GST DRC-07 Demand Order: How to Reply on GST Portal

TL;DR

Form GST DRC-07 is the final summary of an adjudication order issued by a GST tax officer. It creates a confirmed tax demand in your Electronic Liability Register. Once DRC-07 is uploaded, you cannot file a defence reply in Form GST DRC-06. You have four options. File an appeal in Form GST APL-01 within 3 months. Seek rectification under Section 161 within 3 months. Pay the demand via Form GST DRC-03. Or claim a waiver under Section 128A if eligible. Failing to act within 90 days triggers recovery action.

Quick Answer: What is Form GST DRC-07?

Form GST DRC-07 is the electronic summary of an order issued under Rule 142(5) of the CGST Rules, 2017. When a State or Central GST adjudicating authority determines an unpaid tax liability, they upload Form GST DRC-07 on the GST common portal (www.gst.gov.in). This happens after a show-cause notice. The determination can also cover an erroneous refund. Or an ineligible claim of Input Tax Credit (ITC).

The moment Form GST DRC-07 is issued, the tax demand becomes a confirmed government debt. It is no longer a proposed liability. The portal automatically debits the amounts under tax, interest, and penalty. These go into Part II of your Electronic Liability Register (Form GST PMT-01). You cannot file an ordinary written reply against this order. Legal remedies are restricted to statutory appeal. They can also be formal rectification, amnesty waiver, or payment.

[Stage 1: Pre-Notice / Scrutiny] ─── ASMT-10, DRC-01B, DRC-01C, or Audit ADT-02
                  │
                  ▼ (Unresolved discrepancies)
[Stage 2: Show Cause Notice]   ─── Form GST DRC-01 (SCN issued with 30-day window)
                  │
                  ├─ Taxpayer files reply in Form GST DRC-06
                  ├─ Taxpayer attends Personal Hearing under Section 75(4)
                  └─ Officer passes Order ( DRC-07 or DRC-08)
                               │
                               ▼
               [Form GST DRC-07 — Confirmed Demand]
                               │
        ┌──────────────────────┼──────────────────────┐
        ▼                      ▼                      ▼
   [Appeal APL-01]      [Rectification 161]     [Pay DRC-03]
   (90 days)           (90 days)               (Immediate)
        │                      │                      │
        └──────────────────────┴──────────────────────┘
                               │
                               ▼
                  [Recovery u/s 79 if unpaid]

What Triggers a DRC-07 Order?

A Form GST DRC-07 is issued in several situations:

1. After an Adjudication Hearing

The most common trigger. The tax officer issues a show-cause notice (Form GST DRC-01). You file a reply in Form GST DRC-06. You attend a personal hearing. The officer then passes an order. The order summary is uploaded as Form GST DRC-07.

2. Erroneous Refund Recovery

If you claimed a refund you were not entitled to, the tax officer issues a notice. They demand recovery of the refunded amount. The order summary is uploaded as Form GST DRC-07. Interest at 24% per annum is charged from the date of credit.

3. Ineligible ITC Claim

If you claimed Input Tax Credit without matching inward supplies, the officer can raise a demand. The order is uploaded as Form GST DRC-07. The demand covers the ITC amount, interest, and a penalty of 10% of the tax amount (or 100% if the taxpayer detected the error voluntarily).

4. Audit Detection

During a GST audit (Form ADT-01 or ADT-02), discrepancies are found. The case is transferred to adjudication. The final order summary is uploaded as Form GST DRC-07.

Your Four Options After Receiving Form GST DRC-07

Option 1: File an Appeal Under Section 107

You can file an appeal against the Form GST DRC-07 order before the Appellate Authority. This is done using Form GST APL-01 on the GST portal.

Key Parameters

Parameter	Detail
Form to file	GST APL-01
Time limit	90 days from the date of upload of DRC-07
Extension	Additional 30 days possible (total 120 days) on showing sufficient cause
Pre-deposit required	10% of the tax amount demanded (or ₹200 crore, whichever is lower)
Appeal fee	₹1,000 for appellants with a tax liability below ₹500 lakh; ₹5,000 for higher values
Format	Online on gst.gov.in

What to Include in the APL-01 Appeal

1. A copy of the Form GST DRC-07 order.
2. A copy of the DRC-06 reply you submitted earlier (if any).
3. A copy of all relevant invoices, returns, and payment challans.
4. A legal ground of appeal citing specific provisions of the CGST Act or Rules.
5. The computation of the tax, interest, and penalty disputed.

Post-Appeal Process

Once the appeal is admitted, the Appellate Authority may order an stay of the demand. The stay is valid for 30 days or until the order is passed, whichever is earlier. If the Appellate Authority confirms or modifies the demand, the remaining 90% of the tax amount becomes payable.

Option 2: Apply for Rectification Under Section 161

Section 161 of the CGST Act allows rectification of apparent errors. These are errors apparent from the record. They do not require further inquiry.

Rectification under Section 161 is not an appeal. It is a correction of an obvious mistake. The following can be rectified:

• Calculation errors in the order.
• Clerical or typographical errors.
• Any other mistake of law or fact apparent from the record.

You must apply for rectification within 3 months of the date of the order. Submit a formal application to the adjudicating authority that passed the original order.

