You have just received a GST Show Cause Notice. Under the Central Goods and Services Tax Act, 2017, two hard deadlines now govern your options: a 30-day window to settle under Section 74(8) at 25% penalty, and the same 30 days to file a reply preserving your right to contest. Both clocks start from the day you receive the SCN.
Why the first 7 days determine everything
A GST Show Cause Notice is not a demand — it is the start of an adjudication process. The final demand crystallises only when the officer passes an order under Section 73 or Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act). Between receipt of the SCN and that order, two exit paths exist:
Exit 1 — §74(8) settlement: Pay the full tax + interest + 25% penalty within 30 days of receiving the SCN. Proceedings are closed. No adjudication order. The 25% window shuts permanently on Day 31.
Exit 2 — Contested reply: File a detailed reply in FORM GST DRC-06, assemble evidence, challenge procedural defects (DRC-01A omission, limitation, §74 without fraud particularisation), and request a personal hearing under §75(4) before any adverse order is passed.
The 7-day protocol below is designed to gather the information needed to choose between these exits — or a hybrid — before Day 7.
Day 1–2: Classify the SCN and run immediate jurisdictional checks
Identify whether it is Section 73 or Section 74
The two sections carry fundamentally different consequences:
| Element | Section 73 | Section 74 |
|---|---|---|
| Trigger | Tax shortfall — no fraud alleged | Tax shortfall with fraud / suppression / wilful misstatement alleged |
| Standard penalty | 10% of tax (min ₹10,000) | 100% of tax |
| Post-SCN settlement penalty | 10% under §73(8) | 25% under §74(8) within 30 days |
| Limitation period | 3 years from GSTR-9 due date | 5 years from GSTR-9 due date |
| §128A amnesty eligibility | Yes (FY 2017–18 to 2019–20) | No |
Look for the words "fraud," "suppression," or "wilful misstatement" in the SCN body. If absent, the officer is proceeding under §73. If present, it is §74 — and the 30-day §74(8) window applies immediately.
Check limitation on the spot
The officer's jurisdiction to raise a demand under §73 expires 3 years from the due date of GSTR-9 for the relevant financial year. Under §74, the window is 5 years. GSTR-9 due dates have typically fallen on 31 December of the following financial year (for FY 2023–24, due 31 December 2024).
If the SCN was issued after the applicable deadline, the demand is barred by limitation — that is a complete defence, irrespective of the merits.
Check whether DRC-01A was issued
Before issuing a §73 SCN, the officer is required under Rule 142(1A) of the CGST Rules, 2017 to issue a pre-notice communication in FORM GST DRC-01A. If no DRC-01A was issued before this §73 SCN, that is a procedural defect capable of vitiating the proceedings. Document it on Day 1.
(This requirement applies only to §73. Section 74 SCNs do not require a prior DRC-01A.)
Check whether demand has already been paid via DRC-03
If the taxpayer previously paid this demand via FORM GST DRC-03 (voluntary payment), the SCN is partly or fully infructuous. Check: GST portal → My Account → Voluntary Payment History. Any prior DRC-03 payment should be front-and-centre in the reply.
Day 2–3: Assemble documents
Pull these five categories from the GST portal and physical records:
- GST returns — GSTR-1, GSTR-3B, GSTR-2A, GSTR-2B, GSTR-9 and GSTR-9C for every month in the demand period
- Purchase invoices — originals for each transaction challenged; supplier GSTIN registration status at the time of supply (verify on the GST portal)
- Bank statements — payment to each challenged supplier via NEFT/RTGS; FIRC/BRC if exports are involved
- Books of account — ledger entries, stock register, debit/credit notes for the disputed period
- Transport documents — e-way bills, lorry receipts, delivery challans if goods movement is in dispute
Prioritise bank statements and GSTR-2B — these are third-party records the officer cannot dispute and are the most powerful corroboration of a genuine transaction.
Day 3–4: Legal analysis and the strategic decision
Work through the SCN allegation-by-allegation:
- What is the allegation?
- What evidence do we have that responds to it?
- Is this a winning ground (challenge) or a losing ground (concede)?
- What is the tax + interest + penalty exposure on this ground?
Build a simple table: allegation / evidence / challenge-or-concede / amount. This becomes the skeleton of the reply and the basis for the §74(8) vs fight decision.
Can Section 74 be re-characterised as Section 73?
If the SCN invokes §74 but does not specifically particularise the fraud or suppression, this is the highest-value ground to pursue. A successful re-characterisation:
- Reduces penalty from 100% to 10% — a 90% saving on the penalty component
- Potentially bars the demand entirely if the period is beyond the 3-year §73 limitation
CBIC Circular No. 171/03/2022-GST (6 July 2022) limits §74 to cases where fraudulent intent is established — bona fide reliance on an apparently-registered supplier's invoice is not sufficient. Cite this Circular directly in any re-characterisation argument.
Day 4–5: The decision tree
After assembling evidence and mapping allegations, the strategic decision becomes mechanical:
Settle under §74(8) when:
- The demand is substantially correct on the merits
- Evidence does not support a strong challenge on any major ground
- Demand amount is below ₹50 lakh (legal costs rarely justify the appellate journey at this scale)
- CBIC has subsequently clarified the applicable rate or classification against the taxpayer's position
Fight (file a detailed reply) when:
- §74 invoked without fraud particularisation — strongest procedural ground
- DRC-01A not issued before a §73 SCN — procedural defect
- Demand is time-barred under the applicable limitation period
- Evidence clearly supports genuineness of transactions
- Demand is above ₹50 lakh — 75% penalty savings justify legal costs
- Re-characterisation from §74 to §73 would eliminate or drastically reduce the exposure
Day 5–7: File the reply or execute the DRC-03 settlement
If settling under §74(8)
- Compute: tax shortfall + interest under §50 (18% per annum from the return due date to today) + 25% penalty
- File FORM GST DRC-03 on the GST portal: Payments → GST DRC-03 → Reason: SCN received
- Write to the officer citing the DRC-03 Acknowledgement Reference Number (ARN) and requesting closure of proceedings
- Retain the DRC-03 ARN and the written communication as permanent file records
If filing a contested reply
Structure the reply in six sections:
- Preliminary objections — limitation, DRC-01A omission, §74 without fraud particularisation, jurisdictional defects. These are threshold issues; if sustained, they end the proceedings without going to merits.
- Statement of facts — the taxpayer's narrative for the demand period, cross-referenced to document annexures
- Ground-by-ground response — address each SCN paragraph specifically; cite evidence by annexure reference
- §73/§74 re-characterisation argument (if applicable) — cite Circular 171/2022; establish absence of fraudulent intent from evidence
- Taxpayer's quantification — the correct demand amount even if the officer rejects the merits challenge; demonstrates engagement
- Prayer — drop proceedings on preliminary grounds; re-characterise to §73; accept response; and in the alternative, grant personal hearing under §75(4) before any adverse order
Always include an explicit personal hearing request. Section 75(4) CGST Act mandates a hearing before any adverse determination. An order passed without affording this opportunity is void and challengeable under Article 226 of the Constitution of India.
Key deadlines — quick reference table
| Deadline | Basis | What happens if missed |
|---|---|---|
| §74(8) payment (30 days from SCN receipt) | §74(8) CGST Act | 25% penalty window closes permanently; full 100% penalty applies after order |
| SCN reply (typically 30 days; extendable on request) | SCN + Rule 142 | Officer may pass ex parte order; §75(4) personal hearing right survives |
| Personal hearing request | Before adjudication order | No impact on §75(4) right — officer must still offer hearing; but request in writing to create record |
| Appeal against order (3 months from order date) | §107 CGST Act | Right of statutory appeal lost; only Article 226 writ available |
Beyond this brief Preview
Veritect Legal AI subscribers access the full SYNTH_SCN_003 corpus file — a complete practitioner-day protocol covering: verbatim §§73–75 CGST Act and Rule 142 statutory text; the full six-section reply template with clause-by-clause drafting notes; the §74(8) vs §73(8) economic comparison model with interest calculation worksheet; the DRC-01A omission case-law digest; and the §74→§73 re-characterisation argument framework with Circular 171/2022 full-text verbatim. Also includes SYN_ITC_001 cross-reference for SCNs that challenge ITC on §16(2)(aa) GSTR-2B mismatch grounds.
