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Section 73 and Section 74 of India’s Central Goods and Services Tax Act, 2017 (CGST Act) cover tax not paid or short paid, erroneous refunds, and input tax credit wrongly availed or utilised. The dividing line is the conduct alleged: Section 73 applies where the shortfall is attributed to reasons other than fraud, wilful misstatement or suppression of facts to evade tax; Section 74 applies when one or more of those fraud-related grounds is alleged. A section number in a notice is an allegation, not proof.
The ordinary Section 73 framework gives three years to determine tax, while Section 74 gives five years, measured from the statutory starting date. The notice must be issued at least three months before the Section 73 order deadline or six months before the Section 74 deadline. Penalties and reduced-payment routes are also materially different. For financial year 2024-25 onward, Section 74A is the transition provision to check instead of assuming that every newer notice belongs under Section 73 or 74.
What Sections 73 and 74 actually deal with
Both provisions empower the proper officer to determine tax that was not paid, was short paid, was refunded erroneously, or related to input tax credit that was wrongly availed or utilised. The difference is the alleged reason for the tax problem, not the type of tax or the existence of a notice.
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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsSection 73: non-fraud cases
Section 73 is used for reasons other than fraud, wilful misstatement or suppression of facts to evade tax. Typical disputes may involve an interpretation of a classification or exemption, a calculation error, an eligibility disagreement over input tax credit, or information that the department says was reported incorrectly without alleging an intentional attempt to evade tax.
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Section 74: fraud-related allegations
Section 74 is the extended-period provision. The notice alleges fraud, wilful misstatement or suppression of facts to evade tax. The department must identify the factual basis for that allegation; simply printing “Section 74” does not establish it. The taxpayer can challenge both the underlying tax calculation and whether the evidence supports the fraud-related ground.
Section 73 vs Section 74 at a glance
| Issue | Section 73 | Section 74 |
|---|---|---|
| Alleged basis | Reasons other than fraud, wilful misstatement or suppression of facts to evade tax | Fraud, wilful misstatement or suppression of facts to evade tax is alleged |
| Ordinary order deadline | Three years from the statutory starting point | Five years from the corresponding statutory starting point |
| Minimum notice lead time | At least three months before the Section 73 order deadline | At least six months before the Section 74 order deadline |
| Common shorthand for notice cutoff | Two years and nine months from the relevant annual-return due date | Four years and six months from the relevant annual-return due date |
| Ordinary penalty | 10% of tax or ₹10,000, whichever is higher | Penalty equal to the tax |
| Payment after notice | Tax and interest paid within 30 days generally concludes the proceedings without penalty | Tax, interest and 25% penalty paid within 30 days concludes the proceedings under the statutory route |
| Payment after order | Follow Section 73 and the actual order; do not assume the Section 74 route | Tax, interest and 50% penalty paid within 30 days of communication of the order can conclude the proceedings |
| If the fraud allegation fails | Not an initial Section 74 conversion issue | Section 75(2) requires determination as if the notice had been issued under Section 73; the shorter limitation can then bar the case |
These are the ordinary statutory rules. The exact result can change because of the relevant financial year, notified annual-return due date, erroneous-refund date, amendments, court or tribunal stays, and the procedural history of the notice.
How the limitation period is calculated
The first task is to identify the statutory starting event. Do not automatically count from the date the return was filed, the date an audit began, or the date printed on the notice.
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For these demands, Sections 73(10) and 74(10) count the order period from the due date for furnishing the annual return for the financial year to which the demand relates. The relevant due date is the one applicable to that year, including any notification that changed it.
- Section 73: the order must ordinarily be issued within three years from that annual-return due date.
- Section 74: the order must ordinarily be issued within five years from that annual-return due date.
- The notice must precede the respective order deadline by at least three months under Section 73 or six months under Section 74.
That is why practitioners often describe the notice cutoffs as two years and nine months under Section 73 and four years and six months under Section 74. Those expressions are shortcuts, not independent limitation rules. A proper calculation starts with the actual annual-return due date and then checks every exclusion or extension that applies.
Erroneous refunds
When the demand concerns an erroneous refund, the statutory starting point is the date the refund was made, not the annual-return due date. The three-year Section 73 order period, five-year Section 74 order period, and their respective notice lead times are then applied from that event.
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Stays and other exclusions
Section 75 contains computation rules that can affect the calendar. Periods during which service of a notice or issuance of an order is stayed by a court or Appellate Tribunal are excluded in the circumstances specified by the Act. Later amendments, notified due dates and case-specific procedural orders may also change the calculation.
A limitation review therefore needs the tax period, the applicable annual-return due date or refund date, the notice issue and service dates, the order date, and the complete record of any stay. A general article cannot determine a taxpayer’s last permissible date without those facts.
Notice cutoff and order deadline are different
A common error is to treat the final date for issuing an order as the final date for serving a notice. The Act requires the notice to be issued sufficiently before the order deadline so that the adjudication process can occur within the statutory period.
- Find the annual-return due date for the financial year, or the date of the erroneous refund.
