1. Introduction:-
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. The Central Board of Indirect Taxes and Customs (CBIC), through Notification No. 20/2024 – Central Tax dated October 8, 2024, has introduced a significant amendment in the Central Goods and Services Tax (CGST) Act. The notification pertains to the insertion of Section 74A into various sections of the CGST rules, which came into effect from November 1, 2024.
2. Provisions of Section 74A of the CGST Act, 2017 is given below throgh paragraphing presentation :-
| Sections / Provision | Amounts other than Fraud or Wilful Misstatement | Amounts involving Fraud or Wilful Misstatement |
| Section 74A(1) :-
Issuance of Demand Notice |
The proper officer can serve demand notice (for tax and interest u/s 50) to the taxpayer in the following cases only if the demand amount is more than Rs. 1,000 for a financial year:
· Tax – not paid / Short paid / erroneously refunded · ITC wrongly availed or utilised |
|
| Section 74A(2) :-
Time Limit for issuing notices |
The notice should be served within 42 months of:
· Due date of filing annual return for the financial year or · The date of the erroneous refund |
|
| Section 74A(3) :-
Issuance of Statement |
The proper officer may issue a statement containing details of the tax demand for periods other than those covered in the notice under Section 74A(1). | |
| Section 74A(4) :-
Condition for Deemed Notice |
The statement issued u/s 74A(3) will be considered as deemed notice if the grounds of default are the same as covered by the notice u/s 74A(1). | |
| Section 74A(5) :-
Levy of Penalty |
74A(5)(i) – 10% of the tax due or Rs. 10,000, whichever is higher. (Other than fraud) | 74A(5)(ii) – Equivalent to the amount of tax due. |
| Section 74A(6) :-
Determination of Demand |
After considering the representation of noticee, the proper officer determines the amount of tax, interest, and penalty and issues an order. | |
| Section 74A(7) :-
The time limit for issuing the order |
Order under Section 74A(6) should be issued :
· within 12 months from the date of notice. · This period can be extended by a maximum of 6 months with approval from the commissioner or an officer authorised by him not below the rank of joint commissioner. |
|
| Section 74A(8) & (9) :-
Voluntary Payment of Tax |
8(i) Before issuance of Notice:
· No notice or penalty is charged if tax and interest are paid before notice and informed to the officer. 8(ii) Within 60 days from the date of issuance Notice: · No penalty is charged for tax and interest paid within 60 days of notice. |
9(i) Before issuance of Notice:
· No notice is served if the taxpayer pays tax + interest + penalty @ 15% of tax before the notice and the officer is informed: 9(ii) Within 60 days from the date of issuance Notice: · No further proceedings are carried on if tax + interest + 25% penalty of tax is paid within 60 days of notice. 9(iii) Within 60 days of Demand Order: · No further proceedings are carried out if tax + interest + 50% penalty on tax is paid within 60 days of the order. |
| Section 74A(10) :-Shortfall in Payment | If the amount paid u/s 74A(8)(i) is less than the payable amount, notice for the shortfall will be served in the due course. | If the amount paid u/s 74A(9)(i) is less than the payable amount, notice for the shortfall will be served in the due course. |
| Section 74A(11) :- Shortfall in Payment | Notwithstanding anything contained in clause (i) or clause (ii) of sub-section (8), penalty under clause (i) of subsection (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.
-If a person has collected tax and has not paid such tax within 30 days from the due date of payment of such tax. -Self-assessed tax is not paid with in 30 days from the due date of payment of such tax. Even if such tax is paid before issue of notice or within 60 days from issue of notice. Penalty of 10% of tax due or Rupees 10,000/-, whichever is higher shall be payable. (considering these situations as non-fraud cases) |
Not Applicable |
| Section 74A(12) :- Applicability | Section 74A is applicable from Financial Year 2024-25 onwards. | |
3. Threshold Limit :-
No notice will be issued for amounts less than INR 1,000 in any financial year.
4. Differences between section 73, 74 & 74A in relation with issuance of notice and order :-
| Section | 73 | 74 | 74A |
| Time limit for issue of SCN | 33 months | 54 months | 42 months |
| Time Limit for passing the Order | 36 months | 60 months | 54 months, extendable to 60 months |
| Cases | Non Fraudulent | Fraudulent | All Cases |
5. Conclusion :-
it can be concluded that the new Section will cover the proceedings for recovery from FY 2024-25, that the period of limitation has been re-designed and fixed as 4.5 years extendable to 5 years for completion of the show cause notice and adjudication proceedings from the due date of furnishing the annual return, and that the period of voluntary discharge of obligations of the taxpayer in regard to such proceedings has been extended from 30 days to 60 days of the respective dates.
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DISCLAIMER : This publication serves as a general guide for informational purposes only. The references and content provided are for educational purposes and should not be considered as legal advice.
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