Editorial note: Originally drafted in March 2026 and published as part of The Tamvada Brief archive.

In 2017, GST officers in India were learning the new law alongside taxpayers. In 2026, the GST Network’s analytics layer has matured, the e-invoicing regime captures most B2B transactions in real time, and notices land in your registered email before your accountant has reconciled the quarter. The texture of GST compliance has shifted from form-filing to defending notices.

This blog is a working list of the five GST notices Indian businesses see most often in 2026, what each one means, and the senior advocate’s view on how to respond.

Notice 1 — ASMT-10 (Mismatch / scrutiny notice)

The most common GST notice in the inbox. Issued under Section 61 of the CGST Act, 2017 read with Rule 99, it is a scrutiny notice asking the registered person to explain a discrepancy in the returns. Typical triggers:

GSTR-3B output liability lower than the e-invoice or GSTR-1 outward supplies
Input tax credit (ITC) claimed in GSTR-3B mismatched with GSTR-2B available credit
Turnover declared in GSTR-3B differs from turnover in GSTR-9 annual return
Aggregate inward supplies (purchases) reported by counterparties differ from GSTR-2A

How to respond. ASMT-10 requires a written response on the GST portal within the timeline mentioned (typically 30 days). The response — Form ASMT-11 — must address the discrepancy with documentary support. If the discrepancy is genuine (timing difference, vendor late-filing, credit note adjustment), explain. If there is shortfall, voluntary payment under Section 73(5) (interest only, no penalty) is dramatically cheaper than a Section 73 demand.

Don’t ignore. ASMT-10 ignored typically escalates to a Section 73 SCN within 60 to 90 days.

Notice 2 — Section 73 show cause notice

The Section 73 SCN is issued where tax has not been paid, or short-paid, or wrongly refunded, or ITC wrongly availed or utilised, for any reason other than fraud, wilful misstatement, or suppression of facts. The proper officer issues a notice under Section 73(1) calling upon the registered person to show cause why the tax demanded should not be paid, along with interest under Section 50 and a penalty of 10% of the tax or Rs 10,000, whichever is higher (Section 73(9)).

The timeline matters:

The SCN must be issued at least three months before the time limit for the order under Section 73(10) — i.e., within 2 years and 9 months from the due date of the annual return
The order under Section 73(9) must be passed within 3 years from the due date

How to respond. A Section 73 SCN must be replied to in writing within the time stipulated. Three strategic options for the taxpayer:

Pay under Section 73(8) before the SCN issues — if you spotted the issue first, pay tax + interest + 15% penalty (and the SCN is precluded)
Pay within 30 days of the SCN — tax + interest + nil penalty (Section 73(11))
Contest — file a written reply with documents, request personal hearing

Conservative practice when the merits are weak: pay early. When the merits are arguable: contest, with a strong written reply and counsel-led hearing.

Notice 3 — Section 74 show cause notice (fraud, wilful misstatement, suppression)

Section 74 SCNs are the more serious cousin. The cause is the same — tax not paid, short paid, etc. — but the alleged reason is fraud or wilful misstatement or suppression of facts. The penalty is 100% of the tax (Section 74(9)), and the timeline extends — the SCN may issue within 4 years and 6 months from the due date of the annual return; the order, within 5 years.

The Section 74 distinction matters because:

The penalty is ten times higher (100% vs 10%)
The recovery options are stronger
Criminal prosecution under Section 132 may also be triggered for certain offences

How to respond. The Section 74 SCN must be replied to within the stipulated time. Two strategic principles:

Challenge the characterisation. The proper officer must allege facts disclosing fraud, wilful misstatement, or suppression — generic boilerplate language does not suffice. Several Supreme Court and High Court decisions have set aside Section 74 notices that lacked specific factual allegations of suppression (verify the latest holdings before relying on them).
Quantify and engage on amount. Section 74(5) allows payment of tax + interest + 15% penalty pre-SCN; Section 74(8) allows payment within 30 days of SCN with 25% penalty. Even contested matters often settle at the 25% mark.

Notice 4 — DRC-01 (Demand cum recovery notice)

DRC-01 is the form in which the proper officer summarises the Section 73 or Section 74 demand at the SCN stage. It is the formal document on which the taxpayer’s reply hangs. Following DRC-01, the officer issues DRC-01A (intimation of payment) where applicable, and DRC-07 (final order) at the end.

