SCN in GST: Sections 73, 74 and 74A, Deadlines and How to Reply

An SCN (show cause notice) in GST is a formal notice from a GST officer asking you to explain why tax, interest and penalty should not be demanded from you. For tax periods up to FY 2023-24 it is issued under section 73 (no fraud alleged) or section 74 (fraud, wilful misstatement or suppression alleged); for FY 2024-25 onwards, both situations fall under a single new section, 74A.

An SCN is not an order. It is the start of a process in which you can pay, argue, or do a mix of both, and the choices you make in the first 30 to 60 days decide how much penalty you end up paying. Here is how the three sections differ, what the deadlines are, and how to reply.

Which section your SCN falls under

Section 73: periods up to FY 2023-24, no fraud alleged

Used for genuine errors: tax short-paid, input tax credit (ITC) wrongly claimed, or a refund wrongly granted, where the officer does not allege fraud or suppression. Section 73 now applies only to tax for periods up to FY 2023-24.

Section 74: periods up to FY 2023-24, fraud alleged

Used where the officer alleges fraud, a wilful misstatement or suppression of facts to evade tax. It carries a longer limitation period and much heavier penalties.

Section 74A: FY 2024-25 onwards, both cases

The Finance (No. 2) Act, 2024 inserted section 74A, which applies to demands for FY 2024-25 and later. It uses one common notice timeline for all cases, but keeps different penalties depending on whether fraud or suppression is alleged. No notice is issued under section 74A if the tax involved for a financial year is less than ₹1,000.

Time limits for issuing an SCN and the order

• Section 73 — the order must be passed within three years of the due date of the annual return for the year concerned, and the SCN must be issued at least three months before that deadline.
• Section 74 — the order must be passed within five years of the annual return due date, and the SCN must be issued at least six months before that deadline.
• Section 74A — the SCN must be issued within 42 months of the annual return due date (or of the date of an erroneous refund). The order must follow within 12 months of the notice, extendable by up to six months with reasons recorded by a senior officer. If no order is issued within that time, the proceedings are treated as concluded.

For example, the annual return for FY 2024-25 was due on 31 December 2025, so a section 74A notice for that year can be issued up to 30 June 2029.

Penalties, and how paying early reduces them

Section 73 (no fraud)

• Pay tax and interest before the SCN is issued: no penalty, and no notice for the amount paid.
• Pay tax and interest within 30 days of the SCN: no penalty, and the proceedings for that amount close.
• Otherwise: penalty of 10% of the tax or ₹10,000, whichever is higher.

Section 74 (fraud alleged)

• Pay before the SCN: penalty of 15% of the tax.
• Pay within 30 days of the SCN: penalty of 25%.
• Pay within 30 days of the order: penalty of 50%.
• Otherwise: penalty equal to 100% of the tax.

Section 74A (FY 2024-25 onwards)

• No fraud alleged — pay tax and interest before the notice or within 60 days of it: no penalty. Otherwise: 10% of the tax or ₹10,000, whichever is higher.
• Fraud alleged — 15% if paid before the notice, 25% if paid within 60 days of the notice, 50% if paid within 60 days of the order, and 100% otherwise.

Interest under section 50 is payable on top of the tax in every case. Early payment saves penalty, not interest.

The forms you will see on the GST portal

• DRC-01A — an optional pre-notice intimation. The officer may use it to tell you what they think is payable before issuing an SCN. It is not itself an SCN, and you can respond to it or pay against it.
• DRC-01 — the summary of the SCN, uploaded on the portal. Courts have held that the summary does not replace the SCN itself; you should receive a proper notice setting out the grounds.
• DRC-03 — the form for paying tax, interest or penalty voluntarily, before or after an SCN.
• DRC-06 — your reply to the SCN. If you disagree in part, reply in DRC-06 and pay the accepted part through DRC-03.
• DRC-07 — the summary of the order. It also serves as the notice for recovery, so no separate recovery notice will follow.

Notices appear under Services, then User Services, then View Additional Notices and Orders on the GST portal, not just in your email. Check that tab regularly.

