Since its introduction, the Goods and Services Tax (GST) has provided for strict compliance in India, which is enforced through statutory notices, assessments, and adjudication processes. Among these, ASMT-10 and DRC-01 are two key instruments used by the GST Department to ensure tax compliance. Although both are issued when discrepancies or defaults are noticed, the two notices serve fundamentally different purposes, arise at different stages of compliance, and carry distinct legal consequences.
This comprehensive guide explains in detail the purpose, issuance process, timelines, legal provisions, and consequences associated with ASMT-10 and DRC-01, along with best practices to address them efficiently.
What is ASMT-10?
When a registered taxpayer’s GST return is selected for scrutiny, the tax officer has the right to examine the return on the basis of information available to them. If they find discrepancies such as mismatches between GSTR-3B and GSTR-1 or GSTR-2B), they will issue Form ASMT-10, asking the taxpayer to explain the issue.
Taxpayer’s response (ASMT-11):
The taxpayer has two options:
- Accept the discrepancy and pay the fine; OR
- Provide a detailed written explanation in Form ASMT-11, along with supporting documents, to clarify why the discrepancy occurred.
Closure of matter (ASMT-12):
If the officer is satisfied with the explanation of the taxpayer or the payment made, they will formally close the matter by issuing Form ASMT-12, stating that no further action is required.
Characteristics:
- Purpose: The aim is to seek explanation or clarification on specific mismatches such as differences between GSTR-3B and GSTR-1 (outward supplies), GSTR-3B and GSTR-2B (Input Tax Credit), or anomalies between returns and books of accounts.
- Nature: It is not an adjudication notice but a non-confrontational opportunity given to taxpayers to clarify errors or furnish reasons for mismatches. No demand is raised at this stage.
- Response Process: The taxpayer must submit a reply in Form ASMT-11 explaining the reasons for the mismatch or correcting the return if necessary. Supporting documents, reconciliations, or rectified returns should accompany the reply.
- Closure: If the explanation is satisfactory, the Proper Officer closes the case by issuing ASMT-12. If not, the matter may be escalated to a demand notice via DRC-01.
What is DRC-01?
DRC-01 is a Show Cause Notice (SCN) issued under Section 73 or Section 74 of the CGST Act, 2017, depending on whether the case involves fraud, willful misstatement, or suppression of facts.
Characteristics:
- Purpose: It formally initiates adjudication proceedings for recovery of unpaid taxes, interest, or penalties. It is issued when the tax department concludes that a shortfall exists that has not been rectified or explained satisfactorily.
- Section 73:
- Deals with tax shortfall due to reasons other than fraud.
- The proper officer must issue a notice at least 3 months before passing the final order.
- If the taxpayer voluntarily pays tax and interest before notice, no penalty is applicable.
- If payment is made within 30 days of receiving the notice, no penalty is levied.
- The order must be passed within 3 years from the due date of the annual return.
- Section 74:
- Covers cases of fraud, suppression, or wilful misstatement.
- Notice must be issued at least 6 months before passing the final order.
- If the taxpayer pays tax, interest, and a 15% penalty before the notice, no further notice is issued.
- If the taxpayer pays the tax along with interest and 25% of the penalty within 30 days of receiving the DRC-01 notice, then the entire proceedings are concluded.
- If payment is made within 30 days after the final order (DRC-07) is passed by the tax officer, then a 50% penalty of the tax amount applies.
- The order must be passed within 5 years from the due date of the annual return.
- Response Options:
- DRC-03: Voluntary payment of tax, interest, and applicable penalty.
- DRC-06: Reply to the show-cause notice explaining why the demand is incorrect.
- DRC-07: Final demand order, if the officer finds the reply unsatisfactory.
- Outcome: The Proper Officer, after evaluating the response and conducting a hearing if requested, will issue Form DRC-07 – a formal demand order specifying the confirmed liability, if any.
ASMT-10 Vs DRC-01
| ASMT-10 | DRC-01 | |
| Governing Section | Section 61 of the CGST Act, 2017 | Section 73 (non-fraud) / Section 74 (fraud) of the CGST Act, 2017 |
| Rule | Rule 99 of CGST Rules | Rule 142 of CGST Rules |
| Legal Nature | Return scrutiny notice (pre-adjudication) | Show Cause Notice (quasi-judicial & adjudicatory) |
| Purpose | To obtain clarification on return discrepancies | To initiate demand and recovery proceedings |
| Stage of Action | Initial review stage | Post-scrutiny and determination stage |
| Triggering Events | Return mismatches, unusual ITC claims, and under-reporting | Tax evasion, underpayment, or unresolved ASMT-10 |
| Response Format | ASMT-11 | DRC-06 (reply) or DRC-03 (payment) |
| Deadline to Respond | Mentioned in notice (typically 15 days) | 30 days from service of DRC-01 |
| Resolution Document | ASMT-12 (case closed) | DRC-07 (final order) |
| Limitation Period | Not specifically prescribed | 3 years (Sec 73) / 5 years (Sec 74) |
| Voluntary Compliance Option | Return correction or clarification in ASMT-11 | Voluntary payment in DRC-03 may reduce the penalty |
| Consequence of Non-Response | Escalation to adjudication | Confirmation of demand, recovery action |
Practical Tips for Handling ASMT-10 and DRC-01
- Maintain detailed GST reconciliations every month.
- Archive all return filings, invoices, and ITC ledgers for audit reference.
- Use GST audit software or expert review for anomalies before filing returns.
- Do not ignore notices, as non-compliance attracts serious consequences.
Conclusion
ASMT-10 is a preventive scrutiny mechanism, whereas DRC-01 is curative and adjudicatory in nature. Timely action can protect your business from avoidable penalties, interest, and litigation. Before responding to such notices, it is crucial to understand these notices in depth. In case of confusion, do not hesitate to reach out to the GST expert.
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