A GST Show Cause Notice (SCN) is a formal communication from the GST authorities asking you to explain why a proposed action — such as demand of tax, penalty, or cancellation of registration — should not be taken against you. Responding to an SCN correctly and within the deadline is critical to protecting your business from adverse orders.
Types of GST Show Cause Notices
| Section | Reason for SCN |
|---|---|
| Section 73 | Tax not paid / short paid / erroneously refunded — without fraud or wilful misstatement (normal period: 3 years) |
| Section 74 | Tax not paid / short paid due to fraud, wilful misstatement, or suppression (extended period: 5 years) |
| Section 29 | Cancellation of GST registration |
| Section 76 | Tax collected but not deposited with the government |
| Section 122 | Penalty for various offences under GST |
| Section 130 | Confiscation of goods and conveyances |
Section 74 notices (fraud/wilful misstatement) carry a mandatory penalty of 100% of the tax amount. These are far more serious than Section 73 notices and require immediate professional assistance.
Step 1: Read the SCN Carefully
Before drafting a reply, thoroughly understand:
- The section under which the notice is issued (73, 74, 29, etc.)
- The tax period to which it relates
- The specific allegation — short payment, ITC mismatch, non-filing, etc.
- The amount of tax, interest, and penalty proposed
- The deadline for reply (usually 30 days from date of notice)
Step 2: Gather Evidence and Documents
- GSTR-1, GSTR-3B, and GSTR-2B for the relevant period
- Purchase invoices and supplier details for ITC claims
- Bank statements and payment records
- E-way bills and delivery challans
- Books of accounts and ledgers
- Any previous correspondence with the GST department
Step 3: Draft the Reply
A well-structured SCN reply should include:
- 1Reference to the SCN: Date, reference number, and section under which issued
- 2Statement of facts: Your version of the facts, clearly and concisely stated
- 3Legal grounds: Relevant provisions of the CGST Act, rules, and circulars supporting your position
- 4Reconciliation: If there is a genuine discrepancy, explain it with supporting calculations
- 5Precedents: Cite relevant court judgments or GST Council circulars if applicable
- 6Prayer: Specifically request the authority to drop the proceedings or reduce the demand
Step 4: Submit the Reply
Replies to SCNs must be submitted through the GST portal (www.gst.gov.in) under Services → User Services → My Applications, or as directed in the notice. Always keep a copy of the submitted reply and acknowledgement.
What Happens After the Reply?
- The proper officer will review your reply and may call for a personal hearing
- After the hearing, an Order-in-Original (OIO) is passed
- If you disagree with the OIO, you can appeal to the Appellate Authority (within 3 months)
- Further appeals lie with the GST Appellate Tribunal, High Court, and Supreme Court
Common Mistakes to Avoid
- Ignoring the notice or missing the deadline — leads to ex-parte orders
- Admitting liability without verifying the department's calculations
- Not citing relevant legal provisions and judgments
- Submitting incomplete or unorganised documents
- Not requesting a personal hearing when the matter is complex
GST notices require prompt and expert handling. Bhowal Associates has successfully represented clients before GST authorities across all types of notices and appeals. Contact us for a consultation.