GST Show Cause Notice (DRC-01) in 2026: Section 73, 74 and 74A Explained, With Time Limits and How to Reply
GST | RegisCorp Team
Short answer: A GST show cause notice in Form DRC-01 is not a demand order. It is a notice asking you to explain why the department should not demand tax, interest and penalty. For financial years up to 2023-24 it comes under Section 73 (non-fraud) or Section 74 (fraud). From 2024-25 it comes under Section 74A, which covers both. You reply in Form DRC-06 on the GST portal, within the time written on the notice, and you can pay any part you agree with through DRC-03. If you do nothing, the officer can pass a demand order in DRC-07, and an order is much harder to fight than a notice.
Source note. The time limits below follow published commentary on Sections 73, 74 and 74A of the CGST Act and the Rule 142 forms, and the 57th GST Council press release of 8 October 2026 for the proposed relief. We link the official portals at the end. Read your own notice carefully, because the dates, section and grounds in the notice decide your deadlines. This is general information, not legal advice.
Why this matters now
Notices are rising because the GST system now matches your GSTR-1, GSTR-3B, GSTR-2B and e-invoice data automatically. When the numbers do not match, a notice follows. In October 2026 the 57th GST Council also recommended several reliefs, such as a Rs 10,000 minimum for show cause notices and lower penalties, but those need law changes. Until then, the existing rules and deadlines apply to you. For a practical, step-by-step service view, see our guide to replying to a GST notice.
Section 73, Section 74 or Section 74A: which one applies to you?
| Financial year | Section used | Meaning |
|---|---|---|
| Up to 2023-24 | Section 73 | Tax short paid or not paid, credit wrongly taken, without fraud |
| Up to 2023-24 | Section 74 | The same, but with fraud, wilful misstatement or suppression |
| 2024-25 onwards | Section 74A | One section for both fraud and non-fraud cases |
The first thing to check on any notice is the section and the financial year. They decide your time limits and the penalty exposure. If a notice quotes the wrong section for the year, say so in your reply.
Time limits that decide whether a notice is valid
| Section | Notice must be issued | Order must be passed |
|---|---|---|
| 73 | At least 3 months before the order deadline | Within 3 years of the annual return due date |
| 74 | At least 6 months before the order deadline | Within 5 years of the annual return due date |
| 74A | Within 42 months of the annual return due date | Within 12 months of the notice date |
Worked examples
- Financial year 2023-24 (annual return due 31 December 2024), Section 73: the notice must go out by 30 September 2027 and the order by 31 December 2027.
- Financial year 2023-24, Section 74: the notice by 30 June 2029 and the order by 31 December 2029.
- Financial year 2024-25 (annual return due 31 December 2025, if the due date was not extended), Section 74A: the notice by 30 June 2029 and the order by 30 June 2030.
The annual return due date, not the date you actually filed, is the starting point. Check the notice date against these limits. A notice outside the time limit can be challenged on that ground alone.
DRC-01 and DRC-01A: do not confuse them
- DRC-01A is an intimation the officer may send before a formal notice, inviting you to pay the tax shown, with interest, voluntarily. Paying at this stage can avoid a penalty in many cases.
- DRC-01 is the show cause notice proper, issued under Rule 142(1). It lists the grounds, the period and the amount.
A notice covers one financial year and the same grounds cannot be raised twice for the same year, but different grounds can be raised in a later notice. A separate notice is issued for each other year.
What to do in the first seven days
- Log in and download the notice. Notices are served on the GST portal, and also by email or SMS. The date of service matters.
- Note four things: the section, the financial year, each ground, and the reply date.
- Collect the records: invoices, e-way bills, GSTR-1, GSTR-3B, GSTR-2B, bank statements, contracts and any earlier reconciliations.
- Decide what is right and what is not. If part of the demand is correct, you can pay it through DRC-03 and mention the payment in your reply.
- Ask for more time if you need it. The extension request is made through the reply form on the portal, so make it before the date passes.
How to write the reply (DRC-06)
A good reply is short, structured and complete:
- Answer every ground in the notice, one by one. A reply that skips a ground can be treated as not answering it.
- Attach evidence for each point, with a simple index.
- State any legal objection clearly, such as a wrong section, a time limit, or a duplicate demand.
- Mention any payment already made through DRC-03, with the reference.
- Ask for a personal hearing and attend it with a written note.
You can still upload a reply on the portal after the date has passed, but do not depend on this. An order can be passed once the time is over.
What can happen next
- If the officer is satisfied, the case is closed with an order in DRC-05.
- If the officer is not satisfied, or you filed no reply, a demand order is passed in DRC-07.
- You can appeal against a DRC-07 order, usually after paying a part of the disputed tax as a pre-deposit. The press release of the 57th GST Council recommended a cap on the pre-deposit for appeals against penalty-only orders. It is not yet in force.
What the 57th GST Council recommended (not yet law)
These items come from the Council's press release of 8 October 2026 and need notifications or amendments before they apply:
- A minimum threshold of Rs 10,000 for show cause notices under Sections 73, 74 and 74A.
- A 5% penalty in non-fraud cases if tax and interest are paid within 30 days of the order under Section 73 or 60 days under Section 74A.
- Removal of the Rs 10,000 minimum penalty in non-fraud cases.
- A lower cap on the general penalty under Section 125, from Rs 25,000 to Rs 10,000.
- A circular on the quality and timing of notices and orders, including natural justice and personal hearings.
Until those are notified, plan on the existing penalty rules. Our summary of all the Council decisions is in the 57th GST Council guide.
The five most common reasons for GST notices
- Credit mismatch between GSTR-2B and GSTR-3B.
- Sales mismatch between GSTR-1 and GSTR-3B, or against e-invoice and e-way bill data.
- Credit from non-filing or cancelled suppliers, or from invoices not shown in GSTR-2B.
- Late or missing returns, including the annual return.
- Reverse charge not paid, or paid late, on eligible purchases.
Fixing these before a notice arrives is far cheaper than answering one. Monthly reconciliation of your books against GSTR-2B and GSTR-1 is the best habit you can build.
Mistakes that turn a notice into an order
- Ignoring a notice because it looks like a routine message.
- Replying to only some of the grounds.
- Paying the tax but not filing a reply, which can look like an admission.
- Using the old Section 73 or 74 time limits for a 2024-25 matter that falls under Section 74A.
- Missing the appeal time after a DRC-07 order.
Frequently asked questions
Is a DRC-01 a demand? No. It is a show cause notice. The demand comes only with an order in DRC-07.
How many days do I have to reply? The notice states the date. Reply within it. If you need more time, ask on the portal before it passes.
Can I pay part of the amount? Yes. Pay the part you accept through DRC-03 and refer to it in your reply.
Which section applies to FY 2024-25? Section 74A, which covers both fraud and non-fraud cases.
Will the Rs 10,000 threshold cancel my small notice? Not yet. It is a recommendation that needs a law change. Answer the notice in the meantime.
Do I need a professional? For small, simple mismatches you may handle it yourself. For fraud allegations, large amounts or credit disputes, speak to a GST professional early.
How RegisCorp can help
Our team reviews the notice, checks the section and time limits, prepares the reply and supporting records, and represents you through the hearing. Share your notice with us through the website or WhatsApp.
Official sources
- GST portal (gst.gov.in): notices, replies and forms
- CBIC notifications, circulars and the CGST Act and Rules (cbic.gov.in)
- GST Council: Recommendations of the 57th Meeting, 8 October 2026 (gstcouncil.gov.in)
Last updated 3 November 2026. Dates and sections vary by case, so verify your own notice.