Summary: The GST demand framework distinguishes limitation periods based on the relevant financial year and statutory provision. For periods up to FY 2023-24, Section 73 applies to tax not paid, short-paid, erroneously refunded or ITC wrongly availed/utilised for reasons other than fraud, wilful misstatement or suppression, with orders generally required within three years from the annual return due date and SCNs at least three months before the deadline. Section 74 covers fraud, wilful misstatement or suppression, with a five-year order period and SCNs at least six months before the deadline. From FY 2024-25 onwards, Section 74A provides a common framework, requiring SCNs within 42 months from the annual return due date and orders within 12 months of the SCN, with a possible six-month extension subject to recorded reasons. Section 36 generally requires GST books and records to be retained for 72 months from the annual return due date. Where appeals, revisions, proceedings or investigations are pending, relevant records must be retained for one year after final disposal or the normal retention period, whichever is later. The content recommends maintaining year-wise limitation and record-retention trackers.
Introduction: GST compliance is not only about correctly calculating and paying tax. Businesses must also understand how long the GST department can initiate proceedings, issue a Show Cause Notice (SCN), pass an order and how long taxpayers are required to preserve their books and supporting records. The GST demand framework has undergone a significant change with the introduction of Section 74A of the CGST Act. While Sections 73 and 74 continue to govern demands relating to periods up to FY 2023-24, Section 74A applies to demands relating to FY 2024-25 onwards. Understanding these limitation periods is critical because a delay in responding to a GST notice—or destroying records too early—can create unnecessary litigation and compliance risks.
- 1. What is GST Limitation?
- 2. Section 73 – GST Demands Without Fraud
- Limitation under Section 73
- Example of Section 73 Limitation
- 3. Section 74 – GST Demands Involving Fraud or Suppression
- Limitation under Section 74
- 4. Section 74A – The New GST Demand Framework
- 5. Section 74A SCN Limitation – 42 Months
- Example: FY 2024-25
- 6. Section 74A Order Limitation – 12 Months
- 7. Section 73 vs Section 74 vs Section 74A – Quick Comparison
- 8. Record Retention Under GST – How Long Should Businesses Keep Records?
- GST Records That Should Be Preserved
- 9. What Happens if There Is an Appeal or Investigation?
- Practical Rule for GST Record Retention
- 10. Why GST Limitation Matters for Businesses
- Example: ITC Dispute and Documentation Risk
- 11. Limitation Does Not Mean "No Risk After the Deadline"
- 12. How Businesses Should Maintain a GST Limitation Tracker
- A. Financial Year
- B. Annual Return Due Date
- C. Applicable Section
- D. SCN Limitation Date
- E. Order Limitation Date
- F. Record Retention Date
- G. Litigation Status
- 13. Suggested GST Record-Retention Policy
- 1. Financial Records
- 2. Transaction Records
- 3. ITC Records
- 4. Return Records
- 5. E-way Bill and Logistics Records
- 6. Tax Payment Records
- 7. Agreements and Correspondence
- 8. Litigation Records
- 14. Key Takeaways on GST Limitation and Record Retention
- For FY 2023-24 and Earlier
- For FY 2024-25 Onwards
- Record Retention – Section 36
- Conclusion: GST Limitation and Record Retention
1. What is GST Limitation?
In simple terms, limitation refers to the statutory time period within which the GST authorities must initiate and complete demand proceedings.
The limitation provisions are particularly relevant when the department alleges:
- Non-payment or short payment of GST
- Erroneous GST refunds
- Wrong availment or utilisation of Input Tax Credit (ITC)
- Fraud
- Wilful misstatement
- Suppression of facts
The applicable limitation period depends on the financial year involved and the relevant section of the CGST Act.
2. Section 73 – GST Demands Without Fraud
Section 73 applies to cases involving tax not paid, short-paid, erroneously refunded or ITC wrongly availed/utilised for reasons other than fraud, wilful misstatement or suppression of facts to evade tax.
Following the Finance (No. 2) Act, 2024, Section 73 is restricted to tax periods up to FY 2023-24.
Limitation under Section 73
The proper officer is required to issue the SCN at least three months before the statutory deadline for passing the order.
The order is required to be issued within three years from the due date for furnishing the annual return for the relevant financial year, or within three years from the date of an erroneous refund, as applicable.
Therefore, in the normal annual-return situation:
Annual Return Due Date → 3 Years for Order → SCN at least 3 Months before Order Deadline
For practical purposes, the SCN limitation works out to approximately 33 months from the due date of the annual return.
Example of Section 73 Limitation
Suppose the annual return for a particular financial year was due on 31 December 2022.
The order under Section 73 would generally need to be issued by 31 December 2025, while the SCN would need to be issued at least three months before that deadline.
This makes it important for taxpayers to track limitation dates even when no notice has yet been received.
3. Section 74 – GST Demands Involving Fraud or Suppression
Section 74 deals with cases where tax has not been paid, has been short-paid, an erroneous refund has been granted, or ITC has been wrongly availed or utilised by reason of fraud, wilful misstatement or suppression of facts with an intention to evade tax.
