Answering a DRC-01: Building the Reply

Answering a DRC explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A reply is not an essay. It is a structured answer in which each layer, if it succeeds, makes the ones below it unnecessary — and each one must be raised now, because grounds not taken at this stage are hard to take later.

Answer in this order: jurisdiction, limitation, documents relied upon, facts, law, quantum, penalty and interest. File in FORM GST DRC-06 under Rule 142(4). Ask for a personal hearing in writing under s.75(4). Anchor every factual assertion to a document, and put the relied-upon material in issue where it has not been supplied.

Before drafting: five checks

1. Which provision? Section 73 or 74 for periods up to FY 2023-24; s.74A for FY 2024-25 onwards. A notice invoking the wrong provision for the period is defective on its face.

2. Is it in time? Compute the limitation from the annual return due date for each year, or from the date of erroneous refund. The limitation map →

3. What is the DRC-01 attached to? The DRC-01 is a summary under Rule 142(1)(a). The notice itself must accompany it. A DRC-01 uploaded without the notice does not put the taxpayer on notice of the case.

4. Were the relied-upon documents supplied? List what the notice refers to and what you actually have.

5. What are the payment windows? For a fraud-category notice under s.74A, 25% within sixty days; for non-fraud, nil penalty within sixty days. That clock runs from the notice, so the commercial decision has to be taken early, not after the reply is drafted. Penalty windows →

Layer 1: jurisdiction

• Rank and authority — is the issuing officer the proper officer for the amount involved, under the CBIC's monetary limits for adjudication?
• Cross-empowerment — s.6(2)(b): has the other authority already initiated proceedings on the same subject matter? Identify the earlier notice by number, date, period and subject matter. Multi-state audits →
• Service — was the notice served in a mode permitted by s.169? Does it carry a DIN?
• Parallel proceedings — is the same issue for the same period already the subject of an audit, an investigation or another notice?

Layer 2: limitation

Compute it and state the computation, year by year:

• the annual return due date for the year;
• the limitation date under the applicable provision;
• the date of the notice;
• and, for a statement under s.74A(3), whether the grounds are the same as the earlier notice, which is the express condition in s.74A(4).

Where any year is out of time, that year should be dealt with separately and first, because a partial success on limitation removes the largest years from the arithmetic.

Layer 3: the documents relied upon

Identify everything the notice relies on and state which of it has not been supplied:

• annexures and computation sheets;
• audit reports and ADT-02 findings;
• special audit reports — for which s.66(4) independently requires an opportunity of being heard on the material;
• third-party statements recorded under s.70;
• data extracts — GSTR-2A/2B, e-way bill, TDS/TCS;
• reports from other jurisdictions.

Ask for them in writing, and ask that the time to reply run from the date of supply. A reply filed without the material should say so, expressly and on the first page, and reserve the right to supplement.

Layer 4: the facts

This is where most cases are actually decided.

Answer paragraph by paragraph. Take each allegation in the notice in its own numbered paragraph and answer it.

Anchor every assertion. Invoice number and date, ledger reference, contract clause, e-way bill number, GSTR-1 table and filing date. An unanchored assertion is worth little.

Attach the working. The reconciliation that explains the difference is the reply; the narrative around it is commentary.

Correct the department's data errors. Duplicates counted twice, credit notes not netted, amendments not carried, inter-branch flows read as supplies. These are the cheapest wins and should be dealt with first.

Layer 5: the law

Cite the provision, then the notification entry, then the circular, then the ruling — in that order of authority.

Deal with the department's authority. Where the notice relies on a circular or a decision, address it — distinguish it on facts or explain why it does not apply. Ignoring it invites the order to record that it was unanswered.

Keep interpretation separate from fact. A reply that mixes them makes it easy for the order to treat a legal disagreement as a factual concession.

Layer 6: quantum

Even where the issue is lost, the number is usually wrong.

• Period — is any part outside limitation, or outside the notice?
• Rate — the correct rate, including the GST 2.0 transition where the period straddles 22.09.2025;
• Value — deductions under s.15(3), pure agent exclusions under Rule 33, amounts already reversed;
• Credit — offsetting credit available on the very transaction, particularly on a reverse-charge demand;
• Double counting — amounts already paid, already reversed, or already demanded in another notice;
• Cum-tax — where the consideration was received inclusive of tax, the value should be worked back.

Give the alternative computation in a schedule. An order that confirms a demand while ignoring an unrebutted alternative computation is vulnerable.

Layer 7: penalty and interest

Penalty is separate from tax. Address it separately even where tax is conceded.

• s.74A(5)(i) — 10% or ₹10,000 for non-fraud; s.74A(5)(ii) — 100% for fraud. Argue against the fraud characterisation where the facts were disclosed. The suppression allegation →
• s.75(13) — where a penalty is imposed under s.73, s.74 or s.74A, no penalty for the same act or omission shall be imposed under any other provision. Take this against a s.122 penalty proposed in the same notice.
• s.126 — general disciplines relating to penalty, for minor breaches and procedural lapses.
• Interest — s.50(1) with its proviso limiting interest to the net cash liability where the return is furnished after the due date, except where proceedings under s.73, 74 or 74A have been initiated. Check the computation against the proviso and against s.50(3) for wrongly availed and utilised credit.

Filing and the hearing

File in DRC-06 under Rule 142(4), on the portal, within the time stated.

Ask for a personal hearing in writing. Section 75(4): an opportunity of hearing shall be granted where a request is received in writing, or where any adverse decision is contemplated. Make the request in the reply itself, in terms.

Attend the hearing and file written submissions at it, so that whatever is argued is on the record.

Watch s.75(6) and s.75(7) when the order comes: the order must set out the relevant facts and the basis of the decision, must not exceed the notice, and must not confirm on grounds not specified in it. Section 75(7) →

Key takeaways

• Reply in a fixed order: jurisdiction, limitation, documents, facts, law, quantum, penalty.
• Raise every ground now — grounds not taken at this stage are hard to take later.
• Ask in writing for relied-upon material not supplied, and reserve the right to supplement.
• Answer paragraph by paragraph, anchoring each assertion to a document.
• Always give an alternative computation, even where the issue is contested.
• Request the personal hearing in writing under s.75(4), and file written submissions at it.

Read next

• Rule 142: The DRC Forms From 01A to 08
• Section 75(7): No Demand Beyond the Notice
• The Suppression Allegation and How It Is Answered
• Reply to DRC-01 Show Cause Notice — Sample Draft

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition).