A GST Show Cause Notice (SCN) is one of the most critical documents a business can receive from the tax department. It indicates that the department has identified a potential tax liability and is giving you an opportunity to explain your position before a demand order is passed. Responding correctly — and on time — is essential.
Issued under Section 73 (non-fraud cases) or Section 74 (fraud/suppression cases) of the CGST Act. This is the formal notice proposing a demand of tax, interest, and penalty. Under Section 73, the adjudicating authority must issue the SCN at least 3 months before the time limit for passing the order. Under Section 74, this period is 6 months.
Issued when the proper officer identifies discrepancies in the return filed. The taxpayer is required to furnish an explanation within 30 days (or such extended period as allowed). This is not a demand notice — it is a pre-show cause communication — but must be taken seriously.
This is not a notice but a form through which a taxpayer can make voluntary payment of tax, interest, or penalty during the course of an audit or investigation. Filing DRC-03 appropriately can reduce penalties.
Issued to taxpayers who have not filed their GST returns by the due date. Continued non-compliance can lead to cancellation of GST registration.
Understanding the time limits is critical because a demand raised after the limitation period is void:
Non-response to an SCN results in the proper officer passing an ex-parte order based on available material. This virtually always results in a demand being confirmed in full, along with maximum penalties.
Confirm that the notice has been issued by the correct officer with territorial and subject-matter jurisdiction. An SCN issued by an officer without jurisdiction can be challenged.
If the reply deadline is insufficient to prepare a comprehensive response, you may request an extension. Most adjudicating officers grant reasonable extensions on application.
The reply must address every allegation in the SCN with documentary evidence. Cite relevant legal provisions, CBIC circulars, and judicial precedents supporting your position. A well-drafted reply significantly improves your chances at the adjudication stage.
Request and attend a personal hearing. This is your opportunity to present oral arguments and address the officer’s concerns directly.
If tax is paid before the issue of notice (or within 30 days of SCN under Section 73), no penalty is payable. If paid within 30 days of a Section 73 order, penalty is reduced to 10% of tax. Taking prompt action can significantly reduce the financial impact.
Received a notice? Contact Kyra Advisors immediately — our litigation team handles SCN replies across all GST authorities.