ASMT-10 Reply for Excess ITC: A Step-by-Step Guide to Answering a GST Scrutiny Notice

A notice in Form GST ASMT-10 saying that the input tax credit claimed in GSTR-3B exceeds what appears in GSTR-2A or 2B is the most common scrutiny notice a registered business receives. It is also the most winnable, if it is answered properly and on time. This guide explains how to prepare an ASMT-10 reply for excess ITC: what the notice is, which rules apply to which year, what evidence answers it, and what the officer may and may not do next.

What an ASMT-10 is, and Where it Sits in the GST Scheme

Section 61 allows the proper officer to scrutinise a return, tell the taxpayer about discrepancies and seek an explanation. If the explanation is accepted, the taxpayer is informed and no further action is taken. If no satisfactory explanation comes within thirty days (or a longer period allowed), or a discrepancy is accepted but not corrected, the officer may proceed to audit, special audit, search or a demand under sections 73 or 74.

Rule 99 supplies the forms. The notice is ASMT-10, which should quantify the tax, interest and other amounts where possible. The taxpayer may accept the discrepancy, pay and inform the officer, or explain in ASMT-11. Acceptance of the explanation or payment is communicated in ASMT-12.

For central taxpayers, the CBIC has issued two standard operating procedures. Instruction No. 02/2022-GST of 22 March 2022 governs FY 2017-18 and 2018-19; Instruction No. 02/2023-GST of 26 May 2023 governs FY 2019-20 onwards. Both require the discrepancies to be specific and quantified rather than vague, contemplate a single ASMT-10 per GSTIN per financial year, and set internal timelines: ASMT-12 within thirty days of an acceptable reply, and action under section 73 or 74 within fifteen days after the reply period if there is no reply, or within thirty days of an unacceptable one. Under the 2023 instruction, the parameter-wise details and worksheets are uploaded with the notice on the portal.

Why Excess ITC Notices Arise, and Which Rule Governs Which Year

The typical discrepancy is simple: the credit claimed in Table 4 of GSTR-3B is higher than the credit reflected in the auto-generated statement of inward supplies. Whether the difference is a problem depends on the period.

Circular 193 gives a worked example for the middle period: if GSTR-2A shows Rs 3 lakh and GSTR-3B claims Rs 5 lakh, with a 20 per cent cap, only Rs 60,000 of the Rs 2 lakh difference can be supported by certificate. The other Rs 1.4 lakh is inadmissible whatever the certificate says.

How to Prepare an ASMT-10 Reply for Excess ITC: Step by Step

1. Diarise and, if needed, seek time

The first step in preparing an ASMT-10 reply for excess ITC is to note the date of service and calculate the thirty-day response period. If the reconciliation cannot be completed in time, ask the proper officer in writing for an extension before the period expires, explaining the reason for the delay. Silence allows the officer to proceed further under section 61(3).

2. Reconcile invoice by invoice

Download GSTR-2A or 2B for the year and match it against the purchase register and the credit claimed month by month. A year-level difference often hides several different problems, each with a different answer.

3. Sort each difference by cause

• Supplier failures. The supplier did not file GSTR-1, omitted the invoice, reported it as a B2C supply, or used the wrong GSTIN. These are the four situations Circular 183 covers.
• Credit that never appears in 2A/2B. Imports of goods, tax paid under reverse charge and some other entries are reported elsewhere, so a gap on those lines is not a real discrepancy.
• Timing. An invoice claimed in one year and reported by the supplier in the next.
• Reversals already made. Circular 170/02/2022-GST explains where reversals and reclaims are reported in Table 4(B) and 4(D) of GSTR-3B. Credit already reversed there should not be demanded again.
• Genuine errors. Duplicate claims, blocked credit under section 17(5), invoices never received.

