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3 Months to Appeal
Non-payment can lead to recovery proceedings including bank account attachment.
Formal tax demand for unpaid GST, interest, and penalty
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A GST demand notice is a formal demand from the tax department for payment of unpaid or short-paid GST along with interest and penalty. It is typically issued after a show cause notice (DRC-01) and adjudication process.
The demand notice specifies the exact amount of tax, interest, and penalty you must pay. If you disagree, you can file an appeal within 3 months. If you don't pay or appeal, recovery proceedings may begin.
| Component | Details |
|---|---|
| Tax Amount | The actual GST amount that was short-paid or unpaid |
| Interest @ 18% p.a. | From the due date of payment till date of actual payment |
| Interest @ 24% p.a. | Applicable on wrong ITC claimed and utilized |
| Penalty (Section 73) | Up to 10% of tax or ₹10,000 (whichever is higher) — non-fraud cases |
| Penalty (Section 74) | Equal to 100% of tax — fraud/suppression cases |
Review the demand order
Carefully review the total demand — tax, interest, and penalty component. Check which section (73 or 74) is invoked.
Verify the computation
Cross-check the department's calculation. Verify tax period, rates applied, ITC adjustment, and interest calculation.
Decide: Pay or Appeal
If demand is correct, pay via DRC-03 to avoid recovery proceedings. If incorrect, prepare for appeal.
File appeal if disputing
File appeal with GST Appellate Authority using Form APL-01 within 3 months. Pre-deposit of 10% of disputed tax is required (max ₹25 crore).
Seek stay on recovery
Along with appeal, apply for stay on recovery proceedings. The appellate authority can grant interim relief.
What is a GST demand notice?
A formal demand for unpaid or short-paid GST along with interest and penalty. Issued after adjudication of a show cause notice (DRC-01).
What happens if I don't pay the demand?
The department can initiate recovery proceedings — attachment of bank accounts, deduction from any refund due, attachment of property, or arrest in extreme cases.
Can I appeal a GST demand?
Yes, you can appeal within 3 months to the Appellate Authority (APL-01) or within 6 months to the Appellate Tribunal. Pre-deposit of 10% disputed tax is required.
What is DRC-03 voluntary payment?
DRC-03 is a form to make voluntary payment of tax, interest, or penalty. Use this to pay demand quickly and close the matter without appeal.
⚠️ Disclaimer: This guide is for educational purposes only. Always consult a qualified CA or GST practitioner before responding to any demand notice.