The newly inserted Section 74A in the CGST Act, 2017, introduces significant changes aimed at streamlining the process of determining and addressing tax demands. Effective from FY 2024-25, this section will replace the existing provisions under Sections 73 and 74, which currently manage non-fraud and fraud cases respectively. Section 74A seeks to simplify the issuance of notices, set clear thresholds, and define penalties, thereby enhancing the efficiency of tax administration and compliance.
Overview:
1. A new Section 74A is proposed to streamline the determination of these demands, applying the old provisions for demands up to FY 2023-24 and the new provisions from FY 2024-25 onwards.
2. Currently, tax notices for unpaid or short-paid taxes, wrongly availed ITC, and erroneous refunds are categorized under non-fraud [Section 73] and fraud cases [Section 74], each governed by different provisions.
Key Provisions:
- Threshold Limit: No notice will be issued for amounts less than INR 1,000 in any financial year.
- Time Limit for Issuance of Notice: Notices must be issued within 42 months from the due date of furnishing the annual return for the relevant financial year or from the date of the erroneous refund for refund demands.
- Issuance of Statements: If a notice has been issued for one period, the officer can issue a statement for tax or refund demands for another period, provided the grounds are identical. Such statements will be considered as serving notice.
- Penalties:
| Type of Case | Penalty Amount |
| Non-fraud cases | 10% of tax due or INR 10,000, whichever is higher |
| Fraud cases | 100% of tax evaded |
- Time Limit for Issuance of Order: Orders must be issued within 12 months from the date of the notice issuance. This period can be extended by up to 6 months by the Commissioner or an authorized officer, provided the reason for delay is documented.
- Deemed Conclusion: If an order is not issued within 18 months (including any extensions), the proceedings will be considered concluded.
- Relief in Penalty: If the taxpayer pays the tax along with applicable interest.
| Time of Payment | Non-fraud cases | Fraud cases |
| Before service of notice | No penalty | 15% penalty |
| Within 60 days from issue of notice | No penalty | 25% penalty |
| Within 60 days from communication of order | 10% of tax due or INR 10,000, whichever is higher | 50% penalty |
- Shortfall in Payment: If a taxpayer pays tax with interest before receiving the notice but the payment is insufficient, the officer can issue a notice for the shortfall.
- Appeals and Adjustments: If an Appellate Authority, Tribunal, or Court determines that fraud or deliberate misstatement charges are not sustainable, penalties will be adjusted to those applicable for non-fraud cases.
* Legislative Update: The CGST Act will be updated to replace references to Sections 73 and 74 with Section 74A, reflecting the new provisions for tax demands.
Note: The views expressed are personal and contents of this document are solely for informational purpose. The information in article has been drawn primarily from the www.cbec.gov.in and other sources. While every effort has been made to keep the information stated in this article error free.
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