, not the notice itself. The document attached to it is what you actually answer, and any defect in that document is what you challenge.

One lookalike is worth separating out. DRC-01B, issued under Rule 88C, deals with a mismatch between the liability declared in GSTR-1 and the liability paid in GSTR-3B. It has its own reply in DRC-01C and a short response window. It is not an adjudication notice, and it should not be answered as one.

Reading Part A and Part B of the intimation

Part A is short and should be read line by line. Check four things: the tax period and financial year, the split between IGST, CGST, SGST and cess, the section invoked, and the reason recorded. Departments sometimes paste a standard narrative. If the reason is missing, ask for it in your reply. You cannot answer a case you cannot see.

Part B offers two choices. You may accept the amount ascertained and record the payment details, or you may disagree and state why. Rule 142(1C) allows Part B to be filed within the period mentioned in Part A. That period is not fixed by statute; it is whatever the officer writes, commonly seven to fifteen days. Treat the date on the form as a hard deadline even though it is administratively set, because the next document in the file is the notice.

While you are on that screen, compare the notice date against the outer limitation. For a non-fraud case relating to FY 2022-23, the order has to be passed within three years of the annual return due date, and the notice must be served at least three months before that date. An officer writing to you in the middle of 2026 is working to a clock, and that is useful to know when you decide how to respond.

How to file your DRC-01A reply, and whether to pay

Where you agree, pay the tax with interest under Section 50 and file FORM GST DRC-03 on the portal. Interest runs at 18% per annum and starts from the date the tax ought to have been paid, not from the date of the intimation. Quote the reference number in Part B and upload the DRC-03 acknowledgement. If the payment covers the full ascertained amount, proceedings for that amount end without a penalty and without a show cause notice.

Where you disagree, file Part B with reasons and attach a working. Adjectives achieve nothing here. A month-wise reconciliation of GSTR-2B, your purchase register and the supplier's GSTR-1, with invoices tabulated and matched, is the reply. If part of the demand is correct and part is not, pay the correct part through DRC-03 and dispute the balance. That splits the penalty exposure and shows good faith.

Doing nothing is also a choice, and the department will read it as one. The officer proceeds to DRC-01, and you enter adjudication with no explanation on record. Forms for these filings sit on the GST portal, under Services, Returns, then the voluntary payment tile for DRC-03.

• Download Part A as a PDF and note the tax period, section and reply date in your compliance register

• Reconcile GSTR-2B against your purchase register for the exact months named in the intimation

• Write to the concerned supplier and record whether tax has since been paid to the government

• Decide the split between the amount you accept and the amount you contest, and put it in a computation sheet

• Pay the accepted portion through DRC-03 and save the ARN before filing Part B

• Upload Part B with annexures well before the stated date, and keep the acknowledgement

A worked scenario: ₹6.84 lakh of ITC under question

A Pune engineering firm with turnover of about ₹14 crore received DRC-01A Part A in May 2026 for FY 2022-23. The demand was input tax credit of ₹6,84,000 (CGST ₹3,42,000 and SGST ₹3,42,000) taken on invoices from a fabrication supplier who had collected the tax but stopped filing GSTR-3B after the December 2022 quarter. The officer gave fifteen days to respond.

The interest arithmetic is where owners get a shock. On ₹6,84,000 at 18%, interest accrues at about ₹1,23,000 a year. Paying by 30 June 2026 means roughly ₹3,90,000 of interest on top of the tax, an outflow near ₹10.74 lakh with no penalty. Contesting and losing by the order date in December 2026 means interest of about ₹4.51 lakh, the tax, and a Section 73 penalty of 10% of tax, that is ₹68,400, taking the total close to ₹12 lakh. The exact start date of interest depends on when the credit was availed.

The gap of roughly ₹1.3 lakh is the price of a defence that fails, before professional fees. Where the firm has a genuine case, contesting is clearly worth more than that difference. Where the supplier has simply defaulted and the tax never reached the government, the defence is thin, though the firm can still show that credit was already reversed, or that the supplier has since filed and paid. That second possibility is exactly why the supplier correspondence in the file matters.

Documents to keep

Keep the Part A and your filed Part B as downloaded PDFs, the DRC-03 with its ARN, month-wise GSTR-2A and 2B extracts, your purchase register, supplier emails and any later GSTR-1 filings, plus transport documents, e-way bills and weighbridge slips for the relevant invoices. If the dispute reaches adjudication, this bundle is your evidence, and reconstructing it two years later is far harder than filing it now.

What changes when a formal DRC-01 show cause notice is issued

Once DRC-01 appears, you are in adjudication. The reply is filed in FORM GST DRC-06. The time allowed is stated in the notice, usually thirty days from receipt, and the officer can extend it on a written request. Make that request in writing and keep the acknowledgement; an oral request leaves no trace on the portal.

Which section applies depends on the tax period and on whether fraud, suppression or wilful misstatement is alleged. For periods up to FY 2023-24, Section 73 covers the non-fraud cases on a three-year clock from the annual return due date, while Section 74 covers the rest on a five-year clock. From FY 2024-25, Section 74A, inserted with effect from 1 November 2024, replaces that split with a single track and a forty-two-month limit from the annual return due date.

The reply itself has to be on merits: a signed submission with annexures, a clear computation of what you accept and what you dispute, and a written request for a personal hearing under Section 75(4). The statute gives you that hearing where you ask for it in writing, or where an adverse decision is contemplated. Ask.

Penalty, personal hearing and the adjudication order

Under Section 73, if you pay the tax with interest within thirty days of the notice, no penalty is payable. Beyond that window the order levies a penalty of 10% of the tax or ₹10,000, whichever is higher. Under Section 74 the exposure is heavier, normally equal to the tax, with a reduced 15% penalty available where you pay before the notice is served. Section 74A harmonises this for FY 2024-25 onwards through a graded penalty keyed to how early you settle.

Attend the personal hearing. Officers record what is said, and a submission handed over at the hearing and filed on the portal the same day becomes part of the record. Skipping it usually means the order is written on the department's papers alone.

The order is uploaded with a summary in FORM GST DRC-07. Appeal lies to the appellate authority under Section 107, in FORM GST APL-01, within three months of communication, with a pre-deposit of 10% of the tax in dispute, capped at ₹20 crore each under CGST and SGST. The Acts, rules and forms are published on the CBIC website. Missing the appeal window makes the demand final, and recovery follows.

Common mistakes at both stages

• Filing an appeal against a DRC-01A. There is no order yet, so there is nothing to appeal.

• Paying through DRC-03 but never filing Part B or informing the officer, so the demand continues in the system.

• Sending a reply that asserts the credit is genuine without a single reconciled figure or invoice reference.

• Ignoring the portal because a physical copy came by post, or the reverse. Both channels carry the same notice.

• Skipping the personal hearing and then discovering the adverse findings were recorded without your version.

• Not checking the limitation date on the notice, which is often the strongest technical ground available.

If a notice is already on your dashboard, the next action is simple and time-bound: download every document in the case file today, fix the reply date in your calendar, and decide within one week whether you are paying a part, the whole, or nothing. Whichever you choose, put it in writing on the portal before the date in Part A. This article is for general information only and is not legal advice. Consult a qualified professional for your specific facts.