What is a GST DRC-01 notice and how do I reply?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-07-28 · ~4 min read

⚡ Quick answer

A DRC-01 is a show-cause-cum-demand notice the GST department issues — under Section 73 (where there's no fraud) or Section 74 (where fraud or wilful suppression is alleged) of the CGST Act — when it believes you underpaid GST or claimed input tax credit you weren't entitled to. You reply in Form DRC-06 within the time stated (usually 30 days), attaching your reconciliation and explanation; or, if the demand is correct, you pay it via DRC-03 to close the matter.

Draft a free DRC-01 reply →

Getting a GST DRC-01 notice can be alarming, but it is a routine part of GST administration and is manageable if you act in time. It's the department's formal way of saying 'we think you owe more tax — explain or pay.' What matters is understanding why you got it, replying correctly in the right form, and never letting the deadline pass. This guide walks you through exactly that, in plain language.

1What a DRC-01 is

DRC-01 is a combined show-cause notice and demand. It tells you the tax period, the amount the department thinks is short, the reason, and the legal section it's issued under. It gives you a chance to respond before any demand is confirmed.

It comes under one of two sections — and which one matters a lot for the penalty:

Section 73 — for genuine mistakes, no fraud: lower penalty (often nil or 10% if you pay promptly)
Section 74 — where fraud or wilful suppression is alleged: much higher penalty (up to 100% of the tax)

2Why you got it

Most DRC-01 notices are triggered by automated mismatches in your returns. The common reasons:

A mismatch between your GSTR-1 (sales) and GSTR-3B (summary/tax paid)
ITC claimed in GSTR-3B that's higher than what appears in your GSTR-2B
Tax declared but not actually paid, or short-paid
Differences between your GST turnover and the income shown in your income-tax return

3How to reply — step by step

Don't panic and don't ignore it. Work through it methodically:

Read the notice carefully — note the section (73 or 74), the amount, the period and the deadline.
Reconcile the demand against your own records — GSTR-1, GSTR-3B, GSTR-2B and your purchase/sales registers.
If the demand is wrong, file Form DRC-06 on the GST portal with your explanation and supporting documents before the deadline.
If the demand is correct (fully or partly), pay that part via Form DRC-03 — paying promptly under Section 73 can reduce or remove the penalty.

✅ TipEven if you need more time or only partly agree, file a DRC-06 reply within the deadline. A timely, reasoned reply protects your right to be heard; silence leads to an automatic adverse order.

4What happens if you ignore it

If you don't respond, the officer can pass an ex-parte order in Form DRC-07, confirming the entire tax, interest and penalty without your side being heard. Recovery can then follow — including attachment of your bank account. After an adverse order, your remedy is an appeal, which costs time and a pre-deposit. Replying on time is far cheaper.

💡 ExampleA small trader got a DRC-01 for ₹80,000, claiming an ITC mismatch. On reconciling, he found the ITC was genuine but one supplier had filed late, so it appeared in a later GSTR-2B. He filed a DRC-06 explaining this with screenshots of the GSTR-2B — and the demand was dropped. Had he ignored it, a DRC-07 order for ₹80,000 plus penalty would have stood.

Key takeaways

DRC-01 is a show-cause-cum-demand notice for underpaid GST or excess ITC.
Section 73 = no fraud (low penalty); Section 74 = alleged fraud (penalty up to 100%).
Reply in Form DRC-06 within the deadline (usually 30 days) with your reconciliation.
If the demand is correct, pay via DRC-03 — prompt payment under 73 reduces the penalty.
Ignoring it leads to an ex-parte DRC-07 order and recovery; always reply on time.

Frequently asked questions

What happens if I ignore a DRC-01 notice?

The officer can pass an ex-parte demand order (DRC-07) confirming the full tax, interest and penalty without hearing you, followed by recovery action. Always file a DRC-06 reply within the deadline, even if only to seek time or clarify.

What is the difference between DRC-01, DRC-03, DRC-06 and DRC-07?

DRC-01 is the show-cause/demand notice; DRC-06 is your reply to it; DRC-03 is the form used to pay tax voluntarily or against the demand; DRC-07 is the final demand order the officer issues after considering (or in the absence of) your reply.

Can I get the penalty reduced on a DRC-01?

Yes, often. Under Section 73 (no fraud), if you pay the tax and interest before the notice or within 30 days, the penalty can be nil or minimal. Under Section 74 the relief is smaller, but early payment still reduces the penalty.

How long do I get to reply to a DRC-01?

The notice states the deadline, typically 30 days. If you need more time, request it through a DRC-06 reply before the deadline rather than letting it lapse.