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GST Tax Notice – A Complete Guide for Businesses in India
The Goods and Services Tax (GST) is one of the most significant tax reforms in India, introduced in July 2017 to bring a unified taxation system across the country. By replacing multiple indirect taxes like VAT, service tax, excise duty, and entry tax, GST simplified the tax landscape.
But simplification doesn’t mean businesses are free from responsibility. The GST system works on self-assessment, which means taxpayers are expected to:
✔️ File accurate returns.
✔️ Report sales and purchases truthfully.
✔️ Claim Input Tax Credit (ITC) only when eligible.
✔️ Pay taxes on time.
When businesses fail to comply, the GST authorities issue notices.
Think of a GST notice like a red traffic signal. It doesn’t mean the end of your journey, but it’s a warning that you need to stop, check, and correct before moving forward.
Some notices are just reminders, while others demand clarification or payment. But in all cases, responding on time is critical.
At Bharat United Startups (BUS), we’ve seen countless cases where businesses panic after receiving a notice. In reality, most notices can be handled smoothly with the right response strategy.
What is a GST Tax Notice?
A GST Tax Notice is an official communication from the GST Department to a registered taxpayer. Its purpose is to:
✔️ Alert the taxpayer about a compliance issue.
✔️ Demand unpaid tax or interest.
✔️ Ask for clarifications or documents.
✔️ Investigate fraud or suspicious activity.
Example 1: A retail shop in Ghaziabad files GSTR-3B showing ITC of ₹2 lakh but their supplier has not filed returns. The system detects mismatch, and a scrutiny notice is issued.
Example 2: A startup in Noida forgets to file GSTR-1 for 3 months. The GST department issues a default notice, warning of cancellation of GSTIN.
These notices are governed by different sections of the Central Goods and Services Tax (CGST) Act. Each notice has a specific format, timeline, and response requirement.
Key point: A GST notice should never be ignored. Even if you think it’s a small issue, always reply, because silence can lead to penalties, interest, or even business closure.
Why Do Businesses Receive GST Notices?
There are several reasons businesses may receive GST notices. Some are simple errors, others are serious violations. Below are the most common reasons with practical examples:
1. Mismatch in Returns
✔️ When sales reported in GSTR-1 do not match summary data in GSTR-3B.
✔️ When ITC claimed in GSTR-3B is higher than reflected in GSTR-2B.
Example: You claim ₹5 lakh ITC in GSTR-3B, but suppliers uploaded invoices worth only ₹4.5 lakh. The system detects mismatch → notice issued.
2. Non-Filing of Returns
✔️ If you fail to file monthly/quarterly returns for consecutive periods.
✔️ Even delay in filing can trigger an automated reminder.
Example: A freelancer registered under GST does not file returns for 6 months. Notice under Section 46 is issued.
3. Wrong ITC Claim
✔️ Claiming ITC without invoice.
✔️ Claiming ITC on blocked credits (e.g., motor cars, club memberships).
✔️ Double claiming ITC.
4. Delayed Tax Payment
✔️ Returns filed but payment not made.
✔️ Partial payment of taxes.
5. Underreporting of Sales
✔️ Sales declared in GST lower than actual sales in income tax filings.
✔️ Mismatch between GST data and e-way bill system.
Example: You generate e-way bills worth ₹1 crore but declare sales of only ₹80 lakh. Discrepancy = notice.
6. Refund Issues
✔️ Inflated refund claims on exports.
✔️ Wrong classification of zero-rated supplies.
7. Wrong Registration
✔️ Doing business above turnover threshold without GST registration.
8. Audit Findings
✔️ If discrepancies are found during departmental audit or special audit.
9. Anti-Profiteering
✔️ If your business fails to pass GST rate benefits to customers.
10. Fraud / Fake Invoicing
✔️ Issuing invoices without supply.
✔️ Circular trading to claim fake ITC.
