What actually happens when a buyer claims ITC from a cancelled supplier? (Practical experience neede

• What happens: The GST department flags the ITC mismatch because the supplier's GSTIN is cancelled, viewing it as an inadmissible claim.

• The Process: A formal Show Cause Notice (DRC-01) is issued, typically preceded by scrutiny notices (ASMT-10). This can arrive anywhere from months to years after the filing.

• The Defense: Businesses fight it using comprehensive proof of transaction (e-way bills, bank payment records, stock registers) and leverage High Court precedents (Suncraft Energy, D.Y. Beathel) protecting honest buyers.

• The Cost: It involves significant operational pain—requiring 18% annual interest on disputed amounts, legal fees, mandatory 10% pre-deposits for appeals, and litigation timelines stretching across 1 to 3 years.

Thank you this is incredibly helpful. One last question if you don't mind: In your practice, roughly what percentage of mid-size manufacturer clients have faced at least one DRC-01 notice due to a cancelled supplier GSTIN in the last 3 years? Is this something you see regularly, or is it rare? I'm trying to gauge how widespread this pain is.

It can not be measured with numbers to form a generalised view yet unless we hva e govt backed data. Businesses generally defend their position by leveraging High Court precedents such as Suncraft Energy and D.Y. Beathel. The argument centers on proving that the transaction was genuine, the payment was made to the supplier, and the buyer acted in good faith, shifting the responsibility away from the buyer for the supplier's post-transaction cancellation.