New GST rules on what a show cause notice must say
If the tax department accuses you of fraud or hidden sales under GST, its notice must state the specific facts behind that accusation.
- Document
- Circulars CGST 258/04/2026-GST
- Dated
- 26 Oct 2026
- Effective
- Not stated (circular dated 26.10.2026)
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The circular governs GST show cause notices and the orders that follow them.
- A notice alleging fraud or hidden facts must state the specific facts behind it.
- Repeating the words 'fraud' or 'suppression' alone is not enough, per the Supreme Court.
- Notices must name you, your GSTIN, the tax periods, and the basis of any demand.
- Officers may send an early DRC-01A intimation before a formal notice, where feasible.
In short
CBIC circular 258/04/2026-GST, issued 26 October 2026 by the Central Board of Indirect Taxes and Customs, tells GST officers how to write show cause notices and decide cases. A show cause notice (SCN) is the department's written demand asking you to explain why tax or a penalty should not be imposed. It aims to make notices and orders clear, reasoned and fair. This summary covers only the part of the circular we could review, and the text stops partway through; the full circular is at the original link.
What has changed
How it worked before
Before this circular, GST notices already had to set out the allegations and officers already had to give reasons. The circular says many orders were vague, ignored taxpayers' replies, and led to avoidable appeals. It also says some notices used the words 'fraud' or 'suppression' without explaining why.
What has changed
Officers must now set out the specific facts behind any fraud, wilful misstatement or suppression claim in the notice itself. A notice must also identify the taxpayer, the tax periods, the background of the check, the legal provisions, and the amount demanded, split by financial year where it covers several. Officers are asked to avoid categorical words such as 'determined', and to send an early DRC-01A intimation where feasible.
Who this affects
Anyone registered under GST, such as a shop owner, trader, company or firm with a GSTIN, who receives a show cause notice or an order based on one.
An example
Ravi runs a registered shop in Pune and sells online. His notice says he hid sales over two years and demands tax, but only uses the word 'suppression'. Under this circular, the notice must state the specific facts showing he intended to evade tax, and split the demand by financial year. If it does not, Ravi can point out the gap in his reply.
What you should do
Read the notice for its tax periods, the amount, and the facts behind any fraud or suppression claim. If it only repeats those words without facts, say so in your reply and cite this circular and the Supreme Court ruling it relies on. Note the reply deadline in the notice's final paragraph. If you receive a DRC-01A early intimation, you can use it to clarify your position before a formal notice.
If you do nothing
The circular does not set out penalties for missing a reply. Each show cause notice must state its reply deadline and the consequences of not replying in its final paragraph. Check that paragraph and respond before the deadline it gives.
The terms explained
- show cause notice (SCN)
- A written notice from the tax department asking you to explain why it should not take a particular action, such as demanding tax.
- pre-SCN intimation (DRC-01A)
- An early notice, on form DRC-01A, telling you the tax the department thinks you owe before any formal show cause notice is issued.
- suppression of facts
- Hiding facts you should have declared in a return or statement, or not answering a written request for information.
- wilful misstatement
- Deliberately giving false information in a return or other document to the tax department.
The original document
| Issued by | GST |
|---|---|
| Document | Circulars CGST 258/04/2026-GST |
| Full title | Clarification on issues related to demand, adjudication and appeal proceedings under the CGST Act, 2017. |
| Issued on | 26 October 2026 |
| Effective | Not stated (circular dated 26.10.2026) |
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.