Summary Table: Reasons for GST Notices
| Reason | Example | Notice Issued |
|---|---|---|
| Mismatch in Returns | GSTR-1 sales ≠ GSTR-3B sales | Scrutiny Notice (ASMT-10) |
| Non-Filing of Returns | 6 months no filing | GSTR-3A Notice |
| Wrong ITC Claim | Claiming blocked ITC | SCN (Show Cause Notice) |
| Delayed Tax Payment | Filed returns, unpaid taxes | DRC-01 |
| Underreporting of Sales | GST vs e-way bill mismatch | Scrutiny/SCN |
| Refund Fraud | Inflated export refund | RFD-08 |
| Wrong Registration | Not registered despite turnover > ₹40 lakh | REG-17 (Cancellation) |
| Audit Findings | Discrepancies found | Audit Notice |
| Anti-Profiteering | Not reducing MRP after GST cut | NAA Investigation |
| Fake Invoicing | Claiming ITC on bogus invoices | SCN |
Types of GST Notices – A Complete Breakdown
The Goods and Services Tax Act prescribes different formats and types of notices, each serving a specific purpose. Some are reminders to comply, while others are show cause notices (SCN) that can lead to penalties.
Understanding these notices will help you stay calm and respond correctly instead of panicking.
1. GSTR-3A Notice – For Non-Filing of Returns
✔️ Issued under Section 46 of the CGST Act.
✔️ Sent when a registered taxpayer fails to file monthly/quarterly returns (like GSTR-3B, GSTR-1).
✔️ It’s usually the first step before the department moves to assessment.
Example: A clothing retailer does not file GSTR-1 for 2 months. GST department issues GSTR-3A notice.
Response:
– File the pending returns immediately.
– Pay applicable late fees and interest.
– Submit compliance report on GST portal.
2. Scrutiny Notice (ASMT-10)
✔️ Issued under Section 61.
✔️ Sent when the department finds discrepancies in returns filed.
✔️ Common mismatches:
— GSTR-1 ≠ GSTR-3B
— GSTR-3B ITC ≠ GSTR-2B ITC
— GST returns ≠ e-way bills
Example: A business claims ITC of ₹10 lakh but supplier data reflects only ₹8.5 lakh. Scrutiny notice ASMT-10 issued.
Response:
— Submit explanation within 30 days.
— If mismatch is genuine, pay tax + interest.
— If mismatch due to supplier, present evidence.
3. Show Cause Notice (SCN) – DRC-01
✔️Issued under Section 73/74.
✔️ It’s a serious notice demanding explanation for tax short payment, fraud, or ITC misuse.
✔️ Section 73: For unintentional errors (no fraud).
✔️ Section 74: For fraud, suppression, or willful misstatement.
Example: A trader claims ITC on fake invoices. Department issues SCN under Section 74.
Response:
— File reply with supporting documents.
— Attend personal hearing.
— Pay tax + penalty (if applicable).
4. DRC-03 – Voluntary Payment
✔️ While not exactly a “notice,” this form allows businesses to pay tax voluntarily if they realize a mistake after receiving scrutiny or show cause.
Example: You wrongly claimed ITC but discover it yourself → pay via DRC-03 before SCN is issued → penalty avoided.
5. REG-17 – Notice for Cancellation of Registration
✔️ Issued under Rule 22 of CGST Rules.
✔️ Sent when GST officer believes registration is liable to be cancelled.
Reasons:
— Not filing returns for 6+ months.
— Issuing fake invoices.
— Business closed down.
Example: An e-commerce seller shuts shop but doesn’t surrender GSTIN. Department issues REG-17.
Response
— File reply within 7 working days.
— If registration is valid, show proof of business activity.
— If business closed, apply for cancellation voluntarily.
6. REG-23 – Revocation Notice
✔️ If you apply for revocation of cancelled GSTIN and officer is not satisfied, REG-23 is issued.
Example: GSTIN cancelled for non-filing. You apply for revocation but didn’t attach required returns → REG-23 issued.
7. Audit Notice
✔️ Issued under Section 65.
✔️ GST department can audit any taxpayer.
✔️ Covers turnover, ITC claims, refund applications.
Example: A manufacturing unit with ₹50 crore turnover gets audit notice. Department seeks records for past 2 years.
8. Special Audit Notice
✔️ Section 66 empowers Commissioner to order special audit.
✔️ Usually given when complex transactions or fraud suspected.
Example: An IT company shows huge ITC claim compared to output tax. Special audit ordered.
9. Anti-Profiteering Notice
✔️ Under Section 171 of CGST Act.
✔️ Sent when a business doesn’t pass GST rate reduction benefits to customers.
Example: GST on shampoo reduced from 28% to 18%, but seller continues to charge old MRP. Notice issued.
