SCN Full Form in GST — Show Cause Notice Meaning, Section 73, 74 and 74A

SCN full form in GST

SCN is the acronym for Show Cause Notice. In GST it is the formal notice that precedes an adjudication order. The taxpayer is asked to show cause why the proposed tax, interest and penalty should not be recovered.

The SCN itself is a detailed document setting out the officer's allegations, the period involved, the section under which the demand is proposed, and the annexed working. The summary is served on the portal in DRC-01.

Section 73 vs Section 74 vs Section 74A

The correct section drives the limitation period, the penalty exposure, and the standard of proof:

• Section 73 — non-fraud cases. SCN within 33 months, order within 3 years; penalty 10% or ₹10,000 whichever higher.
• Section 74 — fraud, wilful mis-statement or suppression. SCN within 54 months, order within 5 years; penalty equal to tax.
• Section 74A — unified provision for FY 2024-25 onwards. Consolidated SCN and order timelines; penalty depends on whether allegations of fraud are made out.

Section 73 — demand where there is no fraud

Section 73 covers tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised for any reason other than fraud, wilful mis-statement or suppression of facts. It is the section that applies to ordinary reconciliation differences — GSTR-3B versus GSTR-2B mismatches, Rule 42/43 reversals, classification or rate disputes taken in good faith.

The order must be passed within 3 years of the due date for furnishing the annual return for that financial year, and the SCN must precede it by at least 3 months. Penalty is 10% of the tax or ₹10,000, whichever is higher. If the tax and interest are paid before the SCN is issued (after a DRC-01A intimation), no penalty is payable; paying within 30 days of the SCN also closes the proceedings without penalty.

Section 74 — demand alleging fraud or suppression

Section 74 applies only where the short payment or wrong credit is by reason of fraud, wilful mis-statement or suppression of facts to evade tax. The extended period is not automatic: the officer must plead and establish the ingredient of intent, and a bare repetition of the statutory words in the SCN is itself a ground of challenge in the reply.

The order timeline is 5 years from the annual return due date, with the SCN issued at least 6 months earlier. Penalty is equal to the tax demanded, reducing to 15% if paid before the SCN, 25% if paid within 30 days of the SCN, and 50% if paid within 30 days of the order. Where the notice invokes Section 74 on facts that are visible from filed returns, the reply should argue that there is no suppression and the demand, if any, must fall under Section 73 — which often makes it time-barred.

Section 74A — the unified provision from FY 2024-25

For FY 2024-25 onwards, Sections 73 and 74 are replaced by a single Section 74A. The same limitation applies whether or not fraud is alleged: the SCN is issued within 42 months and the order within 12 months of the SCN (extendable by 6 months). No demand is raised where the tax involved is less than ₹1,000 in a financial year.

The distinction survives in the penalty, not the timeline — 10% or ₹10,000 in non-fraud cases, and 100% of the tax where fraud, wilful mis-statement or suppression is established. Reduced-penalty windows for payment before the SCN and within 60 days of the SCN continue to apply.

How the SCN is served — DRC-01

Rule 142(1) requires the summary of every SCN to be served electronically in Form GST DRC-01. This DRC-01 is what the taxpayer sees on the portal, along with the full SCN as an annexure. The reply is filed electronically in Form GST DRC-06 within 30 days of service.

Limitation on the SCN

The SCN must be issued at least 3 months (Section 73) or 6 months (Section 74) before the last date for passing the order. FY-wise time limits have been extended by CBIC notifications for several past years — a limitation challenge is a threshold ground and should be raised in the reply itself.

How to reply to an SCN in GST

Reply in Form GST DRC-06 within 30 days. Cover — jurisdiction, limitation, natural justice; statement of facts; paragraph-wise response; grounds on law and merits with case law; DRC-03 payment particulars for admitted portion; prayer and personal hearing request.

Frequently asked questions