Last updated: 13 October 2026. For tax relating to FY 2024-25 onwards, a GST demand for unpaid tax, short-paid tax, an erroneous refund or wrongly availed or utilised input tax credit (ITC) is raised under Section 74A of the CGST Act, whether or not fraud is alleged. The officer has 42 months from the annual return due date to issue the notice and 12 months from the notice to pass the order, extendable by up to six months. An allegation of fraud no longer buys the department more time. It only changes the penalty.
Applicability Note: This guide is based on GST provisions applicable as of 13 October 2026, read from CBIC's active repository that day. Always verify the current position on gst.gov.in or with a GST professional before taking action.
Who Should Care?
This guide applies to:
- Businesses that have received, or expect, a show cause notice for FY 2024-25 or FY 2025-26
- Taxpayers under audit or scrutiny who want to know how long a period stays open
- Anyone weighing whether to pay a disputed amount now or fight it
- CAs and tax teams who still handle Section 73 and 74 cases for older years
1. Which Section Applies to Your Notice?
The financial year the tax relates to decides the section, not the date the notice arrives. Section 74A was inserted by section 138 of the Finance (No. 2) Act, 2024 and came into force on 1 November 2024 (Notification No. 17/2024-Central Tax dated 27 September 2024). At the same time, Sections 73 and 74 were each given a sub-section (12) limiting them to tax "pertaining to the period up to Financial Year 2023-24".
| Tax relates to | Non-fraud demand | Fraud, wilful misstatement or suppression |
|---|---|---|
| FY 2017-18 to FY 2023-24 | Section 73 | Section 74 |
| FY 2024-25 onwards | Section 74A | Section 74A |
So for the next several years both systems run side by side. A notice issued in 2027 for FY 2022-23 is still a Section 73 or 74 notice. A notice issued in 2027 for FY 2024-25 is a Section 74A notice.
2. The 42-Month Clock
Under the old sections, the deadline that mattered was the one for the order. The notice deadline was worked backwards from it, and fraud cases got two extra years. Section 74A sets the notice deadline directly and applies it to every case.
| Step | Section 73 (to FY 2023-24) | Section 74 (to FY 2023-24) | Section 74A (FY 2024-25 onwards) |
|---|---|---|---|
| Last date for notice | At least 3 months before the order deadline (73(2)) | At least 6 months before the order deadline (74(2)) | 42 months from the annual return due date, or from the erroneous refund (74A(2)) |
| Last date for order | 3 years from the annual return due date (73(10)) | 5 years from the annual return due date (74(10)) | 12 months from the date the notice is issued (74A(7)) |
| Extension | None | None | Up to 6 more months, by the Commissioner or an authorised officer not below Joint Commissioner, with reasons in writing, before the 12 months expire (proviso to 74A(7)) |
A worked example
Take a business whose FY 2024-25 annual return was due on 31 December 2025 (we found no extension for that year, but check your own due date). The last day for a Section 74A notice is 30 June 2029, whether or not fraud is alleged. If the notice is issued on that day, the order is due by 30 June 2030, or 31 December 2030 if the time is extended.
Compare FY 2023-24, assuming an annual return due date of 31 December 2024. A Section 73 order had to come by 31 December 2027, so the notice had to issue by 30 September 2027. A Section 74 order could come as late as 31 December 2029, with the notice by 30 June 2029.
The result cuts both ways. For a non-fraud demand, the window before a notice has grown from about 33 months to 42. For a fraud demand, it has shrunk from about 54 months to 42. Section 75(10) still says what happens if the officer misses the 74A(7) deadline: the proceedings are deemed concluded.
3. The ₹1,000 Floor (Section 74A Only)
The proviso to Section 74A(1) says no notice shall be issued if the tax involved "in a financial year is less than one thousand rupees". That figure is in the CGST Act. The statute does not say it combines CGST and SGST, so do not read it as a combined total.
Section 73 has no such minimum. A small demand for FY 2023-24 or earlier can still reach you.
4. Penalties: Non-Fraud and Fraud Cases
This is where the old split survives. Section 74A(5) sets two penalty levels, and sub-sections (8) and (9) set out what you pay if you settle early. The ₹10,000 below is the CGST Act figure, so it applies per Act: the SGST Act carries a matching provision.