How to reply to an SCN, step by step

1. Note the dates. The issue date, the reply deadline given in the notice, the 30-day (sections 73 and 74) or 60-day (section 74A) payment window, and any hearing date.
2. Identify the section and the period. A notice for FY 2024-25 should be under section 74A. A notice under section 73 or 74 for FY 2024-25 or later, or one issued after the limitation date, is a legal point worth raising.
3. Break the demand into issues. SCNs often bundle several items, such as an ITC mismatch, a turnover difference between GSTR-1 and GSTR-3B, and an e-way bill gap. Treat each separately.
4. Reconcile each issue with your records. Pull invoices, GSTR-2B, purchase registers, bank statements and e-way bills. Many demands come from timing differences that your books can explain.
5. Decide: pay, contest, or split. Pay what is genuinely due within the penalty-free window through DRC-03, and contest the rest.
6. File a specific reply in DRC-06. Address each allegation with numbers and attach evidence. A generic "we deny all allegations" reply invites a confirmed demand.
7. Attend the personal hearing. The law requires an opportunity of hearing where you ask for one in writing or where an adverse decision is being considered, and it limits adjournments to three. Ask for one in your reply.
8. If the order goes against you, appeal. Appeals to the Appellate Authority are due within three months of the order, with a pre-deposit of the admitted amount plus 10% of the disputed tax, subject to a statutory cap.

Worked example: a Surat textile trader with an ITC mismatch

A Surat fabric trader claimed ₹3,60,000 more ITC in its FY 2023-24 GSTR-3B returns than appears in its GSTR-2B. The annual return for that year was due on the standard date, 31 December 2024, so a section 73 order must be passed by 31 December 2027, and the SCN must arrive by 30 September 2027. The trader receives an SCN under section 73 on 10 August 2027 demanding ₹3,60,000 plus interest and a penalty of ₹36,000 (10% of the tax, which is more than ₹10,000).

1. Reconcile. The trader's books show ₹2,20,000 of the gap relates to invoices from two suppliers who filed their GSTR-1 late; those invoices now show in later GSTR-2B statements, and the trader has tax invoices, e-way bills and bank payments for each. The remaining ₹1,40,000 was a genuine error: a bill was booked twice.
2. Pay the genuine part. Within 30 days of the SCN, so by 9 September 2027, the trader pays ₹1,40,000 plus interest through DRC-03. No penalty applies to that amount.
3. Contest the rest. In DRC-06 it explains the ₹2,20,000 invoice by invoice, attaches the supporting documents, and asks for a personal hearing.
4. Outcome scenarios. If the officer accepts the reply, the matter closes with no penalty. If the officer confirms the ₹2,20,000, the penalty is ₹22,000 (10% of ₹2,20,000, which exceeds ₹10,000), and an appeal would need a pre-deposit of ₹22,000, being 10% of the disputed tax.

Splitting the demand turned a potential ₹36,000 penalty into, at worst, ₹22,000, and at best nothing. If the same issue repeated in FY 2024-25, it would come under section 74A instead, with a 60-day penalty-free payment window and a notice deadline of 30 June 2029.

Common mistakes with GST notices

• Not checking the portal's notices tab, then learning about the SCN only when the DRC-07 order arrives.
• Treating a DRC-01A intimation as the final word and paying everything without reconciling.
• Missing the 30-day or 60-day window on amounts that were clearly payable.
• Filing a vague reply without invoice-level evidence.
• Skipping the hearing.
• Not checking whether the notice was issued in time, or under the right section for the period.

hellobooks< / a > -helps-you-avoid-and-answer-scns">How HelloBooks helps you avoid and answer SCNs

Most SCNs for small businesses start with a mismatch that could have been caught earlier. HelloBooks reconciles your purchase bills against GSTR-2A and GSTR-2B every month, so missing or late supplier invoices surface before you claim the credit, not three years later. It prepares GSTR-1, GSTR-3B and GSTR-9 from the same transactions, which keeps your returns consistent with each other. When a notice does arrive, the audit trail, general ledger, attached bills and reconciliation reports give you the invoice-level evidence a DRC-06 reply needs. Your CA or tax advocate still drafts the reply and represents you; the software keeps the records straight and the compliance calendar keeps your due dates visible.

This is general information as of November 2026, not tax or legal advice. Check the CGST Act on the CBIC website or consult a qualified CA or tax advocate for your situation.