10. Refund Related Notices (RFD-08, RFD-09)
✔️ Issued if refund claims are in doubt or appear inflated.
Example: Exporter claims refund of ₹20 lakh ITC, but verification shows only ₹15 lakh eligible. RFD-08 issued.
11. Enforcement/Investigation Notices
✔️ Issued by DGCI (Directorate General of GST Intelligence).
✔️ Usually for fraud, bogus billing, fake invoicing.
Example: Syndicate of traders issuing bills without supply → DGCI investigation notice.
Summary Table: Major GST Notices
| Notice Form | Reason | Response Timeline |
|---|---|---|
| GSTR-3A | Non-filing of returns | 15 days |
| ASMT-10 | Discrepancies in returns | 30 days |
| DRC-01 (SCN) | Tax short paid / ITC misuse | 30 days |
| REG-17 | Cancellation of registration | 7 working days |
| REG-23 | Unsatisfactory revocation reply | 7 working days |
| RFD-08 | Refund discrepancies | 15 days |
| Audit Notice | Departmental audit | Specified in notice |
| Special Audit | Complex cases / fraud suspicion | As directed |
How to Respond to a GST Notice – A Complete Step-by-Step Guide
Receiving a GST notice can feel overwhelming, especially for small businesses and startups who may not have a full-fledged accounting team. But the truth is, most GST notices are routine and can be handled smoothly if you respond properly.
Here’s a step-by-step process every business should follow when dealing with GST notices.
Step 1: Stay Calm and Read the Notice Carefully
The first mistake many taxpayers make is panicking. Remember:
✔️ Not every GST notice is a penalty notice.
✔️ Many are just requests for clarification or reminders.
Example: If you filed GSTR-3B late, the department may just ask you to pay interest. That doesn’t mean you’re accused of fraud.
Step 2: Identify the Type of Notice
Each GST notice has a specific form number (GSTR-3A, DRC-01, ASMT-10, REG-17, etc.).
✔️ Check the form number.
✔️ Refer to the table (like the one we created earlier).
✔️ Understand what action is required.
Example: If you get ASMT-10, it’s not a demand – it’s a scrutiny notice asking you to clarify mismatches.
Step 3: Note the Response Deadline
Almost every GST notice mentions a timeframe. Missing this deadline can cause serious consequences like:
✔️ Auto-assessment by GST officer.
✔️ Cancellation of GSTIN.
✔️ Penalties and prosecution.
Example: GSTR-3A gives 15 days to file pending returns. If ignored, officer will assess tax based on “best judgment,” which may be much higher than actual liability.
Step 4: Gather Required Documents
Depending on the notice type, prepare all relevant records:
✔️ GST returns filed (GSTR-1, GSTR-3B, GSTR-9).
✔️ Purchase & sales invoices.
✔️ E-way bills.
✔️ ITC ledger from GST portal.
✔️ Bank statements (in case of scrutiny).
Example: If you’re asked about ITC mismatch, download GSTR-2B (supplier invoices) and compare it with your claimed ITC.
Step 5: Draft a Proper Reply
Your reply should be:
✔️ Polite and professional – never argue with the officer.
✔️ Supported with documents – don’t just give explanations, attach proof.
✔️ Clear and concise – officers don’t have time to read lengthy stories.
Sample Reply Format for Scrutiny Notice (ASMT-10):
Subject: Reply to Scrutiny Notice ASMT-10
Respected Sir/Madam,
With reference to notice ASMT-10 dated [insert date], we hereby submit our reply. The difference in ITC arises due to delayed filing by some suppliers, which has now been reconciled. We are attaching reconciliation statements along with supporting invoices.
Kindly consider our reply and oblige.
Regards,
[Taxpayer Name & GSTIN]
Step 6: File Reply Online
Most GST notices can be replied to directly on the GST portal.
Steps:
✔️ Log in to www.gst.gov.in.
✔️ Go to “Services → User Services → View Notices and Orders.”
✔️ Click on the notice reference number.
✔️ Upload reply (PDF/doc) + attachments.
✔️ Submit using Digital Signature Certificate (DSC) or EVC.
Always save the Acknowledgment Reference Number (ARN) – proof that you replied.
Step 7: Pay Dues if Required
If the notice points to tax short payment or interest liability, clear dues immediately:
✔️ Pay through challan GST PMT-06.
✔️ File DRC-03 if voluntary payment.
