Answering a Scrutiny Notice on Credit: ASMT-10

A notice in FORM GST ASMT-10 is the department’s first written question about a year’s returns. It usually arrives two or three years after the year it covers, by which time the people who prepared those returns may have moved on. On credit, it usually lists a set of comparisons between GSTR-3B, GSTR-2A or GSTR-2B and the annual return, each with an amount against it. The notice is not a demand, and nothing can be recovered on its strength. But the thirty days it allows decide whether the matter closes with an ASMT-12 or moves to a show cause notice. A point that is accepted at this stage cannot be reopened on the same material.

This guide covers the procedure for credit discrepancies: who selects the return, what the notice must contain, the reply in ASMT-11, acceptance in ASMT-12, and what follows when the reply is not accepted. The demand procedure itself is in Notices and Demands: DRC-01A, DRC-01, and Sections 73, 74 and 74A.

How a return is selected

Section 61(1) allows the proper officer to “scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any”. Rule 99 prescribes the manner.

For taxpayers under Central tax administration, CBIC’s Instruction No. 02/2023-GST of 26 May 2023 sets out the procedure for 2019-20 onwards:

• The Directorate General of Analytics and Risk Management selects the GSTINs, “based on identified risk parameters”, and places them on the officer’s dashboard in the ACES-GST application. The risk parameters and the amount at stake for each are shown to the officer. They are not published.
• The officer scrutinises all the returns of the selected year and may issue “a single compiled notice” for the year.
• The officer is expected to rely on information already on record. There “should normally not be any need for seeking documents/records from the registered persons before issuance of FORM GST ASMT-10”.
• The notice is issued through ACES-GST and reaches the taxpayer on the common portal, “and therefore, there will be no need for sending any manual communication”.

State tax administrations follow their own instructions, but the rule and the forms are the same.

The discrepancies a notice on credit usually raises

Instruction No. 02/2022-GST, the earlier procedure for 2017-18 and 2018-19, attached an “indicative list of parameters”. The list for later years has not been published. The credit items in the 2022 list show the kind of comparison a notice is likely to make:

Comparison	What a gap may indicate
Reverse charge credit in table 4(A)(2) and (3) against reverse charge tax in table 3.1(d), and against cash paid in table 6.1	Credit taken on reverse charge supplies without the tax being paid in cash
ISD credit in table 4(A)(4) against the ISD tables of GSTR-2A	Credit not distributed to the GSTIN
“All other ITC” in table 4(A)(5) against supplier invoices in GSTR-2A	Credit on invoices the supplier never reported
Credit on invoices dated after a supplier’s registration was cancelled with retrospective effect	Credit not available after the effective date of cancellation
Credit on invoices where the supplier had not filed GSTR-3B	Credit open to question under section 16(2)©
GSTR-3B filed after the section 16(4) deadline	Credit claimed in that return is time-barred
Import credit in table 4(A)(1) against the import tables of GSTR-2A and ICEGATE	Credit without a matching bill of entry
Reversals in table 4(B) against rules 42 and 43	Common credit not reversed for exempt or non-business use

To these may be added credit on items blocked by section 17(5), which is the discrepancy in the Rajasthan case discussed below. The law behind each item is covered in Input Tax Credit: the Conditions in Section 16(2), Blocked Credits and Apportionment and Reversal of Credit.

What the notice must contain, and the time it allows

Rule 99(1) requires the officer to inform the person “of such discrepancy” and seek an explanation “within such time, not exceeding thirty days from the date of service of the notice or such further period as may be permitted by him”. The officer is also to quantify, “where possible”, the tax, interest and other amounts involved. Instruction No. 02/2023-GST adds that the discrepancies “should, as far as possible, be specific in nature and not vague or general”. It also requires the officer to mention them parameter-wise and to upload worksheets and supporting documents.

Payments already made through DRC-03 after the returns were filed “may also be taken into consideration” in framing the notice.

What to have ready

Item	Where it comes from
The ASMT-10, with its worksheets and annexures	Portal: Services > User Services > View Notices and Orders
GSTR-3B, GSTR-1 and GSTR-9 for the year (and GSTR-9C where filed)	Returns
GSTR-2A and GSTR-2B for every month of the year	Portal
A credit reconciliation for the year: books, GSTR-3B table 4 and GSTR-2A/2B, supplier by supplier	Books and portal
Supplier registration status and GSTR-3B filing status	Portal, search taxpayer and GSTR-2A
Bills of entry; ISD invoices; reverse charge self-invoices and challans	ICEGATE, the books, the cash ledger
Rule 42 and 43 workings for the year	Books
DRC-03 payments already made for the year	Portal
Any DRC-01B or DRC-01C reply already filed for the same months	Portal: Return Compliance

The reply: ASMT-11

Rule 99(2) gives two courses. The person “may accept the discrepancy mentioned in the notice … and pay the tax, interest and any other amount arising from such discrepancy and inform the same or furnish an explanation for the discrepancy in FORM GST ASMT-11”.

FORM GST ASMT-11 has a table with one row per discrepancy and the reply against it, a table of the amount admitted and paid, and a verification by the authorised signatory. A single reply can accept some items and explain others.

The portal’s FAQ adds that an admitted amount may be paid through DRC-03. Alternatively the corrective entry may be made in GSTR-1 or GSTR-3B, by reporting an omitted invoice or debit note or reversing the credit. Section 61(3) contemplates the second course. It treats as a failure the case where the person, “after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted”. Interest on credit wrongly availed is due only where it was also utilised. The rate is 18 per cent under section 50(3), calculated under rule 88B(3).

