I Got a GST Notice After 3 Years of Business — Here's What Happened
Three years into running my SaaS startup, I got a GST scrutiny notice. Nobody tells you how stressful this is when you are building a company. I want to share what happened so other founders know what to expect.
THE NOTICE
Got a DRC-01 notice (demand notice) claiming I had not paid GST on certain receipts. The amount stated: Rs 8.4 lakh including interest and penalty.
MY INITIAL REACTION: PANIC.
WHAT ACTUALLY HAPPENED
I called my CA at 9pm. He asked me to send the notice immediately. By 11pm he called back: "The department is claiming your export invoices to foreign clients should have had IGST. They don't understand zero-rated supplies."
Our situation: We export software services to US and UK clients. Zero-rated supply under GST — either pay IGST and claim refund, or export under bond/LUT without paying IGST. We had a valid LUT (Letter of Undertaking) filed every year. The system had not properly matched our LUT filings with the scrutiny.
THE PROCESS
- Responded to notice within the 30-day window (critical — do NOT let deadline pass)
- Submitted: LUT copies, export invoices, FIRC (Foreign Inward Remittance Certificates from bank), GSTR-1 showing zero-rated supplies
- Attended personal hearing with the GST officer
- Officer acknowledged the documentary evidence
- Order came 45 days later: Demand dropped to zero
TOTAL DAMAGE: Legal fee Rs 35,000. 3 weeks of distracted focus.
LESSONS FOR OTHER STARTUP FOUNDERS
1. File LUT every financial year without fail if you export services — April 1 should be on your calendar
2. Respond to every GST notice, even if you think it is wrong — ignoring creates ex-parte orders
3. Keep FIRC for every foreign remittance — banks issue these, make sure you save them
4. Get a good GST CA, not just any CA — it is a specialist field now
5. The GST department's data matching is improving — gaps between your filings and third-party data will be flagged
THE NOTICE
Got a DRC-01 notice (demand notice) claiming I had not paid GST on certain receipts. The amount stated: Rs 8.4 lakh including interest and penalty.
MY INITIAL REACTION: PANIC.
WHAT ACTUALLY HAPPENED
I called my CA at 9pm. He asked me to send the notice immediately. By 11pm he called back: "The department is claiming your export invoices to foreign clients should have had IGST. They don't understand zero-rated supplies."
Our situation: We export software services to US and UK clients. Zero-rated supply under GST — either pay IGST and claim refund, or export under bond/LUT without paying IGST. We had a valid LUT (Letter of Undertaking) filed every year. The system had not properly matched our LUT filings with the scrutiny.
THE PROCESS
- Responded to notice within the 30-day window (critical — do NOT let deadline pass)
- Submitted: LUT copies, export invoices, FIRC (Foreign Inward Remittance Certificates from bank), GSTR-1 showing zero-rated supplies
- Attended personal hearing with the GST officer
- Officer acknowledged the documentary evidence
- Order came 45 days later: Demand dropped to zero
TOTAL DAMAGE: Legal fee Rs 35,000. 3 weeks of distracted focus.
LESSONS FOR OTHER STARTUP FOUNDERS
1. File LUT every financial year without fail if you export services — April 1 should be on your calendar
2. Respond to every GST notice, even if you think it is wrong — ignoring creates ex-parte orders
3. Keep FIRC for every foreign remittance — banks issue these, make sure you save them
4. Get a good GST CA, not just any CA — it is a specialist field now
5. The GST department's data matching is improving — gaps between your filings and third-party data will be flagged
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Disclaimer: This content is the author's personal opinion and analysis. It does not constitute professional tax or legal advice. Consult a qualified professional for specific advice on your situation.
Comments (8)
Not all GST officers are unfamiliar with zero-rated supplies. Depends on the jurisdiction.
Scary but helpful
Been there
Ravi, thank you for sharing this. The 30-day response window is absolutely critical — missing it means an ex-parte order which is much harder to fight.
Good outcome
The FIRC point is so important. Many startups do not even know what FIRC is until they get a notice. Banks issue FIRC for every foreign inward remittance.
Rs 35,000 for a DRC-01 response? That CA overcharged. Should be 10-15k max.
Relatable 😅