Option 3: Pay the Demand via Form GST DRC-03

If you accept the demand, you can pay the tax, interest, and penalty (or a portion of it) using Form GST DRC-03 on the portal. Payment can be made from your electronic credit ledger or through internet banking.

If you pay the full demand, the liability is closed. If you pay only part of the demand and file a protest against the balance, the paid portion is not recoverable.

Option 4: Claim Waiver Under Section 128A (for Specified Cases)

Section 128A was introduced for certain amnesty and waiver schemes. Not all DRC-07 orders qualify. If your order relates to a category covered by a notification under Section 128A, you can claim a waiver of the penalty portion.

The Recovery Process: What Happens If You Ignore the DRC-07

If you do not appeal, rectify, pay, or seek a waiver within the statutory period, the GST officer initiates recovery under Section 79 of the CGST Act.

Recovery Steps Under Section 79

1. Electronic Liability Ledger Debit: The portal automatically debits amounts from your electronic credit ledger (Form GST PMT-01) against the demand.
2. Prohibition on Filing Returns: You cannot file GSTR-1 or GSTR-3B returns if an outstanding demand exists in Part II of your Electronic Liability Register.
3. Withholding of Refunds: Any refund claim you file (such as ITC or export refund) is withheld and adjusted against the outstanding demand.
4. Physical Recovery Actions:
   • Attachment and sale of goods, books, and plant.
   • Attachment of bank accounts.
   • Detention of books and records.
   • Appointment of a receiver for the business.

The Pre-Deposit Requirement: Key Numbers to Know

The pre-deposit is one of the most critical practical aspects of filing a GST appeal. Here are the exact numbers:

Demand Amount	10% Pre-Deposit Required
₹10 lakh	₹1 lakh
₹1 crore	₹10 lakh
₹5 crore	₹50 lakh
₹10 crore	₹1 crore
₹50 crore	₹5 crore
₹200 crore or more	₹20 crore (cap)

The pre-deposit can be paid from the electronic credit ledger or through net banking. It must be paid before the APL-01 appeal is submitted.

Common Mistakes After Receiving Form GST DRC-07

1. Filing a DRC-06 Reply Against DRC-07: A common mistake is attempting to file a written reply in Form GST DRC-06 against a DRC-07 order. DRC-06 is the reply format for show-cause notices (DRC-01). Once the order is passed, DRC-06 is no longer the correct form. Your only remedies are appeal, rectification, payment, or waiver.
2. Missing the 90-Day Deadline: The 90-day deadline for filing Form GST APL-01 is strictly enforced. If you miss it, you can apply for an additional 30-day extension. But this requires showing sufficient cause. Do not assume the deadline is flexible.
3. Not Paying the 10% Pre-Deposit Before Filing Appeal: The GST portal will not accept your APL-01 appeal unless the pre-deposit has been paid. Ensure the credit ledger or bank account has sufficient balance before attempting to file.
4. Confusing Appeal with Rectification: Rectification (Section 161) is only for obvious errors. It is not a way to contest the merits of the order. If you disagree with the findings of fact or law, you must file an appeal.
5. Ignoring the Demand While Pursuing Other Remedies: Recovery action does not wait for an appeal to be heard. File the appeal AND pay the required pre-deposit to stay recovery.

Frequently Asked Questions

How long do I have to file an appeal against Form GST DRC-07?

You have 90 days from the date of upload of Form GST DRC-07 on the GST portal. You can apply for an additional 30 days if you have sufficient cause for the delay.

Can I avoid paying the 10% pre-deposit when filing a GST appeal?

No. The CGST Act requires the 10% pre-deposit as a mandatory condition for filing an appeal. The amount must be paid before the appeal is accepted by the Appellate Authority.

What is the maximum pre-deposit amount?

The pre-deposit is capped at ₹20 crore (10% of ₹200 crore). This is the maximum amount you will ever need to pay as a pre-deposit for a single appeal.

Can I pay the full demand and still file an appeal?

No. If you pay the full demand, the liability is treated as paid in full. You cannot then appeal against the order. However, if you pay only a portion and explicitly record that you are paying under protest, you may retain the right to contest the balance.

What happens if the Appellate Authority upholds the demand?

If the Appellate Authority confirms or modifies the demand, the remaining 90% of the tax amount becomes immediately payable. If you win the appeal, the pre-deposit amount is refunded.

Can I file a rectification application for a DRC-07 issued against my vendor’s fraud?

Rectification under Section 161 covers only apparent errors. It does not cover situations where you disagree with the officer’s findings of fact. In cases involving fraud, evasion, or misrepresentation by your vendor, you must contest the demand through an appeal. You may also need to provide evidence that you did not know about the vendor’s fraud.

Can recovery be initiated while my appeal is pending?

Generally, once a stay is granted by the Appellate Authority, recovery is paused. However, if you have not obtained a stay order, recovery action under Section 79 can continue even while your appeal is pending.

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Need Help with a GST Demand Order?

If you have received a Form GST DRC-07, FinTax24 can help. We assess the order, identify the correct legal remedy, prepare the APL-01 appeal with supporting documents, and manage the pre-deposit payment process. We also handle Section 161 rectification applications and Section 128A waiver claims. Contact us to protect your business from recovery action.

Explore our GST return filing service and GST notice response service for more.