4. Assemble the evidence

For each supplier-failure item in the earlier periods, Circular 183 requires the officer to verify possession of the tax invoice, receipt of goods or services, payment of value and tax to the supplier, and compliance with the section 16(4) time limit. Where the difference for a supplier in a financial year exceeds Rs 5 lakh, a certificate from a chartered accountant or cost accountant, with UDIN, confirming that the supplies were made and that the supplier paid the tax in its GSTR-3B is required. Where it is Rs 5 lakh or less, a certificate from the supplier is enough. The circular is limited to bona fide errors and applies to pending proceedings, not concluded ones.

5. Check the time-limit points

If the notice also alleges late claims under section 16(4), check section 16(5), inserted by the Finance (No. 2) Act 2024 with effect from 1 July 2017. It allows credit for FY 2017-18 to 2020-21 claimed in any return filed up to 30 November 2021. Circular 237/31/2024-GST of 15 October 2024 directs officers at every stage, including scrutiny, to apply it.

6. Pay what is genuinely wrong

Credit that cannot be supported should be reversed or paid through Form DRC-03, and the reply should say so. Interest under section 50(3), as substituted from 1 July 2017 by the Finance Act 2022, is payable only where credit was both wrongly availed and utilised. Where the electronic credit ledger always carried a sufficient balance, that point should be made with ledger extracts.

7. File ASMT-11 and ask for closure

File the reply in ASMT-11 with a covering note, the reconciliation, the certificates and the proof of any payment. Ask for a personal hearing if the officer is not satisfied, and ask expressly for ASMT-12 if the explanation is accepted.

If the Officer Moves to a Show Cause Notice

The High Courts have treated the scrutiny stage as carrying real safeguards, though not uniformly.

• Goverdhandham Estate v. State of Rajasthan (Rajasthan High Court, Division Bench, 17 January 2024): where a notice rests only on discrepancies in the return, the officer must first follow section 61, consider the explanation and record reasons. Once an explanation has been accepted in ASMT-12, proceedings under section 73 on the same discrepancy cannot follow.
• Vadivel Pyrotech v. Assistant Commissioner (ST) (Madras High Court, 27 September 2022): a demand flowing from scrutiny must be preceded by an ASMT-10 on those same discrepancies; issues not raised in the notice could not be added in the order.
• PepsiCo India Holdings v. Union of India (Gauhati High Court, 19 September 2025): invoking section 73 on a return-based discrepancy without first issuing ASMT-10 was unauthorised, and the writ was entertained despite the alternative remedy.

The other side must be stated. In Nagarjuna Agro Chemicals v. State of Uttar Pradesh (Allahabad High Court, Division Bench, 15 May 2023), the court held that scrutiny and section 74 proceedings are separate and distinct, so a section 61 notice is not a condition precedent to a demand, particularly where the case rests on material other than the return itself. Read together, these decisions support a working rule: where the department has nothing but a return discrepancy, section 61 should come first; where it has independent material, it need not.

Supplier Default and Suncraft Energy

Many excess ITC notices really concern a supplier who collected tax and did not pay it. In Suncraft Energy Pvt Ltd v. Assistant Commissioner, State Tax (Calcutta High Court, Division Bench, 2 August 2023), the court set aside a demand against the buyer where the officer had made no enquiry against the supplier and ignored the invoices and bank proof. It held that the department should first proceed against the supplier and turn to the buyer only in exceptional cases such as collusion or a missing supplier.

Two cautions. First, the Supreme Court dismissed the department’s special leave petition on 14 December 2023 having regard to the small size of the demand. That is not an affirmation on the merits. Second, section 16(2)(c) still makes actual payment of tax by the supplier a condition of the buyer’s credit, and not every High Court has followed Suncraft. The current position in the reader’s own High Court should be checked before relying on it.

ASMT-10 Compared with DRC-01B and DRC-01C

DRC-01C was introduced by Notification 38/2023-Central Tax of 4 August 2023. A parallel system intimation, DRC-01B under rule 88C, covers the opposite mismatch, where output tax in GSTR-1 exceeds that paid in GSTR-3B. A reply already given to a DRC-01C should be referred to in any later ASMT-11 on the same difference.

