Section 74A of CGST Act: A middle path between Section 73 and Section 74

With the passage of 30.09.2025, the limitation period for issuing fresh notices under Section 73 (Non-Fraud Cases) for FY 2021-22 has now expired. Hence, no new notices can be issued for that period, and such matters shall be treated as time barred. However, notices already issued will continue to remain under adjudication. The limitation period for issuing SCN under Section 74 (fraud cases) will continue to remain 2 more years.

Going forward, as we prepare to file the GST Annual Return for FY 2024-25, it is important to note that adjudication proceedings for FY 2024-25 and onwards will be governed by the newly introduced Section 74A, instead of the earlier provisions under Section 73 (Non-Fraud) and Section 74 (Fraud).

A comparative summary of Section 74A vis-à-vis Sections 73 and 74 along with the taxpayer impact is provided below. Please note, cases relating to FY 2023-24 and prior years will continue to be governed by Sections 73 and 74.

Section 74A of CGST Act (applicable from FY 2024-25) – Impact on Taxpayers vis-à-vis Sections 73 & 74

Background

The Finance Act, 2024 introduced Section 74A, effective for FY 2024-25 onwards, as a single consolidated provision to govern tax demands (both fraud and non-fraud). Sections 73 and 74 will continue to apply for periods up to FY 2023-24.

Comparative Overview

Key Taxpayer Implications

Favorable changes (Pros):

• Fraud cases: look-back period reduced (5 years → 42 months).
• Extended cure period: 60 days instead of 30 days to settle demand with reduced penalty.
• De-minimis relief: No notices for demands below ₹1,000.

Adverse changes (Cons):

• Non-fraud cases: exposure period increased from 3 years to 42 months.
• Penalty quantum remains unchanged.

Transitional rule:

• Sections 73/74 will continue to govern FYs up to 2023-24.
• Penalties/orders under 73/74 will not get automatically reduced by 74A.
• Relief for older years is available only via special rectification/amnesty procedures (e.g., Section 128A, CBIC Circulars).

Action Points for Taxpayers

• Check the FY of liability:
  • FY 2023-24 or earlier → governed by Sections 73/74.
  • FY 2024-25 onward → governed by Section 74A.
• For new SCNs (FY 2024-25 onwards):
  Consider pre-notice payment or payment within 60 days to avoid/reduce penalty.
• For pending legacy cases:
  Review eligibility under CBIC’s rectification/amnesty notifications; 74A benefit does not apply automatically.
• Maintain records:
  Preserve documentation for at least 4 years (fraud cases under new regime).

Bottom-line

Assessing Officers often prefer to invoke Section 74 without proving or providing any material grounds of wilful misstatement or suppression of facts. However, such allegations must be specifically stated in the SCN or recorded in the proceedings before invoking Section 74. In the absence of these essential ingredients, the notice becomes invalid and beyond jurisdiction. Several court judgments have upheld this principle, holding that Section 74 cannot be invoked arbitrarily against the Taxpayer.

Section 74A consolidates adjudication provisions from FY 2024-25 onwards. It slightly extends non-fraud exposure, shortens fraud look-back, and provides taxpayers with longer windows to settle demands with reduced or no penalty. However, old demands (up to FY 2023-24) remain governed by Sections 73/74 unless transitional schemes are specifically invoked.