✔️ Attach challan copy in your reply.
This shows good faith compliance, reducing penalty chances.
Step 8: Attend Personal Hearing (if applicable)
For SCNs (Show Cause Notices), you may be called for a personal hearing.
✔️ Carry all supporting documents.
✔️ Be polite, professional, and cooperative.
✔️ If not confident, hire a GST practitioner or CA to represent you.
Step 9: Keep Records Safe
Always maintain a GST Notice Response File:
✔️ Copy of notice.
✔️ Reply submitted.
✔️ ARN acknowledgment.
✔️ Proof of tax/interest payment.
✔️ Officer’s final order.
This helps during future audits and avoids repeated notices for the same issue.
Common Mistakes to Avoid When Replying to GST Notices
- Ignoring the notice – leads to penalties, cancellation, or prosecution.
- Replying casually without documents – officer will reject explanation.
- Delaying payment – increases interest and late fees.
- Using aggressive or rude language – may trigger stricter action.
- Not consulting experts – small businesses often make costly mistakes without professional help.
Penalties for Not Responding to GST Notices
- ₹10,000 or 10% of tax due (whichever is higher).
- Interest @18% per annum on unpaid tax.
- Cancellation of GST registration.
- Attachment of bank accounts or assets.
- Prosecution for willful default (in fraud cases).
Example: A business ignoring GSTR-3A notice may face cancellation of GSTIN, making it impossible to continue business legally.
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Frequently Asked Questions (FAQs) on GST Notice!
1. What is a GST notice in India?
A GST notice is an official communication issued by the Goods and Services Tax (GST) authorities to a taxpayer. It is usually sent when there are discrepancies, defaults, or non-compliance in GST returns, payments, or registration. Ignoring a GST notice can lead to penalties, cancellation of registration, or even legal action.
2. Why do businesses receive GST notices?
Businesses receive GST notices for reasons such as late or non-filing of GST returns, mismatch in GSTR-1 and GSTR-3B data, wrong claim of Input Tax Credit (ITC), underpayment of tax, failure to register under GST, or suspicious transactions flagged by authorities.
3. What are the different types of GST notices?
Some of the most common GST notices include:
✔️ GSTR-3A: For non-filing of GST returns.
✔️ CMP-05: For questioning eligibility under the composition scheme.
✔️ REG-17: For cancellation of GST registration.
✔️ ASMT-10: For scrutiny of GST returns.
✔️ DRC-01: For demand of unpaid tax.
Each notice has a specific purpose and requires a timely response.
4. How do I check GST notices online?
You can check your GST notices by logging into the official GST portal. After login, go to Services → User Services → View Notices and Orders. All notices issued against your GSTIN will be visible here.
5. How to respond to a GST notice?
To respond to a GST notice:
✔️ Carefully read the notice and understand the issue.
✔️ Collect supporting documents like invoices, returns, or reconciliation statements.
✔️ Log in to the GST portal and submit your reply in the prescribed format.
✔️ Use a digital signature or e-sign to validate.
✔️ If required, pay tax/penalties before replying.
6. What happens if I ignore a GST notice?
If you do not respond to a GST notice within the specified time, you may face penalties, cancellation of GST registration, interest charges, recovery proceedings, or even prosecution in cases of fraud.
7. Can I reply to a GST notice offline?
No, GST notices must be replied to online through the GST portal. However, in case of hearings or audits, physical documents may be requested by the department.
8. What is the penalty for not replying to a GST notice?
The penalty depends on the type of notice. For example:
✔️ Non-filing of returns after GSTR-3A notice → ₹10,000 or 10% of tax due, whichever is higher.
✔️ Wrong ITC claim → Penalty plus reversal of ITC.
✔️ Non-registration → Heavy fines and liability to pay past GST dues with interest.
9. Can Bharat United Startups help me with GST notices?
Yes! At Bharat United Startups, our experts assist in analyzing the GST notice, preparing replies, reconciling records, and filing accurate responses. We ensure you avoid penalties and maintain compliance without stress.
10. How can I avoid getting GST notices in the future?
To avoid GST notices:
✔️ File GST returns on time (GSTR-1, GSTR-3B, etc.).
✔️ Match ITC with GSTR-2B.
✔️ Keep invoices and records accurate.
✔️ Pay GST dues before deadlines.
✔️ Take professional help for GST compliance.
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