GST Notices, Orders and Appeals: What Circular 258/2026 Expects of Officers

A GST demand notice that only quotes the section, or an order that says “the reply has been considered”, is a common cause of appeals. On 26 October 2026 the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 258/04/2026-GST, which sets out how officers should draft show cause notices, hold hearings, write orders and decide first appeals. It is written for officers, but a taxpayer who has received a notice can use it to see what a proper notice and order should contain.

The circular says the guidelines are illustrative and not exhaustive, and officers must not cite them in show cause notices or in orders. They are a statement of good practice, not a new right enforceable on their own. The underlying law is the CGST Act and Rules.

Before the notice: DRC-01A

Where practicable, the officer may first send the taxpayer the tax assessed as payable in Part A of FORM GST DRC-01A (rule 142(1A)). It gives the taxpayer a chance to explain before a formal notice is issued under section 73, 74 or 74A.

What a show cause notice should contain

A notice should ideally have the following parts:

1. Profile of the case. Name, GSTIN, registration status, place of business, jurisdiction, the tax periods, and how the matter arose (audit, scrutiny, enforcement). Where there are several noticees, each is to be described separately.
2. Facts and evidence, stated objectively. The circular says to use expressions such as “it appears that”, and to avoid wording that suggests the outcome has already been decided.
3. Provisions allegedly contravened, each linked to the act complained of, and no unrelated sections added for good measure. Where there are several noticees, the role of each is to be set out.
4. Statement of charges.
5. Quantified demand, year-wise where the notice covers several years. For interest that depends on the date of payment, the notice can ask why “interest as applicable” should not be demanded.
6. Closing paragraph naming the adjudicating authority, the deadline for reply, and the consequence of not replying.

A summary must also be issued electronically in FORM GST DRC-01, and notices must be served by one of the modes in section 169.

The circular relies on two Supreme Court principles. First, a notice which only reproduces the statute, without facts, does not give the taxpayer a fair chance to reply. Second, in G.R. Infra Project Ltd. v. State of Madhya Pradesh (decided 19.08.2026, as cited in the circular), the Court held that what is needed to sustain a notice must be in the notice itself, and that a deficiency cannot be repaired later.

Fraud, wilful misstatement or suppression

Sections 74 and 74A(5)(ii) apply where tax is not paid because of fraud, wilful misstatement or suppression of facts to evade tax. The circular says:

• The notice must state what facts led the officer to that conclusion. Using the words “fraud” or “suppression” mechanically is not enough.
• Intent to evade is essential. A mere omission, or an incorrect statement that is not knowingly false, is not suppression or wilful misstatement.
• These provisions cannot be invoked just because tax was not paid, or because a discrepancy was found in scrutiny.
• A second notice on the same facts for a later period should not invoke fraud again, unless there are new and independent grounds. Later notices should ordinarily be under section 73 or 74A(5)(i).
• Where a notice includes both section 73 and section 74 demands, the reasons for dividing them and the separate amounts must be stated. For 2024-25 onwards, section 74A applies a single 42-month limit from the due date of the annual return, so the time limits no longer differ between fraud and non-fraud cases. The notice should still separate the two sets of facts.

Other points on notices

• No parallel proceedings. Under section 6, where a State or Union territory officer has already begun proceedings on a subject matter, the central officer should not begin proceedings on the same matter, and the reverse applies.
• Timely issue. Notices should not be left to the last day before the limitation date.

Hearings

• Under section 75(4), a hearing must be given on a written request, or where an adverse decision is contemplated.
• Section 75(5) bars more than three adjournments. The circular reads this as a maximum of four hearing opportunities, and says reasons for refusing an adjournment must be recorded.
• Authorised representatives under section 116 are to be allowed, and virtual hearings may be offered.
• Each hearing must be recorded, and the record included in the order.
• The order should be communicated promptly after the hearing, preferably within a month.
• If the adjudicating officer is transferred, the successor must give a fresh hearing.

What a good order looks like

The order must be a “speaking order”, meaning it gives reasons. The circular says it should:

• Begin with the facts, the issues to be decided, and the taxpayer’s appeal rights, forum and pre-deposit condition.
• Examine the evidence against the allegations, rather than merely listing documents.
• Deal with the taxpayer’s reply, including documents filed with FORM GST DRC-06, and say whether each point is accepted, partly accepted or rejected, and why. A bare line such as “reply has been considered” is to be avoided.
• Stay within the notice. Under section 75(7), the tax, interest and penalty cannot exceed the notice, and no demand can be confirmed on a ground not in the notice. A new issue needs a fresh notice.
• Cite judgments accurately, check that they have not been overruled, and record reasons if a judgment cited by the taxpayer is held not applicable.
• Quantify tax, interest and penalty issue-wise and year-wise, preferably in a table, under CGST, SGST, IGST and UTGST. Where part of the demand is dropped, both the original and confirmed amounts are to be stated, and payments already made are to be adjusted.
• Mention that interest runs until actual payment. Section 75(9) makes interest payable on short-paid tax whether or not the order says so.
• Impose a penalty only with a reasoned finding, not mechanically, and observing section 126.
• Be issued with a summary in FORM GST DRC-07.

Where the extended period is challenged, the officer should examine it and, if the notice has no clear evidence of intent to evade, confine the demand to section 73 or 74A(5)(i), recording reasons.

Where an officer uses artificial intelligence tools, the circular requires human oversight and independent verification of what the tool produces. The officer remains responsible for the correctness of the order.

Rectification under section 161

An error apparent on the face of the record may be rectified by the same authority that passed the order. An application can be made within three months, and the rectification order should be passed within six months, except for purely clerical or arithmetical errors. The circular stresses that an error needing a long process of reasoning, or involving two possible views, is not an error apparent on the face of the record. Section 161 cannot be used to review the merits, which is the work of an appeal. Rectification requests are to be disposed of through FORM GST DRC-08.

First appeals

• Scrutiny at filing. The Appellate Authority checks maintainability under rule 108 (limitation, form, pre-deposit, grounds and so on), but should not reject on merits at the registration stage.
• Limitation first. An appeal is due within three months of communication, with a further one month where sufficient cause is shown (section 107(1) and (4)). Limitation is a separate preliminary question. If the delay cannot be condoned, the appeal is not decided on merits even when the case looks strong.
• Withdrawal. Under rule 109C, once APL-02 is issued, withdrawal needs the authority’s approval, to be decided within seven days.
• Hearings. The dates should be communicated through the portal, and the order should record the hearing, the submissions and the documents filed.
• New grounds and evidence. Additional grounds under section 107(10) may be allowed if the omission was neither wilful nor unreasonable, but a new factual issue needing investigation should not ordinarily be taken up. Additional evidence under rule 112 may be admitted only in the listed situations, with reasons. If it is rejected, a personal hearing is to be given, and if it is admitted, the adjudicating officer must be given a chance to examine it. An appeal should not become a fresh investigation to repair a weak order.
• Timeline. Section 107(13) expects an appeal to be decided within a year of filing, so far as possible.
• Cross appeals. If the taxpayer and the department both appeal against one order, they should be decided together by a common order.
• Summary. The order is to be accompanied by FORM GST APL-04.

The guidance on hearings, orders and the extended period applies to appellate authorities as well.

What this means for a taxpayer

A taxpayer served with a notice can check whether it names the facts, the provisions and the quantified amount, and whether any claim of suppression is backed by stated material. A reply should answer each charge, because the order is expected to deal with each point. Time limits for appeal still run from communication of the order, whatever the quality of the order, so the three-month period should be watched.