Portal steps

The portal’s user manual for scrutiny of returns describes the reply as follows:

1. Go to Services > User Services > View Notices and Orders, and open the case.
2. On the NOTICES tab, download the ASMT-10 and its attachments.
3. Where an amount is admitted, use the DRC-03 link on the REPLIES tab to pay, or record a payment already made. The amount admitted and paid then appears in the reply.
4. On the REPLIES tab, choose ADD REPLY and select REPLY-ASMT 11. Enter the reply and upload supporting documents.
5. Tick the verification, select the authorised signatory, enter the place, preview, and file with DSC or EVC.

The portal issues a reference number and the case status changes to “Reply furnished, pending for order by tax officer”. The FAQ states that a personal hearing cannot be requested in an ASMT-11 reply. An extension of the thirty days is a matter for the officer under rule 99(1).

Who signs

ASMT-11 is verified by the authorised signatory, with name and designation, and filed with DSC or EVC.

Acceptance: ASMT-12

Where the explanation, or the information about payment, “is found to be acceptable, the proper officer shall inform him accordingly in FORM GST ASMT-12” (rule 99(3)). The form states that the reply “has been found to be satisfactory and no further action is required to be taken in the matter”. Section 61(2) gives it effect: “no further action shall be taken in this regard”. Instruction No. 02/2023-GST asks officers to issue ASMT-12 within thirty days of the reply.

In Goverdhandham Estate Pvt Ltd v State of Rajasthan (Rajasthan High Court, Division Bench, D.B. Civil Writ Petition No. 16702/2023, 17 January 2024), a hotel received an ASMT-10 for 2017-18. The notice proposed reversal of Rs 18,44,884 of credit on lifts and air-conditioners as blocked under section 17(5). The hotel replied that they were plant and machinery. A show cause notice under section 73 followed on 21 September 2023. On 29 September 2023, an ASMT-12 accepted the reply, with an enclosure saying that this did not affect the show cause notice. The Court held that “once the explanation is accepted, no further proceedings could be drawn”, and set aside both the notice and the enclosure.

When the reply is not accepted, or not filed

Section 61(3) allows the officer to “initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74 or section 74A”. This applies where no satisfactory explanation is given within the thirty days or the extended period. It also applies where the person accepts the discrepancy but does not correct it. Instruction No. 02/2023-GST sets the officer’s timelines:

• where no reply is filed, action within fifteen days after the thirty days end
• where a reply is rejected, action within thirty days of it
• where the matter is referred to audit or the anti-evasion wing, the same thirty days, or forty-five days from the ASMT-10 if no reply is filed

The demand itself is governed by section 73 or section 74 for years up to 2023-24, and section 74A from 2024-25. Payment of the tax and interest before the notice, or within the window after it, avoids penalty in a case without fraud: thirty days under section 73(8), sixty days under section 74A(8)(ii). The procedure is in Notices and Demands.

Whether scrutiny is a precondition to a demand is not settled. In M/s Neelkanth Entrepreneurs Pvt Ltd v State of U.P. (Allahabad High Court, Lucknow Bench, Writ Tax No. 1024 of 2026, 9 September 2026), a works contractor received a show cause notice under section 74A without any ASMT-10. The notice alleged that eighteen sub-contractors from whom it took credit were non-existent. The Court held that section 61 “does not constitute the sole or exclusive gateway” to a demand. The demand provisions open with “where it appears to the proper officer”, and the material may come from any source. The Court distinguished Goverdhandham, where scrutiny had been started. It noted, however, that where the officer has only return-based discrepancy material and no independent source, compliance with section 61 and rule 99 “may be a mandatory procedural safeguard”. The Gauhati High Court took the stricter view in Pepsico India Holdings v Union of India (single judge, 19 September 2025), holding the section 61 procedure mandatory where a demand rests on a discrepancy in the returns; the department’s appeal is pending before a Division Bench. Scrutiny of Returns: ASMT-10, ASMT-11 and ASMT-12 sets out both lines.

What can still be put right

• Before or with the reply, an admitted shortfall can be paid through DRC-03 with interest, or corrected in the return of the month of acceptance. Correcting Mistakes in Returns explains why section 39(9) itself is closed once an error is found “as a result of scrutiny”.
• After a show cause notice, the reply goes in DRC-06, and the payment windows in sections 73(8) and 74A(8) remain open. An adverse order is appealable under section 107, as explained in Appeals and Pre-Deposit.
• Late returns and the interest on them are covered in Late Returns.

The procedure in order

1. Download the ASMT-10 and its worksheets, and note the date of service. Thirty days run from it.
2. Rebuild the year’s credit position: books, GSTR-3B table 4, GSTR-2A/2B and GSTR-9, discrepancy by discrepancy.
3. Decide, item by item, what is accepted and what is explained.
4. Pay accepted amounts through DRC-03 with interest where credit was utilised, or correct them in the current return.
5. File ASMT-11 with a reply against every discrepancy, the payment details and the supporting documents, verified with DSC or EVC.
6. Seek more time from the officer before the thirty days end if the reconciliation is not complete.
7. Watch the ORDERS tab for ASMT-12. If a show cause notice follows instead, the payment window under section 73(8) or 74A(8) starts with it.

The next guide turns from credit questioned by the department to credit the taxpayer wants back: the refund of unutilised credit under section 54(3).