Frequently Asked Questions
Q: What happens if I miss the 30-day window under Section 74(8) CGST Act?
If you do not pay tax, interest, and 25% penalty within 30 days of receiving the Section 74 SCN, the reduced-penalty window under §74(8) is permanently closed. The officer will pass an adjudication order, and the standard 100% penalty applies. After the order, you can appeal under Section 107 CGST Act (3-month window, 10% pre-deposit), but there is no further reduced-penalty settlement path.
Q: Can I get an extension of time to reply to a GST SCN?
Yes. The CGST Act contains no statutory bar on granting additional time — extensions are at the proper officer's discretion. Write formally to the officer before the stated deadline, citing the volume of records involved. In practice, a 15–30 day extension is routinely granted at CGST Circle/Range level. Retain the written request and any acknowledgement as part of your file.
Q: When does settling under Section 74(8) make financial sense?
Section 74(8) settlement makes sense when the demand is substantially correct on the merits and the legal costs of a full appellate journey exceed the 75% of penalty you would save by winning. For demands under ₹50 lakh where the facts are unfavourable, the 25% window is typically the least-cost exit. Above ₹50 lakh, or where §74 was invoked without proper fraud particularisation, a contested reply is almost always preferred.
Q: What documents do I absolutely need to gather in the first 3 days?
The five non-negotiable items are: (1) GSTR-3B and GSTR-2B for every month in the demand period; (2) original purchase invoices for challenged transactions; (3) bank statements showing payment to the challenged suppliers; (4) supplier GSTIN registration status at the time of supply; and (5) e-way bills or delivery documents if goods movement is challenged. Bank statements and GSTR-2B are third-party records the officer cannot dispute — prioritise these first.
Q: How do I request a personal hearing under Section 75(4) CGST Act?
Include an explicit written prayer in your SCN reply (FORM GST DRC-06): "The Noticee respectfully requests a personal hearing under Section 75(4) of the CGST Act, 2017, before any adverse order is passed." Do not assume the officer will schedule a hearing automatically — request it in writing and follow up if no date is communicated within 15 days.
Q: Can a Section 74 SCN be re-characterised as Section 73?
Yes. Courts have re-characterised §74 proceedings as §73 where the officer invoked §74 without establishing actual fraudulent intent. Section 74 requires fraud, wilful misstatement, or suppression — a bona fide classification error or ITC claimed on a facially valid invoice from an apparently-registered supplier does not meet that threshold. CBIC Circular 171/03/2022-GST limits §74 to cases where fraudulent intent is established. A successful re-characterisation reduces the penalty from 100% to 10%.
Sources
- Statutory basis: Central Goods and Services Tax Act, 2017 — Sections 73, 74, 75, 107 on India Code
- Rules basis: Central Goods and Services Tax Rules, 2017 — Rule 142 (Notice and order for demand) on cbic-gst.gov.in
- CBIC Circular No. 171/03/2022-GST dated 6 July 2022 — Demand and penalty provisions in fake-invoice transactions: cbic-gst.gov.in PDF
- Related reading: Section 73 vs 74 CGST Show Cause Notice: How to Identify Which Applies
- Related reading: Section 128A GST Amnesty Framework
Authored by Veritect Legal Intelligence. Content verified against CGST Act 2017 (as amended) and CBIC Circular 171/03/2022-GST on 27 April 2026.
Beyond this brief Preview
Veritect Legal AI subscribers access the complete SYNTH_SCN_003 corpus file — the full 7-day protocol with verbatim §§73–75 CGST Act statutory text, the six-section reply template with drafting notes, the §74(8) interest-and-penalty computation worksheet, and the §74→§73 re-characterisation argument with Circular 171/2022 verbatim. Includes practitioner-day annexure checklist and the DRC-01A omission case-law digest.