Non-fraud cases
| When you pay tax + interest | Section 74A | Old Section 73 |
|---|---|---|
| Before the notice, informing the officer in writing | No notice for the amount paid, no penalty (74A(8)(i)) | No penalty (73(5), (6)) |
| After the notice | No penalty if paid within 60 days of the notice; proceedings concluded (74A(8)(ii)) | No penalty if paid within 30 days (73(8)) |
| At adjudication | 10% of tax due or ₹10,000, whichever is higher (74A(5)(i)) | 10% of tax or ₹10,000, whichever is higher (73(9)) |
"Whichever is higher" makes ₹10,000 the minimum, not a cap. On a ₹5 lakh demand the penalty is ₹50,000.
Two exceptions apply to "no penalty". Under Section 74A(10), if the officer thinks your pre-notice payment fell short, a notice can still issue for the shortfall. Under Section 74A(11), the 10% or ₹10,000 penalty is payable anyway where self-assessed tax, or an amount collected as tax, was not paid within 30 days of its due date. Paying early does not remove it. Unpaid self-assessed tax shown in your return does not need a notice at all. Section 75(12) lets the department recover it directly under Section 79.
Fraud, wilful misstatement or suppression
| When you pay tax + interest + penalty | Section 74A | Old Section 74 |
|---|---|---|
| Before the notice | 15% of tax (74A(9)(i)) | 15% (74(5)) |
| Within the window after the notice | 25%, within 60 days (74A(9)(ii)) | 25%, within 30 days (74(8)) |
| Within the window after the order | 50%, within 60 days of communication (74A(9)(iii)) | 50%, within 30 days (74(11)) |
| Otherwise | Equal to the tax due (74A(5)(ii)) | Equal to the tax (74(1)) |
Explanation 2 to Section 74A defines "suppression" as not declaring facts you were required to declare in a return, statement or other document, or not furnishing information the officer asked for in writing. Explanation 1 says that concluding a notice by payment does not end prosecution proceedings under Section 132.
If the fraud charge fails
Section 75(2A) covers this. If an appellate authority, the Tribunal or a court finds that fraud, wilful misstatement or suppression was not established, the penalty drops to the non-fraud level under Section 74A(5)(i). The demand itself is not thrown out on that ground alone.
On fraud allegations in older notices: For Section 74 notices (FY 2023-24 and earlier), the Supreme Court held in Tata Steel Ltd. v. Union of India (2026 INSC 920, judgment dated 25 August 2026) that the longer time limit cannot be unlocked by merely reciting fraud or suppression. The facts behind the allegation must appear in the notice itself. Under Section 74A the fraud label no longer changes the time limit, so that reasoning has nothing to attach to there. Whether courts will ask for the same foundational facts before applying the 100% penalty is an open question.
5. Interest Comes On Top
Every settlement option above includes interest under Section 50. On unpaid tax, that is 18% a year under Section 50(1) (Notification No. 13/2017-Central Tax dated 28 June 2017). On ITC that was wrongly availed and utilised, Section 50(3) applies, also at 18%. That rate is fixed by the same notification, as amended with retrospective effect from 1 July 2017 by section 116 of the Finance Act, 2022 read with its Sixth Schedule.
6. The Forms You Will See
Rule 142 of the CGST Rules was amended from 1 November 2024 (Notification No. 20/2024-Central Tax dated 8 October 2024) to bring Section 74A into the DRC forms.
| Form | What it is | Rule |
|---|---|---|
| DRC-01A | Pre-notice intimation of tax, interest and penalty. The officer "may" send it, so it is optional | 142(1A) |
| DRC-01 | Summary of the show cause notice | 142(1)(a) |
| DRC-03 | Your intimation of a voluntary payment | 142(2), (3) |
| DRC-05 | Intimation concluding the proceedings after you pay within the window | 142(3) |
| DRC-06 | Your reply to the notice | 142(4) |
| DRC-07 | Summary of the order, treated as the notice for recovery | 142(5), (6) |
Section 74A(3) lets the officer serve a statement for other periods (summarised in DRC-02, Rule 142(1)(b)), and under Section 74A(4) it counts as a notice only if the grounds are the same as in the earlier notice. High Courts have differed on whether one notice can bundle several financial years under Sections 73 and 74. Do not assume Section 74A settles that question.
7. Your Right to a Hearing
Section 75(4) requires a personal hearing if you ask for one in writing, or if the officer is considering an adverse decision. In Hind Maha Mineral LLP v. State of Maharashtra (Bombay High Court, Nagpur Bench, Writ Petition No. 2973 of 2026), a Section 74A(5) order was set aside because no hearing was given. A hearing held earlier on a different issue did not count. Ask for a hearing in your DRC-06 reply anyway.
