Quick Answer
Before replying to any ITC-mismatch notice, split the demanded amount into three buckets at invoice level: (A) ITC that appears in GSTR-2B and is supported by a tax invoice, receipt of goods or services and payment to the supplier within 180 days — dispute it in full; (B) ITC that was claimed in the wrong period, under the wrong head (IGST vs CGST/SGST) or reversed late — reply with the reconciliation, because this is a timing or classification error, not a loss of credit; (C) ITC from suppliers who never filed GSTR-1/3B, or on blocked items under section 17(5) — pay this before the reply, because section 16(2)(aa) and (c) make it irrecoverable and paying within the statutory window saves the penalty where no fraud is alleged: within 30 days of the notice under section 73(8) for periods up to FY 2023-24, or within 60 days under section 74A(8) for FY 2024-25 onwards. Where the notice alleges fraud, wilful misstatement or suppression (section 74, or the fraud limb of section 74A), the penalty is not waived but reduced — 15% if paid before the notice, 25% within the 30/60-day window after it, 50% within the same window after the order. The reply to a DRC-01 is due within the time stated in the notice (usually 30 days); ask for a personal hearing in the reply itself. If the order goes against you, the appeal to the Appellate Authority under section 107 is within three months with a pre-deposit of 10% of the disputed tax (capped at ₹20 crore each for CGST and SGST), and the further appeal to the GST Appellate Tribunal under section 112 needs an additional 10% (same cap). The Tribunal is now functioning — the Principal Bench from 16 February 2026 and the Chennai Bench from 1 April 2026 — and the window for filing appeals against orders passed before the Tribunal became operational closed on 31 July 2026.
Reviewed: 4 November 2026 | Law: CGST Act, 2017 (ss. 16, 17(5), 29, 30, 54, 61, 73, 74, 74A, 107, 112); CGST Rules, 2017 (rules 8, 9, 10A, 14A, 23, 25, 36(4), 88C, 88D, 89, 96, 142); Notifications 03/2026-CT and 05/2026-CT; Circulars 257–264/2026 | Author: CA V. Viswanathan, FCA, ACS, CFE
Answer: Build an invoice-level reconciliation of GSTR-3B against GSTR-2B for each tax period in the notice, with one line per invoice and a status code. The statuses that decide the reply:
| Status of the invoice | Legal position | Decision |
|---|---|---|
| In 2B, invoice and proof of receipt on file, supplier paid within 180 days | All conditions of s.16(2) met | Dispute; annex the invoice, e-way bill or delivery proof, bank payment |
| In 2B of a later period (supplier filed late); claimed in the earlier period | Timing difference; credit is valid once it appears in 2B (s.16(2)(aa)); claim is within s.16(4) if before 30 November following the FY | Reply with the period-wise bridge; interest under s.50(3) only if credit was utilised early |
| Claimed under IGST, appears in 2B as CGST+SGST (or vice versa) | Head mismatch; credit not lost; rule 88D/Circular guidance | Reply with the head-wise reconciliation; correct in a subsequent 3B |
| Not in 2B at all; supplier never filed GSTR-1 | s.16(2)(aa) condition fails; no credit | Pay with interest via DRC-03 before the reply; recover from the supplier under the contract |
| In 2B, but supplier has not paid tax (GSTR-3B not filed) | s.16(2)(c); see Q42 | Dispute on evidence of genuine transaction if the amount justifies litigation; otherwise pay and recover |
| Blocked credit — motor vehicles, food, construction, personal use (s.17(5)) | Not eligible regardless of 2B | Pay with interest |
| Supplier's registration cancelled retrospectively | Contested; depends on whether supply was genuine and tax was paid at the time | Dispute with transaction evidence; weigh the amount against appeal cost |
Pay bucket C through DRC-03 citing the notice reference before the reply is filed, and say so in the reply with the ARN — an officer who sees the undisputed part already paid treats the disputed part differently. The reply itself (DRC-06) should attach the reconciliation as a schedule, not describe it in prose.
Answer: There is no choice at the notice stage — a show-cause notice must be replied to; an appeal lies only against the order that follows. The decision the seller is actually making is how much to pay now. The cash-flow logic, where the notice does not allege fraud, wilful misstatement or suppression: paying bucket C with interest within 30 days of the notice under section 73(8) (periods up to FY 2023-24) or within 60 days under section 74A(8) (FY 2024-25 onwards) means no penalty at all; letting it go to an order costs tax, interest and penalty (the higher of 10% of tax and ₹10,000 under section 73(9) or the corresponding non-fraud penalty under section 74A). Where the notice does allege fraud (section 74, or the fraud limb of section 74A), payment never removes the penalty — it reduces it: 15% of tax if paid before the notice, 25% if paid with interest within the 30/60-day window after the notice, 50% if paid within that window after the order, against 100% otherwise. Either way, an appeal against the order then needs the 10% pre-deposit under section 107(6) and takes months. So pay what cannot be defended, reply on what can, and keep the appeal for the disputed remainder. For a marketplace seller, two specific points: TCS collected by the marketplace under section 52 is reconciled through the TDS/TCS credit facility and the electronic cash ledger, separately from input tax credit; and marketplace commission invoices are often in 2B but the seller's books record them net of sales — a common source of "excess ITC" that is in fact unrecorded expense.
