Key takeaways
- Choose the provision from the tax period, not merely the date on which the notice was issued.
- Section 73 is the non-fraud route and section 74 the fraud route only through FY 2023-24.
- Section 74A applies from FY 2024-25 and uses a 42-month notice limit plus a separate order clock.
- Fraud remains material under section 74A because it changes the penalty and settlement amounts.
- Payment closes proceedings only when every statutory condition, including interest and the applicable penalty, is satisfied.
Which provision applies to which GST period?
The first question is temporal. The current Act expressly limits sections 73 and 74 to determination pertaining to periods up to FY 2023-24. Section 74A governs FY 2024-25 onward. The issue is therefore not the notice date alone; it is the financial year to which the alleged short payment, erroneous refund or wrongly availed or utilised ITC pertains.
| Tax period | Provision | Character of case |
|---|---|---|
| Up to FY 2023-24 | Section 73 | Reason other than fraud, wilful misstatement or suppression to evade tax |
| Up to FY 2023-24 | Section 74 | Fraud, wilful misstatement or suppression to evade tax |
| FY 2024-25 onward | Section 74A | Common determination section; penalty varies with conduct |
Where one notice spans the boundary, split the computation financial-year wise. A single label cannot erase the statutory allocation.
How do sections 73 and 74 differ?
For the old-period regime, section 73 is the ordinary non-fraud route. Its order limitation is three years from the annual-return due date for the relevant year, or from the date of erroneous refund. The notice must be issued at least three months before that order deadline.
Section 74 is reserved for the specified fraud-type conduct. Its order limitation is five years from the corresponding starting point, and the notice must precede the order deadline by at least six months. The longer period does not arise merely because the word “suppression” appears in a notice. The notice must state the material facts said to establish the statutory ingredient and the taxpayer can contest both the allegation and its limitation consequence.
| Point | Section 73 | Section 74 |
|---|---|---|
| Period | Through FY 2023-24 | Through FY 2023-24 |
| Allegation | Non-fraud | Fraud-type conduct with intent to evade |
| Order clock | 3 years | 5 years |
| Minimum notice lead | 3 months | 6 months |
| Standard order penalty | 10% of tax or ₹10,000, whichever is higher | Tax-equivalent penalty |
What changed under section 74A?
Section 74A separates the deadline for issuing the notice from the time allowed to decide it. The notice ordinarily must be issued within 42 months from the due date for the annual return for the relevant financial year, or from the date of erroneous refund. The order must then be issued within 12 months from the notice date. A senior officer may extend that order period by up to six months, but the statutory conditions and recorded reasons matter.
Section 74A also says that a notice is not to issue where the tax involved for a financial year is below ₹1,000. This is not permission to fragment one annual issue into small entries; build an auditable financial-year computation.
What are the section 74A payment and penalty outcomes?
For a non-fraud case, payment of tax and interest before notice, or within 60 days of notice, can conclude the proceedings in the manner specified. If the matter reaches an order, the penalty is 10% of tax or ₹10,000, whichever is higher.
For a fraud-type case, the reduced penalty ladder is materially different:
| Payment point | Fraud penalty under section 74A |
|---|---|
| Before notice | 15% of tax |
| Within 60 days of notice | 25% of tax |
| Within 60 days of order | 50% of tax |
| Otherwise | 100% of tax |
Do not use this table as a payment instruction without reconciling tax, interest, admitted amounts, form mapping and pending proceedings. A partial payment can be acknowledged yet fail to close the balance.
How should a mixed allegation be analysed?
Create an issue matrix. For each line item, record the period, tax head, facts, disclosure trail, department’s allegation, relied-upon documents, provision and amount. Fraud cannot be treated as a global adjective covering unrelated issues.
Example: a disclosed classification dispute and an allegedly concealed parallel invoice set may sit in the same notice. The first may not support a fraud finding merely because the second allegation is serious. Ask whether each allegation contains a positive act, the required intent and evidence linking the conduct to the tax shortfall.
What procedural safeguards remain common?
Section 75 supplies important general rules: relevant facts and the basis of decision must be stated; an opportunity of hearing is required in specified circumstances; the order cannot confirm an amount beyond the notice or travel to new grounds; and interest remains payable on the tax determined even if omitted from the order. Exclusion periods, court stays and redetermination directions can change the clock.
Rule 142 provides the electronic summary and reply chain. The full notice and order remain central. A DRC summary is not a substitute for reasons, allegations and relied-upon material.
What are the common comparison mistakes?
- Selecting the section from the notice date instead of the tax period.
- Treating the longer fraud period as automatic once suppression is alleged.
- Computing only the notice deadline and ignoring the separate order deadline.
- Ignoring notified extensions, exclusions, stays or the pending challenge to an extension.
- Assuming DRC-01 contains the entire case.
- Paying an amount without mapping it to the demand and statutory closure conditions.
What should you do next?
Prepare a financial-year schedule, identify the applicable section, calculate the base deadline from primary records, and then layer in only legally supportable extensions or exclusions. Reconcile the full notice to DRC-01, request missing relied-upon documents, and answer fraud ingredients separately from the quantum. Use the related limitation and DRC guides before deciding whether to pay, contest or appeal.
Primary sources
Frequently asked questions
Which section applies to FY 2023-24?
Sections 73 and 74 apply to determination pertaining up to FY 2023-24. Use section 73 for a non-fraud case and section 74 where fraud, wilful misstatement or suppression to evade tax is alleged and legally supported.
From which year does section 74A apply?
Section 74A applies to FY 2024-25 onward. The relevant Finance (No. 2) Act provisions were brought into force on 1 November 2024.
Did section 74A remove the distinction between fraud and non-fraud?
It created one determination provision, but did not make the distinction irrelevant. Fraud-type findings drive the higher penalty and different reduced-payment windows.
What is the small-demand threshold in section 74A?
A notice is not to be issued where the tax involved in a financial year is below ₹1,000. Aggregate the issue in the manner required by the provision and verify the computation.
Can an officer use section 74 for FY 2024-25?
The current period boundary assigns FY 2024-25 onward to section 74A. A notice citing the wrong track should be examined as a jurisdictional and procedural issue, while the merits are answered without prejudice.
Does voluntary payment always end the matter?
No. Closure depends on the correct provision, timing, full tax and interest, the required penalty where applicable, and whether the payment covers the entire matter. Other proceedings may survive where the statute says so.
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