What the law says
Section 61 of the CGST Act lets the proper officer scrutinise returns and point out discrepancies. Rule 99 sets the procedure:
- The officer issues FORM GST ASMT-10, listing the discrepancies and, where possible, quantifying the tax, interest and other amounts.
- You reply in FORM GST ASMT-11 within 30 days of being informed, or within any further period the officer allows. You can accept and pay, explain, or both.
- If the explanation is acceptable, the officer issues FORM GST ASMT-12 and the scrutiny is closed.
- If you do not reply in time, or the reply is not satisfactory, or you accept but do not pay, the officer can move to audit (s.65), special audit (s.66), inspection or search (s.67), or a demand under s.73 or s.74. For FY 2024-25 onwards the demand route is s.74A.
Scrutiny is meant to be a desk check of returns against the department's own data. It is not an assessment, and ASMT-10 is not a demand. But what you say in ASMT-11 is on record and is the first thing the officer reads if a show cause notice follows.
Central GST officers follow CBIC's scrutiny SOPs (Instruction 02/2022-GST for FY 2017-18 and 2018-19, and later instructions for subsequent years) verify; state officers follow their own state's instructions, which are broadly similar.
Time limits that matter
| Step | Limit |
|---|---|
| Reply in ASMT-11 | 30 days from the ASMT-10, or the extended date the officer allows. Ask for an extension before the date, on the portal. |
| Show cause notice under s.73 (FY 2023-24 and earlier, non-fraud) | At least 3 months before the 3-year limit for the order, counted from the due date of the annual return for that year. |
| Show cause notice under s.74 (fraud or suppression) | At least 6 months before the 5-year limit for the order. |
| Show cause notice under s.74A (FY 2024-25 onwards) | Within 42 months of the annual-return due date; order within 12 months of the SCN, extendable by 6 months. |
Work out the s.73 or s.74A limit for your year before replying. If the non-fraud window is about to close, the officer is under time pressure to issue a show cause notice, and a reply that leaves points open is more likely to be converted into one. If the window has closed, an attempt to invoke the fraud provisions needs evidence of fraud or suppression, which a scrutiny discrepancy alone usually is not.
Typical discrepancies and how to answer them
| Discrepancy | Usual cause | What answers it |
|---|---|---|
| Outward tax in GSTR-3B lower than GSTR-1 | Amendments in later months, credit notes, invoices reported in GSTR-1 of the next year, typing errors in 3B | Month-wise GSTR-1 vs 3B reconciliation, carried to the next year's returns and to GSTR-9 Tables 10 and 11. Pay any genuine short payment with interest. |
| ITC in GSTR-3B higher than GSTR-2A or 2B | Supplier filed late, wrong GSTIN, import IGST (not in 2B until ICEGATE data flows), RCM credit, ITC of an earlier year claimed in this year | Supplier-wise reconciliation with invoice copies, payment proof and, where the supplier filed late, their filing dates. From 1 January 2022, s.16(2)(aa) requires the invoice to appear in GSTR-2B, so answer this point carefully for later years. |
| E-way bill value higher than GSTR-1 or 3B | Bills generated for stock transfers, job work, returns or cancelled trips; bills not cancelled within 24 hours; inward bills counted as outward | EWB register classified by sub-type and document type, cancelled bills listed, branch transfers shown as non-supply or as supplies to distinct persons and matched to their GSTIN. |
| TDS or TCS credit (GSTR-7, GSTR-8) higher than turnover in 3B | Government deductors report contract value or advances; e-commerce TCS includes returns; deductor used the wrong GSTIN or period | Deductor-wise reconciliation of GSTR-7 credits to invoices and contract receipts, timing differences explained, deductor errors flagged. |
| RCM not paid or RCM credit taken without payment | Legal fees, GTA, director sitting fees, renting by unregistered persons, import of services | Ledger-wise RCM working against GSTR-3B Table 3.1(d) and 4A(2)/(3). Pay any shortfall with interest; the credit is usually available, so the net effect is interest. |
| Interest on late payment | Returns filed after the due date | Interest under s.50 is on the net cash liability. Show the computation, and pay any shortfall with DRC-03. |
| Blocked credits, s.17(5) | Motor vehicles, food and beverages, works contract for immovable property, personal consumption | Expense-head analysis showing what was claimed. Reverse what is blocked; for what is not, explain the use (for example, plant and machinery excluded from immovable property). |
| ITC from suppliers whose registration was later cancelled | Retrospective cancellation of the supplier's registration | Show that the supplier was registered on the invoice date, filed GSTR-1 and GSTR-3B for the period, that goods or services were received (e-way bills, transport documents, GRNs) and that payment went through the bank. Courts have repeatedly protected bona fide buyers in such cases, but the burden of proof is yours. |
| Turnover or tax in GSTR-3B differs from GSTR-9 or 9C | Year-end adjustments, unbilled revenue, credit notes, items reported in the following year | A single turnover bridge from books to GSTR-9 to GSTR-3B, using the reconciliation already in GSTR-9C. Explain each item once and cross-reference it. |
| ITC on imports (Table 6E or 8) higher than ICEGATE data | Bill of entry not linked to the GSTIN, IGST paid at another port, SEZ supplies | BoE-wise list with BoE number, date, port and IGST paid, matched to the ICEGATE statement. |
| Place of supply other than the registered state | Hotel stays, events and services consumed in another state, where the supplier correctly charged CGST and SGST of that state | Show the nature of each invoice. Credit of another state's CGST and SGST is generally not available to your registration; accept and reverse, or explain if the supplier charged the wrong tax. |
The para-by-para method
A notice with ten or twelve paras is normal for a multi-state business. Treat it as a project, not a letter.
