DRC-01A is the informal stage before a formal Show Cause Notice. The department says: “We found this discrepancy — explain it or make voluntary payment.” This is your best opportunity to resolve the matter cheaply and quickly.

• No formal demand at this stage — explanatory notice only
• Voluntary payment here: under Section 73 — zero penalty, only tax + interest
• If resolved here — formal DRC-01 (SCN) is never issued
• Respond seriously — DRC-01A is not optional even though it is informal

The formal demand notice — Section 73 (non-fraud) or Section 74 (fraud/suppression). The department states its case, specifies the demand amount (tax + interest + penalty), and gives you 30 days to respond.

Issued under Section 61 when the system detects discrepancies in your filed returns. This is a question, not a demand — the most favourable stage to respond. If your explanation satisfies the officer, ASMT-12 (acceptance order) is issued and the matter closes.

• Response form: ASMT-11, filed on GST portal
• Deadline: 30 days from notice date
• If explanation satisfactory: ASMT-12 — matter closed
• If explanation unsatisfactory: DRC-01A or DRC-01 follows
• Voluntary payment via DRC-03 at this stage: Section 73 = zero penalty

Issued during or after GST registration — for document verification, address verification, or additional information. Deadline is 7 working days. Reply in REG-04 with required documents.

Consequences of non-reply: REG-05 (application rejection for new registration) or progression to REG-17 for existing registrations.

The department wants to cancel your GST registration — for non-filing of returns, address not found on verification, fraud suspicion, or business closure without proper cancellation. Reply with business continuity proof: electricity bill, rent agreement, stock photographs, recent bank statements showing business transactions.

You have been selected for a GST audit. The audit officer will examine your returns, books of accounts, invoices, ITC claims, payment records, and reconciliation for typically 1–3 financial years. ADT-02 contains the audit findings. If discrepancies are found, DRC-01 follows.

Preparation is everything for ADT-01: Organise all purchase registers, sales registers, e-way bills, bank statements, and ITC reconciliation before the audit officer arrives. Disorganised or incomplete records are the fastest path to an adverse audit report.

The final stage — issued when the DRC-01 reply was unsatisfactory or no reply was filed. DRC-07 confirms the final tax demand, interest, and penalty. At this stage, your options narrow significantly.

Issued during goods transit when e-way bill is missing, expired, or mismatches the goods. MOV-06 detains the goods. MOV-09 is the penalty order. Goods are released only after payment or furnishing a bank guarantee. Respond immediately — goods detention costs accumulate daily.

Section 73 — Non-Fraud Cases

Section 74 — Fraud / Suppression / Wilful Misstatement Cases

Why ITC Mismatches Happen

• You claimed ITC in GSTR-3B — but supplier filed GSTR-1 late, so ITC is not in your GSTR-2B for that month
• Supplier filed GSTR-1 with wrong GSTIN — your GSTR-2B shows nothing
• Invoice amount or date differs between your records and supplier’s GSTR-1
• Supplier issued a credit note that you did not reverse in GSTR-3B
• Supplier’s registration was cancelled — ITC from that period is now ineligible
• ITC claimed on Section 17(5) blocked credit items (personal use, food, construction, etc.)

ITC Mismatch — Step-by-Step Resolution

1. 1List every mismatched invoice from the notice — period, invoice number, supplier GSTIN, amount
2. 2Match against your purchase register — verify you have the physical invoice and goods/service receipt
3. 3Check supplier’s GSTR-2B status — did they file late? Has the ITC appeared in a subsequent month’s GSTR-2B?
4. 4Contact supplier — if GSTR-1 not filed, ask them to file or amend. Get written confirmation of the filing
5. 5Prepare reconciliation statement — invoice-wise, showing which ITC you stand behind and why, which you are reversing
6. 6Pay genuinely wrong ITC via DRC-03 — with 18% interest from the month of original claim. This immediately reduces the demand and shows good faith
7. 7File ASMT-11 or DRC-06 reply — with the reconciliation statement, payment challan, supplier correspondence, and GSTR-2B screenshots

1. 1Read the notice completely
   Note: notice reference number, date, section cited (73/74/61/etc.), period covered, specific demand amount, and reply deadline. Different sections have different consequences — identify which applies.
2. 2Gather all documents for the period
   Returns (GSTR-1, GSTR-3B, GSTR-2B), purchase and sales registers, invoices, ITC reconciliation, bank statements, e-way bills, and any correspondence with suppliers about the disputed invoices.
3. 3Understand the department’s exact claim
   What tax is being demanded? What ITC is being disputed? What period? Calculate the department’s claim against your own books. Identify where you agree, where you disagree, and why.
4. 4Pay the undisputed amount via DRC-03 immediately
   If any part of the demand is genuinely correct — pay it now via DRC-03. This stops interest accrual on that portion, demonstrates good faith, and reduces the demand before the reply is even submitted.
5. 5Draft your reply for the disputed portion
   Address every point in the notice — not just some. Structure: (a) Notice reference and period, (b) Your GSTIN and registered name, (c) Point-by-point rebuttal with document references, (d) List of attached documents, (e) Conclusion. Factual and polite — never aggressive or dismissive.
6. 6Submit online via GST portal
   gst.gov.in → Services → User Services → View Notices and Orders → Relevant notice → Reply. For ASMT-10: ASMT-11. For DRC-01: DRC-06. Attach all documents as PDF. Save the acknowledgment/ARN.
7. 7Attend personal hearing if offered
   Personal hearing is your opportunity to present your case verbally. Bring original documents (not just copies). Be prepared to answer follow-up questions. If hearing is not scheduled, you can request one in your written reply.

Some notices can be handled by a careful business owner with good records. Others require a CA or GST practitioner immediately:

1. Monthly GSTR-2B verification before filing GSTR-3B: Claim only ITC reflected in GSTR-2B. Pending ITC (supplier not filed yet) — do not claim until it appears. This single habit prevents the most common ITC mismatch notices.
2. GSTR-1 and GSTR-3B reconciliation before filing: Cross-check output tax in both returns every month. Any difference needs explanation before filing — not after the notice arrives.
3. Reverse ITC on cancelled supplier GSTINs immediately: When you discover a supplier’s GSTIN is cancelled — reverse the ITC from those invoices in the next month’s GSTR-3B. Waiting for a notice costs 18% interest.
4. File returns on time — every time: Late filing generates automatic late fee demands and flags your registration for closer scrutiny. Set calendar reminders for the 10th (GSTR-1) and 20th (GSTR-3B) of every month.
5. Annual reconciliation before GSTR-9: Reconcile the entire year’s GSTR-1, GSTR-3B, purchase register, and books of accounts before filing GSTR-9. Discrepancies in the annual return are a major scrutiny trigger.
6. E-way bill discipline: Generate e-way bills for every applicable consignment. Invoice details must exactly match the e-way bill. Validity must cover the actual transit time.
7. New supplier due diligence: Before taking ITC from a new supplier — verify their GSTIN is active on gst.gov.in and check their return filing history. A supplier who files erratically or has a cancelled GSTIN creates ITC risk for you.