Answer: ASMT-10 (section 61, rule 99) is a scrutiny notice: discrepancies in returns, reply in ASMT-11 within 30 days with explanation or payment; if accepted, ASMT-12 closes it; if not, it proceeds to section 73/74A. DRC-01A (rule 142(1A)) is a pre-notice intimation of the tax the officer proposes to demand: Part A states the amount; you may pay and inform in Part B, or submit why the demand is wrong — there is no statutory time limit but the officer will issue the DRC-01 if nothing is received. DRC-01 is the show-cause notice itself under section 73(1) or 74A(1), with a summary; reply in DRC-06 within the time given, ask for a hearing (section 75(4) requires one before an adverse order if requested or if the order is adverse), and the order follows in DRC-07. Also distinguish DRC-01B (rule 88C, GSTR-1 vs 3B liability difference) and DRC-01C (rule 88D, 2B vs 3B ITC difference) — these are system-generated intimations with a 7-day response on the portal, and ignoring them blocks the next GSTR-1 filing.
Answer: For tax periods up to FY 2023-24, section 73 (no fraud) and section 74 (fraud, wilful misstatement, suppression) apply: under section 73 the order must be passed within three years of the annual-return due date and the notice at least three months before that; under section 74 five years and six months. For FY 2024-25 onwards, section 74A applies to both: the notice within 42 months of the annual-return due date and the order within twelve months of the notice (extendable by six). Penalty-free windows: section 73(8) — pay tax and interest within 30 days of the notice and no penalty is payable; section 74A — pay within 60 days of the notice for no penalty in non-fraud cases, and reduced penalty (15%/25%/50%) at the stages set out in section 74A(9) for fraud cases. Check the notice's section on page one before anything else: a notice issued under section 74 for a plain mismatch without any allegation of fraud is itself a ground of reply, because the extended limitation and higher penalty depend on the fraud finding.
Answer: Section 16(2)(c) conditions credit on the tax having been actually paid to the Government by the supplier, and section 16(2)(aa) on the invoice appearing in GSTR-2B. If the invoice is in 2B (supplier filed GSTR-1) but the supplier has not filed 3B, the credit is at risk under 16(2)(c), and the department's position after rule 36(4) and Circular 183/15/2022 is that the recipient must prove payment or reverse. Courts have given relief where the recipient shows a genuine transaction and the department has not first proceeded against the defaulting supplier — but that relief is case-by-case and takes an appeal to reach. The evidence that decides it: the tax invoice, the e-way bill or transport document, proof of receipt (GRN, stock register), bank payment to the supplier with the GST component, the supplier's GSTIN status on the date of supply, and correspondence showing you asked the supplier to file. The commercial route is faster: the supplier's invoice is a contract, and most supply agreements let you withhold the GST component until it appears as paid. Decide by amount — below the cost of an appeal, pay and recover from the supplier; above it, reply on evidence and preserve the appeal.
Answer: Yes, and the document pack decides whether it passes. Rule 8 requires proof of principal place of business; for a shared or consented premises the portal expects the owner's consent letter (the operator's NOC), the operator's own title or lease, and a utility bill (electricity, property tax, water) in the owner's name — the chain has to connect the building owner to the operator to you. Under rule 9(1) the officer approves within 7 working days, or issues REG-03 within that time; your reply in REG-04 is due within 7 working days; if physical verification under rule 25 is directed, approval runs to 30 days (and the 3-working-day deemed route applies only to applications under rule 14A, the small-taxpayer route with a monthly output-tax limit). REG-03 queries on co-working addresses in our experience fall into a few patterns: the NOC is signed by a sales executive rather than the lease-holder; the utility bill is for a different unit or floor than the lease; the nature of possession selected in the form does not match the document; the operator's lease has expired. Get the operator's full chain — title/lease, latest bill, NOC naming your entity and the specific seat or cabin — and photograph the signboard with your name before filing. After approval, furnish bank details under rule 10A within 30 days or the registration is liable to suspension.