Like Section 73, Section 74 is now restricted to periods up to FY 2023-24.
Limitation under Section 74
The department has a longer limitation period in these cases.
The order must generally be issued within five years from the due date for furnishing the annual return for the relevant financial year, or within five years from the date of erroneous refund, as applicable.
The SCN must be issued at least six months before the deadline for issuing the order.
Therefore, the practical timeline is:
Annual Return Due Date → 5 Years for Order → SCN at least 6 Months before Order Deadline
In annual-return cases, the effective outer period for issuing the SCN is therefore approximately 54 months from the annual return due date.
The extended period exists because allegations involving fraud or suppression are treated more seriously under the GST law.
4. Section 74A – The New GST Demand Framework
One of the most important GST changes introduced by the Finance (No. 2) Act, 2024 is Section 74A.
Section 74A applies to tax demands relating to FY 2024-25 onwards. It provides a common framework for determining GST that has not been paid or has been short-paid, erroneously refunded, or where ITC has been wrongly availed or utilised—irrespective of whether the case involves fraud or not.
This means that the earlier distinction between:
Section 73 = Non-fraud
and
Section 74 = Fraud/suppression
has been replaced for FY 2024-25 onwards by a unified demand provision under Section 74A.
5. Section 74A SCN Limitation – 42 Months
Under Section 74A, the proper officer is required to issue the notice within 42 months from the due date for furnishing the annual return for the relevant financial year.
The same 42-month period applies in cases where the limitation is calculated from the date of an erroneous refund.
Therefore:
Annual Return Due Date + 42 Months = Outer Time Limit for SCN
This is approximately 3.5 years from the relevant annual return due date.
Example: FY 2024-25
Assuming the annual return for FY 2024-25 is due on 31 December 2025, the 42-month limitation for issuing an SCN would generally extend to 30 June 2029.
The exact computation should always be checked against the statutory provisions and any applicable notifications, extensions or judicial directions.
6. Section 74A Order Limitation – 12 Months
Section 74A introduces another important change.
Once the SCN is issued, the proper officer must generally issue the order within 12 months from the date of issuance of the notice.
However, where the officer is unable to issue the order within this period, the Commissioner—or an authorised officer senior to the proper officer and not below the rank of Joint Commissioner—may extend the period by a maximum of six months, provided the reasons for the delay are recorded in writing before expiry of the original period.
Therefore:
SCN Date → 12 Months for Order
with a possible:
Additional Extension → Maximum 6 Months
This creates a more structured adjudication timeline than the earlier Sections 73 and 74.
7. Section 73 vs Section 74 vs Section 74A – Quick Comparison
| Particulars | Section 73 | Section 74 | Section 74A |
|---|---|---|---|
| Applicable period | Up to FY 2023-24 | Up to FY 2023-24 | FY 2024-25 onwards |
| Nature of case | Other than fraud/suppression | Fraud/wilful misstatement/suppression | Common framework for both |
| SCN limitation | At least 3 months before order deadline | At least 6 months before order deadline | Within 42 months from annual return due date |
| Order limitation | 3 years from annual return due date | 5 years from annual return due date | 12 months from SCN |
| Extension for order | Governed by Section 75 provisions | Governed by Section 75 provisions | Up to 6 months under Section 74A |
| Key feature | Non-fraud demand | Fraud-related demand | Unified demand mechanism |
The statutory transition is important: Sections 73 and 74 remain relevant for FY 2023-24 and earlier periods, whereas Section 74A governs FY 2024-25 onwards.
8. Record Retention Under GST – How Long Should Businesses Keep Records?
Limitation periods should always be considered together with the GST record-retention requirement.
Under Section 36 of the CGST Act, registered persons required to maintain books and records must retain them until the expiry of 72 months from the due date of furnishing the annual return for the relevant year.
In simple terms:
Annual Return Due Date + 72 Months = Normal Record Retention Period
That is effectively six years from the annual return due date.
GST Records That Should Be Preserved
This can cover records such as:
- Tax invoices
- Bills of supply
- Debit and credit notes
- Purchase records
- Sales records
- ITC documentation
- E-way bills
- GST returns
- Electronic ledgers and reconciliations
- Payment records
- Bank statements
- Agreements and contracts
- Import and export documentation
- GST audit/supporting documents
- Correspondence with the GST department
9. What Happens if There Is an Appeal or Investigation?
The six-year retention rule should not be treated as an automatic destruction date.
Section 36 contains an important proviso.
If a taxpayer is a party to an appeal, revision or other proceedings before an Appellate Authority, Revisional Authority, Appellate Tribunal or court, the relevant books and records must be retained for one year after final disposal of the appeal, revision, proceedings or investigation, or for the normal statutory period, whichever is later.
The same principle applies to records relating to an investigation for an offence under Chapter XIX.
Practical Rule for GST Record Retention
If litigation is ongoing:
Do NOT destroy records merely because the normal six-year retention period has expired.
Instead, maintain the records until the later of:
- The normal statutory retention period; or
- One year after final disposal of the relevant proceedings/investigation.
