The section 74A of the CGST Act has been introduced vide Finance (No. 2) Act, 2024, and notified vide Notification No. 17/2024 – Central Tax dated 27.09.2024. This section superseded sections 73 and 74 and is applicable from FY 2024-25.
The purpose of this section is initiate proceedings “Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized…”
The proceedings under this section may be initiated in both cases, i.e. the case wherein fraud etc. is not involved or the case wherein the fraud or any wilful-misstatement or suppression of facts to evade tax are involved.
Before this section, i.e. upto the FY 2023-24 the proceedings for reason other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax are initiated under section 73 and the proceedings against reason of fraud or any wilful-misstatement or suppression of facts to evade tax are initiated under section 74.
Gists of this Section 74A
| S.No. | Sub-Section of 74A | Head of the Sub-section | Particulars |
| 1 | 1 | Applicability | Any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized |
| 2 | Proviso to sub- section 1 | Not Applicable | No Notice shall be issued if the Tax Liability is less than one thousand in a financial year. |
| 3 | 2 | Time Limit for issuing the Notice for the Financial Year | 42 months from the due date for furnishing of annual return for the financial year.
For example, Due Date for furnishing the Annual Return for the FY 2024-25 was 31.12.2025 then Last date to issue the Notice under section 74A is 30.06.2029. |
| 3 | 7 | Time Limit for issuing the Order | Within 12 months from the issuance of the notice i.e. 54 months. The period may be extended maximum by six months. |
| 4 | 5 | Penalty | Non-Fraud Case –
10% of the tax due or ₹10000, whichever is higher Fraud Case – Equivalent to the tax dues |
| 5 | 8 & 9 | Penalty relief – Voluntary payment if full payment of Tax along with interest is made before show-cause notice | Non-Fraud Case –
Zero penalty Fraud Case – Penalty – 15% of the Tax – |
| 6 | 8 & 9 | Penalty relief – Voluntary payment if full payment of Tax along with interest is paid within 60 days after issuing the show-cause notice | Non-Fraud Case –
Zero penalty Fraud Case – Penalty – 25% of the Tax |
| 7 | 9 | Penalty relief –
If full payment of tax along with interest and fifty percent penalty are paid within sixty days of the date of communication of the order.
|
Fraud Case –
Balance 50% penalty is immune. |
| 8 | Explanation 1 | All Proceedings under this section | (i) the expression “all proceedings in respect of the said notice” shall not include proceedings under section 132 |
| 9 | Explanation 1 | About Penalty | (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under this section, the proceedings against all the persons liable to pay penalty under sections 122 and 125 are deemed to be concluded. |
| 10 | Explanation 2 | About Suppression | The expression “suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer |
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