If you run a GST-registered business in India, you have probably heard of someone getting a notice. Maybe you have received one yourself. The first reaction is usually panic but here is the thing most people don't realise: the majority of GST notices in 2026 have nothing to do with fraud or deliberate tax evasion.
They come from mismatches. A figure in GSTR-1 that does not line up with GSTR-3B. ITC claimed on an invoice that is not showing in GSTR-2B. A return filed a week late. Small things but the GST department's systems catch them automatically now, and when they do, a notice goes out.
The good news is that most of these are preventable. Here is what is actually getting businesses flagged this year, and what to do about each one.
Why GST Notices Have Increased in 2026
The CBIC has been upgrading its data infrastructure for years, and the results are showing. GSTR-1, GSTR-3B, GSTR-2B, e-invoices, and e-way bills are all being cross-checked in real time. A mismatch that previously required a tax officer to manually review can now trigger an automated intimation within days.
This means even businesses with no intent to evade tax are getting flagged. The system does not distinguish between a mistake and a deliberate error it just spots the gap and sends the notice. More scrutiny, broader detection, same number of filing errors: the math explains everything.
1. GSTR-1 and GSTR-3B Mismatch
This is the single most common trigger for GST notices right now. GSTR-1 records all your outward supplies and sales invoices. GSTR-3B is the summary return where you declare and pay your tax liability. If GSTR-1 shows a higher tax liability than what you paid through GSTR-3B, the system flags it under Rule 88C and sends an intimation in Form DRC-01B.
Since July 2025, GSTR-3B outward liability is auto-populated from GSTR-1. Any gap between the two is visible immediately there is no window to fix it quietly after filing.
What to do: Reconcile GSTR-1 and GSTR-3B before submitting every month. If you amend one, update the other. FreeGST's return filing tools (freegst.co) can flag these discrepancies before you hit submit.
2. ITC Claimed Exceeds GSTR-2B
GSTR-2B is the auto-generated Input Tax Credit statement based on what your suppliers have actually filed. If you claim more ITC in GSTR-3B than GSTR-2B shows, Rule 88D triggers and you receive a DRC-01C intimation.
This happens constantly a supplier files their return late, or there is a data error somewhere in the invoice chain. From your side, the credit looks valid. The system sees it differently.
What to do: Always check GSTR-2B before claiming ITC. Every month, without exception. If an invoice is not reflecting, follow up with the supplier first. Avoid provisional claims unless you are confident they will reconcile before the deadline. FreeGST has detailed guidance on ITC eligibility at freegst.co.
3. Late or Missing Return Filings
Skipping returns for six consecutive months can lead the department to initiate registration cancellation under Section 29. But you do not need to miss six months to face consequences. Even a single late return accumulates fees, hurts your compliance record, and can draw scrutiny to otherwise correct figures.
What to do: File on time, every month including nil returns when you have had no transactions. GSTR-1 is due by the 11th; GSTR-3B is due by the 20th for monthly filers. Check GST due dates anytime at freegst.co.
4. E-Way Bill and GSTR-1 Inconsistency
Every e-way bill generated is recorded in the GSTN system. The department compares this data against your GSTR-1. If a shipment happened under an e-way bill but the invoice is missing from GSTR-1, or the values do not match, it gets flagged.
This catches a lot of businesses with high shipment volumes. Goods move, invoices get delayed, and by the time GSTR-1 is filed, the numbers do not line up.
What to do: Reconcile e-way bills against your GSTR-1 every month before filing. Every dispatch needs a matching invoice in the return the e-way bill record is already in the system whether or not you report it.
5. Blocked Credits Under Section 17(5)
Certain ITC claims are simply not allowed under Section 17(5) of the CGST Act personal-use items, construction expenses, motor vehicles used for non-business purposes, and goods or services tied to exempt supplies. Claiming credit on any of these is a common notice trigger.
The system can pick up ITC patterns that do not match the nature of your business. If your business has no commercial vehicles but you are claiming vehicle-related credit, that inconsistency stands out.
What to do: Know which credits are blocked. If you have claimed something ineligible, reverse it before filing your annual return rather than waiting for a notice.
6. Not Responding to ASMT-10 (Section 61 Scrutiny Notice)
When the department identifies a discrepancy in your returns, the first formal notice is usually ASMT-10 under Section 61. This is not a tax demand it is asking you to explain what happened. You typically have 15 to 30 days to respond.
Many businesses ignore it, assuming it is not urgent or that it will resolve itself. It does not. If you do not reply, the tax officer issues an ex-parte order the full demand is confirmed with maximum penalty, and the only option after that is a formal appeal requiring a 10% pre-deposit.
What to do: When a notice arrives, read it the same day. Identify the discrepancy, gather supporting documents invoices, payment proofs, reconciliation statements and respond before the deadline. If the error is genuine, paying the shortfall with interest is almost always cheaper than contesting an ex-parte order later.
What Changed Under Section 74A (FY 2026-27 Onwards)
The old Sections 73 and 74 have been replaced by Section 74A for FY 2026-27 and beyond. Earlier, Section 73 covered honest mistakes (10% penalty) and Section 74 covered fraud (100% penalty). Section 74A consolidates both under one provision with a 42-month notice window.