- Index the notice. Make a sheet with one row per para: the issue, the amount and head (IGST, CGST, SGST, cess), the officer's data source, whether a working was enclosed, your owner, and the target date.
- Rebuild the officer's number first. Before arguing, reproduce the figure from the portal data the officer used (GSTR-1, 3B, 2A or 2B, 9, 9C, EWB, GSTR-7). If you cannot rebuild it, say so in the reply and ask for the working.
- Classify each para: accepted in full, accepted in part, explained (no liability), or contested on law. Most notices have a mix.
- Look for overlaps. The same difference often appears in two or three paras (for example, a turnover gap in 3B vs 1 and again in 3B vs 9C). Answer it once in full and cross-refer, so you do not pay twice.
- Check materiality and concentration. In large ITC paras, a single supplier often makes up almost the whole amount. Sort the officer's annexure by supplier before doing invoice-level work.
- Quantify what you accept, compute interest under s.50 to the date of payment, and pay through DRC-03 before you file the reply, so the ASMT-11 can quote the ARN.
- Draft the reply in the notice's own numbering, one heading per para, ending each with a clear position.
- Review against the returns: every figure in the reply should be traceable to a return, a ledger or an annexure.
Reconciliation workpapers
Keep these as annexures. The officer will rarely read all of them, but their existence and consistency carry weight.
- Month-wise GSTR-1 vs GSTR-3B (taxable value and tax by head).
- Books turnover to GSTR-9 to GSTR-3B bridge, tied to GSTR-9C.
- Supplier-wise ITC: books vs GSTR-3B vs GSTR-2B (and 2A for older years), with reasons for each difference.
- E-way bill register by document and sub-type vs outward supplies and stock transfers.
- GSTR-7 and GSTR-8 credit reconciliation by deductor.
- RCM ledger working by expense head.
- Import IGST: bill of entry list vs ICEGATE vs GSTR-3B Table 4A(1).
- Interest computation under s.50 for late returns or short payments.
Paying what you accept
- Use FORM GST DRC-03 (voluntary payment) and select scrutiny (ASMT-10) as the cause, quoting the notice reference.
- Pay interest under s.50 to the date of payment: 18% a year on the net cash liability for late tax, and 18% on ITC wrongly availed and utilised (Rule 88B).
- Tax can be paid from the electronic credit ledger where the law allows; interest is paid in cash.
- Quote the DRC-03 ARN in the ASMT-11 and attach the challan. If a demand order is later issued, link the payment to it with DRC-03A.
Tone and documents
- Respectful, factual, short. The officer has a target date and many files. A reply that can be closed in one reading gets closed.
- Open with a summary table: para, amount in the notice, amount accepted and paid, amount explained, reference to the annexure.
- State legal positions plainly with the section or rule, and the circular if one applies. Case law only where it is directly on point.
- Ask for a personal hearing if any para is contested.
- File the reply on the portal against the notice, keep the acknowledgement, and if you also submit by email or in person, keep the receipt.
- Have it signed by the authorised signatory registered on the portal for that GSTIN.
Mistakes to avoid
- Missing the reply date and the hearing. If the date has passed, file the reply immediately with a short request to take it on record, rather than waiting for the next notice.
- Replying with only a covering letter and a stack of returns. The officer needs the reconciliation, not the raw data.
- Accepting a para to make it go away when the difference is a timing difference already paid in the next year. You may pay twice.
- Arguing law where a reconciliation would do. Keep legal arguments for the points that need them.
- Contradicting GSTR-9C or the audited accounts without explaining why.
- Admitting fraud-type language ("suppressed", "not disclosed") in your own words.
- Paying through the wrong form or without the reference, so the payment cannot be linked.
- Ignoring the same issue in other years and other GSTINs. If a para applies to one year, check the next.
Common questions
Can an officer issue a show cause notice without considering my ASMT-11 reply?
The procedure in Rule 99 requires the officer to consider the explanation. High Courts have set aside demands issued without dealing with the scrutiny reply. Even so, answer properly in ASMT-11; you cannot rely on that argument alone.
Do I have to pay before replying?
Only what you accept. Paying accepted amounts with interest before a show cause notice avoids penalty in non-fraud cases under s.73(5) and s.74A.
The officer has not enclosed any working for a para. What should I do?
Answer what you can reconstruct, state that the basis was not provided, and ask for it in the reply. Do not accept a figure you cannot trace.
Will an ASMT-10 show up in an IPO offer document?
Usually as part of outstanding tax proceedings, with the amount involved. Close it with ASMT-12 if you can. See the SME IPO readiness guide.
Related: GST late fee and interest calculator, GSTR-2B reconciliation, ITC reversal calculator, GST RCM checker.