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HIGH SEVERITYSection 73/74 • CGST Act, 2017

GST Show Cause Notice (DRC-01)

DRC-01 is a show cause notice issued when the department determines tax has not been paid, short paid, or erroneously refunded. It demands you to show cause why the tax amount should not be recovered.

Quick Answer

DRC-01 is a GST show cause notice issued under Section 73 or 74 demanding you to explain why tax dues should not be recovered. This is a serious notice with penalty implications.

⏰ Deadline: 30 days💰 Penalty: Section 73: 10% penalty

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What is DRC-01 Notice?

DRC-01 is the electronic summary of a Show Cause Notice (SCN) issued under Section 73 (no fraud/suppression) or Section 74 (fraud/suppression/misstatement). This is a DEMAND notice — significantly more serious than a scrutiny notice.

Key aspects of DRC-01: - It specifies the exact tax amount demanded - It mentions the period of default - It quotes the relevant section (73 or 74) - It gives you 30 days (Section 73) or 30 days (Section 74) to respond

Under Section 73: If you pay the full tax + interest BEFORE the SCN is issued, no penalty applies. After SCN, 10% penalty may apply. Under Section 74: Penalty of 100% of tax applies if fraud/suppression is proven. But if you pay within 30 days of SCN, penalty reduces to 15%.

This notice appears on your GST portal under "View Notices and Orders" tab.

Why You Received DRC-01 Notice

  • •Tax not paid or short-paid on supplies
  • •Wrong availment of Input Tax Credit
  • •ITC claimed on ineligible supplies
  • •Suppression of turnover
  • •Wrong classification of goods/services leading to lower tax
  • •Non-reversal of ITC on exempt/non-business use

How to Respond to DRC-01 Notice — Step by Step

  1. 1Carefully read the DRC-01 and linked SCN document
  2. 2Note the tax amount, interest, and penalty demanded
  3. 3Identify whether it's under Section 73 or 74
  4. 4Consult a CA or tax professional immediately
  5. 5Prepare reply in Form DRC-06 within 30 days
  6. 6If you agree with demand, pay under Section 73(5) or 74(5) to reduce penalty
  7. 7If you disagree, file detailed reply with supporting evidence

Documents Required for DRC-01 Reply

  • 📄Complete SCN document (linked in DRC-01)
  • 📄GSTR returns for the demand period
  • 📄ITC register and reconciliation
  • 📄Tax payment challans
  • 📄Purchase invoices and sale invoices
  • 📄Legal opinions or case laws supporting your position

Expert Tips for DRC-01 Reply

✅Never ignore DRC-01 — failure to reply results in ex-parte order
✅If amount is small and you agree, pay tax + interest to close the matter with minimal penalty
✅Quote relevant case laws and circulars supporting your position
✅Request personal hearing if the matter is complex
✅Engage a qualified CA/advocate for Section 74 notices

Frequently Asked Questions About DRC-01

What is DRC-01 notice in GST?

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DRC-01 is the electronic summary of a Show Cause Notice issued by the GST department demanding payment of tax, interest, and penalty. It is issued under Section 73 (normal cases) or Section 74 (fraud/suppression cases).

How to reply to DRC-01 GST notice?

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File your reply in Form DRC-06 on the GST portal within 30 days. Address each point of the SCN, provide documentary evidence, cite relevant case laws, and request personal hearing if needed.

What is the penalty under DRC-01?

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Under Section 73: 10% penalty (minimum ₹10,000). Under Section 74: Up to 100% penalty, reducible to 15% if you pay within 30 days of the SCN.

What is difference between DRC-01 and ASMT-10?

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ASMT-10 is a scrutiny notice asking for explanation — no demand is raised. DRC-01 is a show cause notice with a specific tax demand. DRC-01 is more serious and carries penalty implications.

Can I appeal against DRC-01 order?

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You cannot appeal DRC-01 directly (it's a notice). But once a final order is passed in DRC-07, you can appeal to the Appellate Authority within 3 months under Section 107.

Related GST Notices

DRC-07critical

GST Demand Order (DRC-07)

Section 73high

GST Notice Under Section 73

Section 74critical

GST Notice Under Section 74 (Fraud)

ASMT-10medium

GST Scrutiny Notice (ASMT-10)

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