DRC-01 — Show Cause Notice for GST Demand
The most serious demand document in GST proceedings. Issued under Section 73 or Section 74 of the CGST Act, 2017. Deadline: 30 days.
Last Updated:
What is a DRC-01?
Form DRC-01 is the formal Show Cause Notice (SCN) for demand of tax, interest, and penalty under Section 73 (non-fraud) or Section 74 (fraud/suppression) of the CGST Act, 2017.
This is the most serious demand document in GST proceedings. Once a DRC-01 is issued, you have 30 days to respond. If you do not respond, the proper officer may pass an ex-parte demand order confirming the full demand with interest and applicable penalty.
Section 73 vs Section 74 — The Critical Distinction
The section under which the DRC-01 is issued determines the penalty exposure and your response strategy. This distinction is critical before drafting any reply.
| Factor | Section 73 | Section 74 |
|---|---|---|
| Applicable when | Genuine error, oversight, interpretation difference | Fraud, suppression, willful misstatement |
| Mandatory penalty | No — penalty can be waived/reduced | Yes — 100% of tax as base penalty |
| Penalty if paid before notice | NIL | 15% of tax |
| Penalty if paid within 30 days of DRC-01 | NIL | 25% of tax |
| Penalty if paid after order, within 30 days | 10% of tax (minimum) | 50% of tax |
| Limitation period for notice | 3 years from due date of annual return | 5 years from due date of annual return |
Important: Before drafting any reply, establish clearly which section applies to your notice. The section number will be stated in the DRC-01 itself.
Reply Template — DRC-06 (Response to DRC-01)
File your reply using Form DRC-06 on the GST portal. The template below covers all key sections — adapt it precisely to your facts and the specific allegations raised in the notice.
To,
[Designation of GST Officer as in notice]
[Jurisdiction]
Subject: Reply to Show Cause Notice in Form DRC-01 under Section 73/74
of the CGST Act, 2017
GSTIN: [GSTIN]
DRC-01 Reference No.: [NUMBER]
DRC-01 Date: [DATE]
Tax Period: [PERIOD]
Alleged Demand: ₹[AMOUNT] (Tax: ₹[X], Interest: ₹[X], Penalty: ₹[X])
Respected Sir/Madam,
This is our reply to the Show Cause Notice dated [DATE] in Form DRC-01
issued under Section [73/74] of the CGST Act, 2017, proposing demand of
tax, interest, and penalty as detailed above.
I. PRELIMINARY OBJECTIONS [if any]
[This section is for jurisdictional or procedural objections — e.g.,
notice issued beyond time limit, DRC-01A not issued before DRC-01, etc.]
1. [Objection 1 with legal basis]
2. [Objection 2 with legal basis]
II. RESPONSE TO THE ALLEGATIONS
Allegation 1 from DRC-01: [Reproduce exactly]
Response:
[Detailed factual rebuttal with document references. Be specific —
amounts, invoice numbers, dates, reconciliation figures. Every statement
should be backed by an enclosed document.]
Supporting Documents: Annexure A
Allegation 2 from DRC-01: [Reproduce exactly]
Response:
[Detailed response]
[Continue for all allegations]
III. ON THE QUESTION OF PENALTY
[IF CONTESTING PENALTY UNDER SEC 73:]
It is respectfully submitted that this is not a case involving fraud,
suppression, or willful misstatement. The alleged discrepancy has arisen
on account of [REASON].
Accordingly, Section 74 is inapplicable and the matter is governed solely
by Section 73. No penalty is therefore imposable beyond the amounts
prescribed under Section 73.
[IF MAKING PAYMENT:]
In respect of the amount of ₹[AMOUNT] which we agree is payable, we have
deposited tax of ₹[TAX] and interest of ₹[INTEREST] through Electronic
Cash Ledger, details of which are enclosed as Annexure [X]. In view of
this payment within 30 days of the SCN, we respectfully submit that
penalty is NIL under Section 73 / 25% under Section 74, as applicable.
IV. PRAYER
In view of the above, we respectfully pray that:
(a) The Show Cause Notice may be dropped in respect of the disputed
amount of ₹[AMOUNT] on the grounds stated above; and
(b) In respect of the agreed amount, credit may be given for the payment
already made and the matter be closed accordingly.
Thanking you,
Yours faithfully,
[Authorised Signatory]
[GSTIN] [Date]
ENCLOSURES:
A — [Primary reconciliation document]
B — Invoices relevant to disputed supplies
C — GSTR-2B extract for disputed ITC
D — Payment challans / Electronic Cash Ledger extract
E — [Any other relevant document]
Related GST Notices
GST proceedings often involve multiple notice types in sequence. Familiarise yourself with these related forms.
Received a DRC-01? Act Within 30 Days.
A Show Cause Notice demands a precise, document-backed reply. The wrong response — or no response — leads to an ex-parte demand order. Get expert guidance to protect your business.