How to Reply to a GST Notice (DRC-01) in India — Step by Step (2026)

1What is Form DRC-01?

DRC-01 is the show-cause notice issued under the CGST Act 2017 when the department believes tax was short-paid, not paid, or wrongly refunded, or input tax credit (ITC) was wrongly availed. It is issued under Section 73 (no fraud — lower penalty) or Section 74 (fraud/suppression — higher penalty).

2Step-by-step: how to reply

• Read the notice carefully — note the section (73 vs 74), the tax period, the amount, and the reply deadline.
• Log in to the GST portal → Services → User Services → View Additional Notices/Orders.
• Reconcile the demand against your own GSTR-3B, GSTR-1 and GSTR-2B for that period.
• If you agree, you can pay using Form DRC-03 (voluntary payment) — this often reduces or removes penalty.
• If you disagree, file your reply in Form DRC-06 with a clear point-by-point explanation and supporting documents.
• Keep a copy of the ARN (acknowledgement) of your reply.

3What documents to attach

• Relevant tax invoices and e-way bills
• GSTR-3B / GSTR-1 / GSTR-2B extracts for the period
• Reconciliation statement
• Any earlier correspondence with the department

4Deadlines & penalty

The notice itself states the reply due date — never miss it. Under Section 73, paying the tax with interest before the notice (or shortly after) can sharply reduce penalty. Under Section 74, penalties are heavier, so professional help is strongly advised. Interest under Section 50 runs at 18% per annum on the net cash tax paid late.