Frequently Asked Questions

What is the time limit to file an ASMT-10 reply for excess ITC?

Rule 99 of the CGST Rules allows thirty days from service of the notice, or any further period the proper officer permits. If more time is needed, a written request should be made before the thirty days expire.

What happens if I do not reply to an ASMT-10?

Section 61(3) allows the officer, if no satisfactory explanation is received, to initiate audit, special audit, search or a demand under section 73 or 74 (section 74A for periods from FY 2024-25). The CBIC’s scrutiny instructions direct officers to act within fifteen days after the reply period where there is no reply.

Is a CA certificate compulsory for an ITC mismatch?

For FY 2017-18 and 2018-19, Circular 183/15/2022-GST requires a certificate from a chartered accountant or cost accountant, with UDIN, where the difference for a supplier in a year exceeds Rs 5 lakh. For smaller differences, a certificate from the supplier is enough. Circular 193/05/2023-GST applies the same route up to 31 December 2021, subject to the rule 36(4) caps.

Can ITC be denied only because the supplier did not pay tax?

Section 16(2)(c) makes the supplier’s payment a condition of credit. In Suncraft Energy (Calcutta High Court, 2023), the court held that the department should first proceed against the supplier and pursue the buyer only in exceptional cases. The Supreme Court declined to interfere because the demand was small, which is not a ruling on the merits, and other High Courts have not all agreed.

Can the officer issue a show cause notice on points not raised in the ASMT-10?

Where the demand flows from scrutiny, several High Courts have held that it must be confined to the discrepancies notified. In Vadivel Pyrotech (Madras High Court, 2022), an order raising issues not in the ASMT-10 was set aside. Where the department relies on independent material rather than the return alone, it is not confined in this way.

Sources

• Central Goods and Services Tax Act 2017, sections 16, 50, 61, 73, 74 and 74A — CBIC tax information portal, e.g. section 73, section 50.
• Central Goods and Services Tax Rules 2017, rules 36(4), 88C, 88D and 99; Notification 38/2023-Central Tax, 4 August 2023 — GST Council.
• CBIC Instruction No. 02/2022-GST, 22 March 2022 — GST Council; CBIC Instruction No. 02/2023-GST, 26 May 2023.
• CBIC Circular 170/02/2022-GST, 6 July 2022 — CBIC.
• CBIC Circular 183/15/2022-GST, 27 December 2022 — CBIC.
• CBIC Circular 193/05/2023-GST, 17 July 2023 — GST Council.
• CBIC Circular 237/31/2024-GST, 15 October 2024 — CBIC; Finance (No. 2) Act 2024, section 118 (sections 16(5) and 16(6)).
• Suncraft Energy Pvt Ltd v. Assistant Commissioner, State Tax, Calcutta High Court, MAT 1218 of 2023, decided 2 August 2023 — full text; Supreme Court, SLP (C) Nos. 27827-27828 of 2023, order dated 14 December 2023.
• Goverdhandham Estate v. State of Rajasthan, Rajasthan High Court, D.B. Civil Writ Petition No. 16702 of 2023, decided 17 January 2024, 2024:RJ-JP:2730-DB — full text.
• Vadivel Pyrotech v. Assistant Commissioner (ST), Madras High Court (Madurai Bench), W.P. (MD) No. 22642 of 2022, decided 27 September 2022 — full text.
• Nagarjuna Agro Chemicals v. State of Uttar Pradesh, Allahabad High Court, Writ Tax No. 336 of 2023, decided 15 May 2023, 2023:AHC:104841-DB — full text.
• PepsiCo India Holdings v. Union of India, Gauhati High Court, W.P. (C) No. 6960 of 2023, decided 19 September 2025.