8. What It Means for Your Buyers' ITC
Section 17(5)(i) blocks ITC on tax paid under Section 74 "in respect of any period up to Financial Year 2023-24". Tax paid under Section 74A is not named, even in a fraud case, so this particular block does not reach it. Whether your customer can claim credit for that tax still depends on the other conditions in Sections 16 and 17.
9. What the 57th GST Council Recommended (Not Yet Law)
On 8 October 2026 the GST Council recommended amending Sections 73, 74 and 74A (PIB Release ID 2320934). The recommendations are to:
- Issue no show cause notice where the tax involved is under ₹10,000 (CGST + SGST + IGST + Cess), and decide pending notices and appeals below that amount as if the threshold had already been in force
- Cut the penalty to 5% in non-fraud cases where tax and interest are paid within 30 days (Section 73) or 60 days (Section 74A) of the adjudication order
- Remove the ₹10,000 minimum penalty in non-fraud cases
- Deem the penalty amount as "charge" where the full tax is voluntarily paid with interest and penalty in time
The Council also asked for a circular with guidelines for officers, including that fraud, wilful misstatement or suppression should be invoked "only based on merits in each case". The release says these take effect only through circulars, notifications or law amendments, and the notice and penalty changes need Parliament to amend the Act. Until then, the ₹1,000 floor and the ₹10,000 minimum penalty stand. Our 57th Council guide covers the full list.
10. What to Do When a Section 74A Notice Arrives
- Check the financial year. Before FY 2024-25 means Section 73 or 74, not 74A.
- Check the dates: was the notice issued within 42 months of that year's annual return due date?
- Diarise day 60 from the notice. If you accept the demand, paying tax and interest by then ends a non-fraud case with no penalty. In a fraud case, it takes tax, interest and a 25% penalty.
- If fraud or suppression is alleged, check whether the notice states the facts behind it. The fraud label is what moves the penalty from 10% to 100% of the tax.
- Reply in DRC-06 and ask for a personal hearing in writing.
- If an order goes against you, see our guide to GST appeals under Section 107. In a fraud case, the 50% option runs for 60 days from the order.
Section 128A's waiver of interest and penalty covered Section 73 demands for FY 2017-18 to 2019-20 only. No similar scheme exists for Section 74A periods. Our Section 122 penalties guide covers the other penalty provisions.
Key Takeaways
- Tax for FY 2024-25 onwards is demanded under Section 74A. Sections 73 and 74 now cover FY 2023-24 and earlier only.
- The notice must issue within 42 months of the annual return due date, fraud or not, and the order within 12 months of the notice (extendable by 6).
- Non-fraud: pay tax and interest within 60 days of the notice and no penalty applies, except where self-assessed tax was paid more than 30 days late.
- Fraud: 15% before notice, 25% within 60 days of the notice, 50% within 60 days of the order, otherwise 100%.
- No notice for under ₹1,000 of tax in a year applies under Section 74A only. The Council's ₹10,000 threshold is a recommendation, not law.
- Always ask for a personal hearing in writing under Section 75(4).
Frequently Asked Questions
What is the time limit for a GST notice under Section 74A?
The notice must be issued within 42 months from the due date of the annual return for the financial year concerned, or within 42 months of an erroneous refund (Section 74A(2)). The order must follow within 12 months of the notice, extendable by up to 6 months (Section 74A(7)).
Does Section 74A apply to FY 2023-24?
No. Section 74A applies to tax pertaining to FY 2024-25 onwards. Demands for FY 2023-24 and earlier still go under Section 73 (non-fraud) or Section 74 (fraud), each now limited by its own sub-section (12).
What is the penalty under Section 74A if I pay within 60 days?
In a non-fraud case, nil: tax and interest within 60 days of the notice concludes the proceedings (Section 74A(8)(ii)), unless Section 74A(11) applies to self-assessed tax paid more than 30 days late. In a fraud case, the penalty is 25% of the tax (Section 74A(9)(ii)).
Is there a minimum amount for a GST show cause notice?
Under Section 74A, no notice is issued if the tax in a financial year is under ₹1,000 (proviso to Section 74A(1)). Section 73 has no minimum. The 57th GST Council has recommended a ₹10,000 threshold across Sections 73, 74 and 74A, but it needs an amendment to the Act first.
⚠️ For informational purposes only.
Have a specific question about a Section 74A notice? Our GST experts can help → gstconsultancy.com or ask a question.