10. Why GST Limitation Matters for Businesses
GST limitation is not merely a technical legal concept. It directly affects a company’s tax risk management.
A business may receive a GST notice years after the original transaction. If the relevant invoices, contracts, reconciliations and supporting documents are unavailable, responding to the notice can become significantly more difficult.
Example: ITC Dispute and Documentation Risk
For example, consider an ITC dispute.
The department alleges that ₹20 lakh of ITC was wrongly availed. The taxpayer may need to demonstrate:
- The underlying purchase
- Valid tax invoice
- Receipt of goods/services
- Payment to supplier
- GST charged by supplier
- Reconciliation with GSTR-2B/GSTR-2A, wherever relevant
- Accounting entries
- E-way bill or delivery evidence, where applicable
- Supplier correspondence
- Relevant contracts
Without proper documentation, even a commercially valid transaction can become difficult to defend.
11. Limitation Does Not Mean “No Risk After the Deadline”
A common misconception is:
“Once the limitation period expires, the department cannot raise any GST-related issue.”
This is too simplistic.
Limitation has to be examined issue-wise and provision-wise. Different GST provisions can have different statutory timelines. Proceedings already initiated within limitation can continue beyond the original period subject to the applicable law.
Similarly, appeals, investigations, court proceedings and other statutory processes can affect how long records should be preserved.
Therefore, businesses should not use a single “six-year destruction rule” for all GST documents without considering pending proceedings.
12. How Businesses Should Maintain a GST Limitation Tracker
A good GST compliance system should maintain a year-wise limitation calendar.
For every financial year, record:
A. Financial Year
Example: FY 2024-25
B. Annual Return Due Date
Example: 31 December 2025
C. Applicable Section
- Section 73
- Section 74
- Section 74A
D. SCN Limitation Date
Track the last date by which the department can issue the SCN.
E. Order Limitation Date
Track the statutory deadline for passing the adjudication order.
F. Record Retention Date
Calculate the 72-month retention period.
G. Litigation Status
Record whether:
- No proceedings are pending
- SCN received
- Reply filed
- Personal hearing pending
- Order received
- Appeal filed
- Matter under investigation
This creates a strong audit trail for the organisation.
13. Suggested GST Record-Retention Policy
Businesses should ideally adopt a written GST document-retention policy covering:
1. Financial Records
Maintain ledgers, trial balances and accounting records.
2. Transaction Records
Preserve purchase and sales invoices, debit notes, credit notes and supporting documents.
3. ITC Records
Maintain ITC reconciliations and supporting evidence.
4. Return Records
Preserve GSTR-1, GSTR-3B, annual returns and relevant reconciliations.
5. E-way Bill and Logistics Records
Preserve documents supporting movement of goods.
6. Tax Payment Records
Maintain challans, electronic cash/credit ledger information and bank payment evidence.
7. Agreements and Correspondence
Important contracts and commercial correspondence should be retained where they support the GST position.
8. Litigation Records
Maintain SCNs, replies, submissions, hearing records, orders and appeal documents separately.
14. Key Takeaways on GST Limitation and Record Retention
The GST demand framework has moved from the traditional Section 73 vs Section 74 model to a more unified Section 74A framework for FY 2024-25 onwards.
The key timelines can be remembered as:
For FY 2023-24 and Earlier
Section 73 – Non-Fraud
- Order: generally within 3 years from annual return due date
- SCN: at least 3 months before the order deadline
Section 74 – Fraud/Suppression
- Order: generally within 5 years from annual return due date
- SCN: at least 6 months before the order deadline
For FY 2024-25 Onwards
Section 74A
- SCN: within 42 months from annual return due date
- Order: within 12 months from SCN
- Possible extension: up to 6 additional months
Record Retention – Section 36
- Normal retention: 72 months from the due date of the annual return
- Pending proceedings/investigation: retain relevant records until one year after final disposal or the normal retention period, whichever is later.
Conclusion: GST Limitation and Record Retention
GST limitation is an area where timing, documentation and legal strategy intersect.
For taxpayers, the objective should not simply be to determine whether a GST notice has been issued within limitation. Businesses should proactively monitor the limitation period applicable to every financial year and maintain sufficient documentation to defend their tax positions.
The introduction of Section 74A has significantly changed the GST demand framework from FY 2024-25 onwards. The new system provides a common limitation framework for fraud and non-fraud cases, with a 42-month window for issuing the SCN and a 12-month period for passing the order, subject to a possible six-month extension.
At the same time, taxpayers should remember that the statutory record-retention requirement under Section 36 is generally 72 months from the due date of the annual return, and relevant documents may need to be preserved for longer where litigation, appeals or investigations are pending.
For businesses, the safest approach is therefore simple:
Track the limitation. Preserve the evidence. Respond within time. Never destroy records while proceedings remain unresolved.
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Disclaimer: This article is for general educational and informational purposes and should not be treated as legal or tax advice. GST limitation can depend on the relevant financial year, nature of demand, statutory amendments, notifications, extensions and judicial decisions. Specific cases should be reviewed based on the facts and applicable law.