The key change: if you respond and pay the dues within 60 days of receiving a Section 74A notice, penalties are significantly reduced. That 60-day window is worth acting on quickly.
Quick Checklist to Stay Notice-Free
If you want to keep your business clear of GST notices, this is what consistent compliance actually looks like in practice:
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Reconcile GSTR-1 and GSTR-3B every month before filing
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Check GSTR-2B before claiming any ITC
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File all returns on time, including nil returns
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Match e-way bills to GSTR-1 invoices monthly
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Know the Section 17(5) blocked credits and avoid claiming them
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Keep all invoices and payment records for at least six years
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Respond to every notice and intimation before the deadline
None of these are difficult individually. Done consistently, they remove most of the reasons a notice would ever be issued.
Already Received a GST Notice?
Read it carefully which period it covers, what exactly is being questioned, and when the response deadline is. Then collect the relevant invoices, reconciliation data, and payment records.
Most scrutiny-stage notices resolve without escalation when you respond clearly and on time. The ones that become expensive are almost always the ones that were left unanswered.
For free tools to help with GST return filing, ITC reconciliation, and notice management, visit freegst.co.
Final Word
Businesses that rarely receive GST notices are not necessarily larger or better-resourced. They just file consistently, check their numbers before submitting, and take intimations seriously when they arrive.
That is the whole thing.
Frequently Asked Questions
FAQ 1: What is the time limit to reply to a GST scrutiny notice (Form ASMT-10)?
Answer: When the department issues a scrutiny notice in Form ASMT-10 under Section 61, you typically get a strict window of 15 to 30 days to submit your online reply. If you ignore this notice, the tax officer can pass an ex-parte order, confirming the full tax demand with maximum penalties.
FAQ 2: How does the new Section 74A affect GST penalties from FY 2026-27 onwards?
Answer: Section 74A consolidates the old Sections 73 (honest mistakes) and 74 (fraud) into a single provision with a 42-month notice window. Under Section 74A, if you pay the tax dues and interest within 60 days of receiving the notice, your penalties are significantly reduced.
FAQ 3: What should I do if I get a DRC-01B notice for GSTR-1 and GSTR-3B mismatch?
Answer: Form DRC-01B is triggered automatically under Rule 88C if your outward liability in GSTR-1 is higher than what you paid in GSTR-3B. You must either pay the differential tax amount with interest or submit a valid explanation on the GST portal within 7 days, otherwise, your next month's GSTR-1 will be blocked.
FAQ 4: How can I avoid getting a DRC-01C notice for Input Tax Credit (ITC) mismatch?
Answer: Form DRC-01C (Rule 88D) is issued when the ITC claimed in GSTR-3B exceeds the ITC available in your auto-generated GSTR-2B. To avoid this, strictly reconcile your purchase register with GSTR-2B using the portal’s Invoice Management System (IMS) every month before filing, and never claim provisional or excess ITC.
FAQ 5: Can I claim Input Tax Credit (ITC) on commercial vehicles or personal expenses?
Answer: No. Under Section 17(5) of the CGST Act, ITC on personal-use items, food & beverages, cosmetics, catering, and motor vehicles (except those used for specific transportation businesses or passenger transport) is strictly blocked. Claiming credit on these items automatically flags your return for a scrutiny notice.
FAQ 6: What happens if an E-Way Bill is generated but the invoice is missing in GSTR-1?
Answer: The GST portal automatically cross-checks E-Way Bill logs with your GSTR-1 filings. If a shipment is recorded via an E-Way Bill but no matching invoice is declared in GSTR-1, the system flags it as data inconsistency or potential tax evasion, which triggers an automated audit or scrutiny notice.
FAQ 7: Can my GST registration be cancelled if I miss a single return filing deadline?
Answer: While a single late filing will not cancel your registration, it will attract daily late fees and interest charges. However, under Section 29, if a regular taxpayer fails to file returns for a continuous period of six months (or as prescribed), the department initiates suo-motu cancellation proceedings.
FAQ 8: Why is the GST department comparing my GST returns with my Income Tax Return (ITR)?
Answer: There is an automated data-sharing mechanism between the CBDT (Income Tax) and GSTN. The system flags your profile if the total turnover reported in your ITR or Annual Information Statement (AIS) does not match the sales value reported in your GSTR-9/9C (Annual GST Returns).
FAQ 9: Is it mandatory to file a GST return if there were zero business transactions in a month?
Answer: Yes, filing a Nil Return is mandatory even if you had zero sales and purchases during the tax period. Failing to file a Nil GSTR-1 and GSTR-3B on time still attracts a late fee and damages your overall compliance rating on the portal.
FAQ 10: What are the due dates for filing GSTR-1 and GSTR-3B to avoid late fees?
Answer: For regular monthly filers, the due date for GSTR-1 is the 11th of the succeeding month, and for GSTR-3B, it is the 20th of the succeeding month. Missing these dates triggers automatic daily late fees and calculates interest at 18% per annum on net tax liability.
About the Author
Mohit Garg is an SEO Content Writer and GST content specialist with experience in creating informative articles on GST registration, GST filing, tax compliance, and business regulations. He focuses on delivering clear, accurate, and user-friendly content that helps businesses understand complex tax concepts and stay compliant with the latest GST requirements.