Section 74A of the CGST Act, 2017 — GST Demand Notices from FY 2024-25: Time Limits and Penalties

The text of Section 74A

74A. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason pertaining to Financial Year 2024-25 onward.— (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder: Provided that no notice shall be issued, if the tax which has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised in a financial year is less than one thousand rupees. (2) The proper officer shall issue the notice under sub-section (1) within forty-two months from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within forty-two months from the date of erroneous refund. (3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax. (4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice. (5) The penalty in case where any tax which has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised,— (i) for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, shall be equivalent to ten per cent. of tax due from such person or ten thousand rupees, whichever is higher; (ii) for the reason of fraud or any wilful-misstatement or suppression of facts to evade tax shall be equivalent to the tax due from such person. (6) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. (7) The proper officer shall issue the order under sub-section (6) within twelve months from the date of issuance of notice specified in sub-section (2): Provided that where the proper officer is not able to issue the order within the specified period, the Commissioner, or an officer authorised by the Commissioner senior in rank to the proper officer but not below the rank of Joint Commissioner of Central Tax, may, having regard to the reasons for delay in issuance of the order under sub-section (6), to be recorded in writing, before the expiry of the specified period, extend the said period further by a maximum of six months. (8) The person chargeable with tax where any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, may,— (i) before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment, and the proper officer, on receipt of such information shall not serve any notice under sub-section (1) or the statement under sub-section (3), as the case may be, in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder; (ii) pay the said tax along with interest payable under section 50 within sixty days of issue of show cause notice, and on doing so, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded. (9) The person chargeable with tax, where any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, may,— (i) before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment, and the proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder; (ii) pay the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent. of such tax within sixty days of issue of the notice, and on doing so, all proceedings in respect of the said notice shall be deemed to be concluded; (iii) pay the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent. of such tax within sixty days of communication of the order, and on doing so, all proceedings in respect of the said notice shall be deemed to be concluded. (10) Where the proper officer is of the opinion that the amount paid under clause (i) of sub-section (8) or clause (i) of sub-section (9) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. (11) Notwithstanding anything contained in clause (i) or clause (ii) of sub-section (8), penalty under clause (i) of sub-section (5) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax. (12) The provisions of this section shall be applicable for determination of tax pertaining to the Financial Year 2024-25 onwards. Explanation 1.— For the purposes of this section,— (i) the expression "all proceedings in respect of the said notice" shall not include proceedings under section 132; (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under this section, the proceedings against all the persons liable to pay penalty under sections 122 and 125 are deemed to be concluded. Explanation 2.— For the purposes of this Act, the expression "suppression" shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer.

What the section does

• Where tax for FY 2024-25 or later has not been paid, been short paid or erroneously refunded, or input tax credit has been wrongly availed or utilised, the proper officer serves a show cause notice for the tax, interest under section 50 and penalty. No notice issues for less than ₹1,000 in a year.
• The notice must be issued within 42 months from the due date of that year's annual return, or of the erroneous refund, and the order within 12 months of the notice, which a senior officer may extend by up to 6 months.
• The penalty is the higher of 10% of the tax or ₹10,000, or the full tax where the reason is fraud, wilful misstatement or suppression of facts.
• Without fraud, paying the tax and interest before the notice, or within 60 days of it, ends the matter with no penalty. With fraud, the penalty falls to 15%, 25% or 50% of the tax if paid before the notice, within 60 days of it, or within 60 days of the order.

Section 74A at a glance: deadlines and penalties

Penalty, without fraud

10% or ₹10,000. Whichever is higher, and none at all if tax and interest are paid within 60 days of the notice (subject to s.74A(11)).

The deadlines

• 31 December 2025 — Due date of the FY 2024-25 annual return, unless extended: the clock for section 74A starts here.
• Within 60 days of a notice — Pay tax and interest (non-fraud) and the proceedings end with no penalty.
• 12 months after the notice — The order must issue, or be extended by up to 6 months before that date.
• 30 June 2029 — Last date for a section 74A notice for FY 2024-25 (42 months from 31 December 2025).

Where people go wrong

• Applying the old section 73 and 74 time limits to FY 2024-25. Section 74A sets one window, 42 months from the annual return due date, whether or not fraud is alleged.
• Waiting for the order before paying. In a non-fraud case, paying tax and interest within 60 days of the notice ends it with no penalty.
• Paying self-assessed tax late and assuming there is no penalty. Section 74A(11) applies the 10% penalty where self-assessed tax is unpaid 30 days after its due date.
• Ignoring a statement for another period. Under section 74A(4) it counts as a notice on the same grounds.

Common questions

What is section 74A of the CGST Act?

The section, inserted by the Finance (No. 2) Act, 2024 from 1 November 2024, under which GST demands for FY 2024-25 onward are raised: tax not paid, short paid or erroneously refunded, and input tax credit wrongly availed or utilised. It replaces the separate section 73 (non-fraud) and section 74 (fraud) procedures with one section and one time limit.

What is the time limit for a GST notice under section 74A?

42 months from the due date of the annual return for the year concerned, or from the date of an erroneous refund. For FY 2024-25, with the annual return due on 31 December 2025, that is 30 June 2029. The order must follow within 12 months of the notice, extendable by up to 6 months.

What is the penalty under section 74A?

Where there is no fraud, wilful misstatement or suppression, the higher of 10% of the tax or ₹10,000. Where there is, a penalty equal to the tax.

Can the penalty under section 74A be avoided?

In a non-fraud case, yes: pay the tax and interest before the notice, or within 60 days of it, and no penalty is payable, subject to section 74A(11) for self-assessed tax left unpaid for 30 days. In a fraud case the penalty falls to 15% before the notice, 25% within 60 days of it, and 50% within 60 days of the order.

Does section 74A apply to FY 2023-24?

No. Section 74A(12) applies it to tax for FY 2024-25 onward. Earlier years are dealt with under sections 73 and 74.

Act on this

• Replying to a DRC-01 show cause notice
• DRC-07 demand order: appeal and rectification
• Section 50 — interest on tax paid late
• Section 16 — the conditions for ITC

• Replying to a DRC-01 show cause notice
• DRC-07 demand order: appeal and rectification
• Section 50 — interest on tax paid late
• Section 16 — the conditions for ITC

Other provisions

• Section 107, Central Goods and Services Tax Act
• Section 44, Central Goods and Services Tax Act
• Section 47, Central Goods and Services Tax Act
• Section 16, Central Goods and Services Tax Act
• Section 50, Central Goods and Services Tax Act
• Section 53, Code on Social Security

• Section 107, Central Goods and Services Tax Act
• Section 44, Central Goods and Services Tax Act
• Section 47, Central Goods and Services Tax Act
• Section 16, Central Goods and Services Tax Act
• Section 50, Central Goods and Services Tax Act
• Section 53, Code on Social Security

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• Official text: The Central Goods and Services Tax Act, 2017 (India Code)
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About this summary

The section in its own words, with a plain-English explanation of what it requires. Not legal advice: take advice on anything turning on your own facts.