Answer: Revocation, if you are within time, because a fresh registration leaves the old GSTIN's liabilities and the gap in ITC chain unresolved and the department may refuse a new registration to a defaulter on the same PAN. Under section 30 and rule 23, apply in REG-21 within 90 days of the cancellation order, extendable by the Commissioner by a further 180 days; before applying, file all returns due up to the cancellation date and pay tax, interest and late fee. The officer may issue REG-23 (show cause against revocation) with a 7-working-day reply in REG-24, and must decide within 30 days of the application or the reply. If the 270 days have passed, the only routes are a writ (courts have ordered revocation on payment of dues in several cases) or a fresh registration with the old liabilities cleared first. On revocation, ITC on inputs held on the cancellation date is restorable and the returns for the cancelled period must be filed within 30 days of the revocation order; invoices issued during the cancelled period are a problem for your customers' ITC, so inform them.
Answer: Two refund routes: export under LUT without payment of tax, then refund of unutilised ITC under section 54(3) and rule 89 (application in RFD-01 within two years of the relevant date, with the statement of invoices and the formula in rule 89(4)); or export on payment of IGST and refund of that IGST under rule 96, which is processed automatically from the shipping bill and GSTR-1 if the data matches. Rule 96 refunds stall on data mismatch — invoice number or value differs between GSTR-1, GSTR-3B (table 3.1(b)) and the shipping bill, or the 3B tax paid is less than the 1 export value. Rule 89 refunds stall on the deficiency memo (RFD-03) stage, and the officer asks for: the LUT acknowledgement for the period, FIRC/BRC for services (receipt in convertible foreign exchange, or in Indian rupees where the RBI permits it — section 2(6)(iv) of the IGST Act — within the FEMA realisation period), the invoice-wise ITC statement with 2B matching, a CA certificate where the refund exceeds ₹2 lakh (rule 89(2)(m)), and proof that the refund has not been passed to another person. Services exported to a related foreign entity attract a further question — whether the Indian entity is a mere establishment of the recipient (section 2(6)(v) IGST Act) — so keep the intercompany agreement ready. After a deficiency memo the claim has to be filed afresh, and rule 90(3) excludes the period from the original filing to the communication of the deficiency when computing the two-year limit for the fresh claim — but the exclusion is of that window only, so an applicant who waits after the memo can still run out of time; file complete the first time; the officer must sanction or reject within 60 days of a complete application (section 54(7)), with 90% provisional refund within 7 days for exporters under section 54(6).
Send the notice (first page showing the section and the date), the tax periods, and your GSTR-2B and 3B for those periods. We return the invoice-level split into dispute/reconcile/pay, the amount to deposit before the reply, and whether the matter is worth taking to appeal, before the reply date.
Send the notice for a reply-or-appeal review
Sources: CGST Act, 2017 — sections 2(6)(v) (IGST Act), 16, 17(5), 29, 30, 50, 52, 54, 61, 73, 74, 74A, 75(4), 107, 112, 132; CGST Rules, 2017 — rules 8, 9, 10A, 14A, 23, 25, 36(4), 88C, 88D, 89, 96, 99, 142; Circular 183/15/2022-GST; Notifications 03/2026-CT and 05/2026-CT; Circulars 257–264/2026; GSTAT constitution and bench notifications (Principal Bench 16 February 2026; Chennai Bench 1 April 2026). Penalty and pre-deposit figures are statutory; processing times beyond the statutory limits are not stated.
Split the demand at invoice level: ITC in GSTR-2B with invoice, receipt and payment on file is disputed; timing or head differences are reconciled in the reply; ITC from suppliers who never filed GSTR-1, or blocked under section 17(5), is paid through DRC-03 within 30 days under section 73(8) (60 days under section 74A(8) for FY 2024-25 onwards) to avoid penalty in non-fraud cases; in fraud cases the same windows reduce the penalty to 25% rather than waive it.
10% of the disputed tax for the first appeal under section 107 (capped at ₹20 crore each for CGST and SGST) and an additional 10% for the GST Appellate Tribunal under section 112 (same cap).
Yes. The Principal Bench began hearing from 16 February 2026 and the Chennai Bench from 1 April 2026; the window to file appeals against orders passed before the Tribunal became operational closed on 31 July 2026.
It is at risk under section 16(2)(c). Relief has been granted where the recipient proves a genuine transaction and the department has not proceeded against the supplier, but that takes an appeal. Below the cost of litigating, pay and recover from the supplier under the contract.
Under rule 9(1) the officer approves or issues REG-03 within 7 working days; if physical verification is directed, up to 30 days. The 3-working-day deemed approval applies only to rule 14A applications. The operator's title or lease, a utility bill in the owner's name and an NOC naming your entity are the documents that avoid the query.
Apply in REG-21 within 90 days of the cancellation order, extendable by the Commissioner by a further 180 days, after filing all pending returns and paying dues (section 30, rule 23).