Under the Goods and Services Tax (GST) system in India, businesses are required to follow specific rules. If the tax authorities think that a business has not paid the correct tax or has claimed the wrong input tax credit (ITC), they may issue a demand notice. This notice requests that the business pay the due amount, along with interest and penalties.
If you or your business receives a GST demand notice, it is important to reply to it properly. In this article, we will explain:
- What a GST demand notice is,
- How to prepare a reply, and
- A simple format you can use.
What is a GST Demand Notice?
A GST demand notice is an official letter sent by the GST department. It asks the taxpayer to pay tax, interest, and penalties for:
- Not paying GST at all or paying less than required,
- Charging a lower tax rate,
- Claiming more input tax credit (ITC) than allowed, or
- Breaking any GST rules.
The demand notice is issued under either Section 73 or Section 74 of the CGST Act, 2017:
- Section 73: Used when the tax shortfall is not due to fraud or wilful misstatement.
- Section 74: Used when the shortfall is due to fraud, misstatement, or hiding facts.
Things to Do Before You Reply
- Read the Notice Carefully – Check the amount demanded, the reason, and the deadline to reply.
- Check Your Records – Look at your GST returns, tax invoices, and books of accounts to see if there was any mistake.
- Decide Your Stand – If the notice is correct, you may need to pay the amount. If not, prepare a proper explanation with supporting documents.
- Get Expert Help – If the case is complicated, consider taking advice from a tax professional or GST consultant.
Online Format of Reply to a GST Demand Notice
Here’s a simple format you can use to reply:
[Your Business Letterhead]
Date: [DD/MM/YYYY]
To
The Superintendent/Assistant Commissioner
[Address of GST Office]
Subject: Reply to GST Demand Notice No. [Notice Number] dated [Date]
Reference: GSTIN: [Your GST Number]
Dear Sir/Madam,
We received your notice dated [Date], Reference No. [Notice Number], under Section [73/74] of the CGST Act, 2017. The notice demands tax, interest, and penalty totalling ₹[Amount].
After reviewing the notice and our records, we would like to submit the following reply:
Background
We are registered under GST with GSTIN [Your GST Number], and we are engaged in [describe your business, e.g., manufacturing, trading, services]. We have regularly filed all GST returns and made tax payments.
Our Explanation
- The notice mentions [briefly state the reason in the notice, e.g., “difference between GSTR-3B and GSTR-2A,” “wrong ITC claim,” or “short payment of tax”].
- After checking our records, we found that [give your explanation, e.g., “the difference was due to the vendor’s late filing,” “we had already paid the tax in [month/year],” or “ITC was claimed based on valid invoices”].
- We have attached supporting documents such as tax invoices, payment receipts, reconciliation statements, and any correspondence with suppliers.
Legal Points
- As per Section [mention the relevant GST law, e.g., “Section 16 of the CGST Act”], we are allowed to claim ITC if the supplier has paid the tax and the invoice is valid.
- The issue does not involve any kind of fraud or suppression of facts; therefore, the penalty under Section [73/74] should not apply…!
Request
In light of the above points:
- We request that you drop the demand and close the case.
- If needed, we are ready to provide further clarifications or attend a hearing to explain our position.
Thank you for your understanding.
Yours sincerely,
[Authorized Signatory]
[Name]
[Designation]
[Business Name]
[Business Address]
[Contact Number]
[Email Address]
Documents to Attach with the Reply
- Copy of the GST demand notice,
- Copies of GST returns for the relevant period,
- Reconciliation statements (e.g., GSTR-3B vs GSTR-2A),
- Tax invoices and payment receipts,
- Any correspondence with vendors or suppliers,
- Other relevant documents.
Helpful Tips
- Be Clear and Concise – Keep the reply simple and to the point. Avoid too many technical terms.
- Respectful Tone – Always address the GST officer politely and professionally.
- Submit on Time – File your reply before the deadline mentioned in the notice.
- Keep Proof of Submission – Get a stamped copy or acknowledgment when you submit the reply.
Conclusion
Receiving a GST demand notice can be an issue of worry or nervousness, but it’s important to reply with the required correct facts with supporting documents. A clear, timely, and well-prepared reply can help you resolve the issue quickly and avoid unnecessary penalties. It also expresses your willingness to cooperate with tax authorities, which can work in your favour during the procedure of hearings or future assessments.
Moreover, active steps like maintaining accurate GST records, reconciling returns, and timely vendor follow-ups can prevent such notices. Make sure your business follows GST compliance guidelines to minimize errors.
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