How to respond. DRC-01 should be read alongside the SCN itself. The reply (DRC-06) must be filed on the GST portal within the time stipulated, accompanied by all supporting documents. Personal hearing must be requested in the reply — failure to request is later treated as waiver.

Notice 5 — Mismatch / ITC reversal notice under Rule 88C and the GSTR-2B regime

The GSTR-2B form is the static input tax credit statement generated by the GSTN on the basis of suppliers’ GSTR-1 filings. Since 2022–23, ITC claimed in GSTR-3B that does not match GSTR-2B is the single largest mismatch trigger.

Rule 88C of the CGST Rules permits the proper officer to direct reversal of ITC where the mismatch is not reconciled within 30 days of intimation. The Rule 86A blocking power — to block ITC in the electronic credit ledger — has also been used in cases of suspected fraudulent credit.

How to respond. The first step is reconciliation. Many ITC mismatches resolve once the supplier’s late-filed GSTR-1 catches up. For genuine mismatches:

File a reconciliation explanation on the portal
Reverse the ITC voluntarily under Section 74(5) if the mismatch is unsupportable
Where ITC has been blocked under Rule 86A, file a written representation; the block is supposed to be temporary and reasoned

The Supreme Court in Bharti Airtel Ltd v Union of India, (2021) (and several High Court rulings) has emphasised that the GSTR-2B regime cannot override substantive entitlement to ITC where a genuine transaction has occurred and tax has been paid (verify the current state of the law before relying on this in a reply).

A scenario — the September Section 73 SCN

A Bangalore SaaS exporter receives a Section 73 SCN in September 2026 alleging short payment of Rs 18 lakh of GST in FY 2023–24, with interest under Section 50 of Rs 4 lakh, plus proposed penalty of Rs 1.8 lakh (10%). The taxpayer’s options:

Pay Rs 18 lakh + Rs 4 lakh interest + nil penalty within 30 days of the SCN under Section 73(11) — total Rs 22 lakh
Contest — file reply, request hearing, defend on merits — but face up to Rs 23.8 lakh + further interest if the order goes against
Mixed — pay the undisputed portion to stop interest from running, contest the disputed portion

The choice depends on the strength of the merits and the taxpayer’s risk tolerance. Conservative practice: pay the indisputable, contest the arguable, and document.

What every business should do this quarter

Designate a GST notice owner. One person whose email is registered for GST correspondence; one designee in their absence. Notices missed by a week become weeks-late replies that hurt.
Set up automatic GSTR-2B vs GSTR-3B reconciliation. Most accounting platforms support this. Mismatches caught monthly are dramatically cheaper than mismatches caught at SCN stage.
Hold a monthly GST risk-review. 30 minutes, with the accountant and a senior commercial person. Flag any unusual transaction (large credit notes, related-party supplies, exports without LUT) for documentation.
Build a litigation budget. GST is no longer a soft compliance area. A modest annual provision for GST counsel and notice-response is the cost of doing business in 2026.
Don’t argue over Rs 50,000 worth of penalty. The cost of contesting a small demand often exceeds the demand. Pay early under Section 73(8) or Section 73(11) where the merits are weak.

The bottom line

The GSTN has matured, the analytics layer is real, and the days of compliance-by-filing-and-forgetting are over. The next three years will see steadily more SCNs, more Section 74 characterisations, and more litigation. Indian businesses that operationalise reconciliation, designate notice ownership, and engage counsel early will pay materially less than those that treat each notice as a fresh fire to firefight.

Sources & further reading

Primary statute (source: indiacode.nic.in):
– Central Goods and Services Tax Act, 2017, Sections 61, 73, 74, 50, Rule 86A, Rule 88C — Act No. 12 of 2017

Regulator portals:
– Central Board of Indirect Taxes and Customs — cbic.gov.in
– GST Network — gst.gov.in
– GST Council — gstcouncil.gov.in

Director Duties Under the Companies Act 2013 (PB-03)
3 Contracts Every Founder Must Have Before Fundraising (blog_03)
Central GST Act, 2017 (full text PDF) — ACT-05
GST reply template — SCN response (PDF) — TPL-15

Paired toolkit CTA: Indirect-tax compliance, contracts, employment and director duties intersect every week in a growing business. The Startup Legal Toolkit Pro covers the cross-cutting commercial layer.

Book a free consultation on TopMate if you have a GST notice in hand or anticipate one.

This blog is informational and educational. It is not legal advice. GST is a fast-evolving area — confirm the current state of the law with counsel before acting.

Originally published 18 March 2026 · Last updated 12 May 2026.