Your GST Show Cause Notice, Measured Against CBIC's New RulebookCircular 258/04/2026-GST

Most GST disputes begin with a show cause notice and end, at the first stage, with an adjudication order. Businesses in Uttar Pradesh often describe the same problems with both. The notice does not say clearly what is wrong, the demand for three or four years appears as one figure, and the word "suppression" is used without any explanation. The order that follows then says the "reply has been considered" and confirms the demand in full.

On 26 October 2026 the Central Board of Indirect Taxes and Customs issued Circular No. 258/04/2026-GST, titled "Clarification on issues related to demand, adjudication and appeal proceedings under the CGST Act, 2017". It was issued under Section 168(1) of the CGST Act. The circular records that the Board had received representations about orders that are "vague, non-speaking, or fail to consider the submissions" of the taxpayer. It then sets out, in 18 pages, what a notice, a hearing, an order and a first appeal are expected to look like.

The circular is written for officers. A taxpayer holding a notice can use it the other way round, as a checklist against which to read that notice.

What the notice itself should contain

Paragraph 4 describes a well-drafted notice in parts. The main points are:

• Identity and background. The notice should give the name, GSTIN, registration status, principal place of business, jurisdiction and the tax period(s) covered. It should also say how the case began: assessment, audit, return scrutiny or enforcement.
• Facts and evidence. The acts or omissions should be set out objectively and the evidence discussed. The circular asks for neutral wording such as "it appears that", and asks officers to avoid "determined" or other words that suggest the result has already been decided.
• Law. Each act or omission should be linked to the provision it is said to breach. Unrelated sections should not be added together unless each applies independently.
• Quantification. A proposed demand should be quantified and its basis given. Where a notice covers several financial years, "efforts should be made to demarcate the demand financial year wise".
• Conclusion. The last paragraph should name the Adjudicating Authority, the deadline for the reply and the consequences of not replying.

The circular relies on the Supreme Court's judgment in G.R. Infra Project Ltd. v. State of Madhya Pradesh (19 August 2026). In that case the Court held that what is needed to sustain a notice must be contained in the notice itself. A deficiency in the notice, including non-application of mind, cannot be cured later.

"Fraud" and "suppression" need material, not just words

The most practical part of the circular is paragraph 5. Section 74(1), and for FY 2024-25 onwards Section 74A(5)(ii), apply where tax is unpaid because of fraud, wilful misstatement or suppression of facts "to evade tax". The circular states that:

• the notice must "specifically disclose the basis" for alleging fraud or suppression, and a mechanical use of those words is not enough;
• the phrase includes an intent to evade tax. An omission or an incorrect statement is not suppression or wilful misstatement unless it is deliberate;
• these provisions cannot be invoked "merely on the ground of non‑payment of GST". Nor are they meant for scrutiny cases simply because a discrepancy has been found;
• a second notice for a later period on the same facts should generally be issued under Section 73 or Section 74A(5)(i), not again as a fraud case, unless new and independent grounds exist.

Where a notice proposes demands under both Section 73 and Section 74, the reasons for the split and a separate quantification under each are required (paragraph 6); the same applies to notices for FY 2024-25 onwards that mix both kinds of allegation. The circular also notes that Section 74A, which applies from FY 2024-25, has a single 42-month period from the due date of the annual return for issuing notices, for fraud and non-fraud cases alike.

The difference matters because fraud-based demands carry heavier penalty consequences, and under the pre-2024-25 sections a longer limitation period. If the material for the allegation is not in the notice, paragraph 13 tells the adjudicating officer to record that finding and confine the demand to Section 73 or Section 74A(5)(i).

The material behind an allegation of fraud belongs in the notice itself.

Personal hearings

Section 75(4) requires a hearing where the taxpayer asks for one in writing or where an adverse decision is contemplated. Section 75(5) allows no more than three adjournments. On that basis, paragraph 10.1 says officers may grant a maximum of four hearing opportunities, and a refusal of adjournment should be reasoned in writing. The circular also says that:

• appearance by an authorised representative under Section 116 should be duly considered;
• virtual hearings may be offered;
• a record of every hearing (date, time, attendees) should be kept and reflected in the order;
• the order should preferably be communicated within one month of the hearing;
• if the officer is transferred, the successor must give a fresh hearing.

Because adjournments are limited, an early hearing should not be treated as a formality. It is often the main opportunity to put documents and arguments on record.

The order: reasons for each point

Paragraph 11 asks for a "speaking order". The order should examine each submission made in Form GST DRC-06 or at the hearing and say whether it is accepted, partly accepted or rejected, with reasons. Generic expressions such as "reply has been considered" are to be avoided. Case law cited by the taxpayer should be discussed, and reasons recorded if it is found inapplicable. Quantification should be issue-wise and, as far as possible, year-wise and separate for CGST, SGST, IGST and UTGST. Any amount already paid should be adjusted. Penalty is not to be imposed mechanically, and the general principles in Section 126 apply. The order's summary is to be uploaded in Form GST DRC-07.

Rectification and first appeal

Section 161 rectification is limited to errors apparent on the face of the record and is to be done by the authority that issued the order. The circular says it "cannot be used as a substitute for appeal". The application is to be made within three months of the order, and rectification is to be done within six months, except for purely clerical or arithmetical errors. Disposal is through Form GST DRC-08.

For first appeals under Section 107, the circular repeats the three-month period from communication of the order, with a further one month that may be condoned under Section 107(4). Limitation is to be decided first, as a preliminary issue, and an appeal filed beyond the condonable period "ought not to be adjudicated on merits". Merits should not be rejected at the stage of registering the appeal. As far as possible, an appeal should be decided within one year under Section 107(13).

A checklist for the notice on your desk

Paragraph 17 states that the guidelines are "illustrative" and "non-exhaustive", and that officers must not cite them in notices or orders. The circular does not, by itself, make a notice invalid. Its value lies in describing in one place what the statute and the courts already require. It is a useful frame for a reply. Related reading: Section 73 or 74 — why the difference matters and responding to a GST show cause notice.