- Add three years for a Section 73 order deadline or five years for a Section 74 order deadline.
- Move back at least three months for the latest ordinary Section 73 notice date, or six months for the latest ordinary Section 74 notice date.
- Check Section 75 exclusions, court or tribunal stays, amendments, and any special transition rule before treating the result as final.
The date of issue and the date of service can matter separately under the Act and procedural rules. Preserve the portal record, email, download timestamp and any other proof showing when the notice was actually made available or served.
Penalty exposure and statutory payment routes
Section 73 penalty
The ordinary Section 73 penalty is 10% of the tax or ₹10,000, whichever is higher. Section 73 also provides a reduced-consequence route: if the tax and interest are paid within 30 days of the notice, the proceedings generally conclude without a penalty. “Within 30 days” must be tied to the statutory triggering event and the payment conditions; it is not a blanket assurance that any payment at any later stage closes the matter.
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Section 74 penalty
The ordinary Section 74 penalty is equal to the tax. The Act provides staged payment options:
- Payment of tax, interest and a 25% penalty within 30 days after the notice concludes the proceedings under the statutory route.
- If the matter reaches an order, payment of tax, interest and a 50% penalty within 30 days after communication of the order can conclude the proceedings on the terms set by Section 74.
The notice and order should be read carefully to confirm the amount of tax, the interest calculation, the applicable payment window and the form of intimation required. A taxpayer should not assume that paying the principal tax alone satisfies a Section 74 settlement route.
What happens when a Section 74 fraud allegation is not established
Section 75(2) addresses a critical limitation trap. It states:
“Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.”
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The conversion does not give the department the five-year Section 74 period after the fraud ground has failed. The proceeding is treated as a Section 73 notice, so the shorter Section 73 notice limitation becomes decisive.
CBIC Circular 185/17/2022-GST explains that, in the circumstances it addresses, proceedings must be dropped when a Section 74 notice is unsustainable and the Section 73 period for issuing a notice had already expired. The circular describes the ordinary Section 73 notice cutoff as two years and nine months from the annual-return due date, or from the erroneous-refund date where that is the statutory starting point. This is why a taxpayer should contest the fraud allegation and limitation independently rather than treating the longer Section 74 period as automatically available.
How to examine a GST demand notice step by step
- Identify the provision. Record whether the notice cites Section 73, Section 74, or another provision. Check the electronic summary and the detailed notice for consistency.
- Identify the period. Note the financial year and each tax period, or the date of the erroneous refund. A single notice can contain multiple periods requiring separate calculations.
- Find the statutory starting date. For tax shortfall or input tax credit disputes, locate the annual-return due date applicable to each financial year. For an erroneous refund, use the refund date.
- Recalculate both deadlines. Compute the order deadline and then the minimum notice lead time. Do not rely only on a date typed into the notice.
- Verify issue and service. Save the portal download, electronic communication, email and service details. The relevant date may affect whether the notice was timely.
- Read the fraud particulars. Under Section 74, list every fact said to constitute fraud, wilful misstatement or suppression to evade tax. Look for the documents, transactions, statements and mens rea-related reasoning actually identified.
- Check exclusions and stays. Gather court or tribunal orders staying service or adjudication, along with any statutory extension or amendment applicable to the period.
- Separate tax from interest and penalty. Reconcile the tax computation, interest start date, penalty percentage and any payments already made.
- Check earlier proceedings. Compare the notice with prior audit objections, scrutiny communications, refunds, replies, orders, appeals and payments to identify duplication or an inconsistent position.
- Choose the response route. If accepting the liability, verify the correct payment window and required electronic intimation. If disputing it, prepare a reply addressing the calculation, limitation, evidence and penalty separately.
Forms and the GST portal record
Rule 142 provides for an electronic summary in Form GST DRC-01 with a demand notice under Section 73 or Section 74. A statement under the corresponding provisions is associated with Form GST DRC-02. The rules also refer to payment and closure forms, including DRC-03 and DRC-05.
The consolidated Central Board of Indirect Taxes and Customs rules document commonly consulted for this framework is dated 1 January 2022. Portal labels, form fields and later amendments can change, so confirm the current workflow when acting on a live notice. Keep copies of the original notice, DRC-01 or DRC-02 summary, DRC-03 payment information, DRC-05 closure record, acknowledgements and the detailed order.
Section 74A and the financial-year transition
The 2024 amendments introduce Section 74A for determinations relating to financial year 2024-25 onward. The transition text limits Sections 73 and 74 to financial years through 2023-24. The financial year to which the demand relates is therefore more important than the date on which the notice happens to be issued.
Do not assume that every notice issued after 1 November 2024 must cite Section 74A. The applicable central enactment, commencement notification, State or Union Territory GST enactment, tax period and transition rules must be checked for the particular case. A notice issued later can still concern an earlier financial year governed by Sections 73 or 74.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to correct them
Counting from the return-filing date
The ordinary statutory clock for tax shortfall and credit disputes runs from the annual-return due date, not automatically from the day the return was filed. Recalculate using the notified due date for the relevant financial year.
Counting from the audit start
An audit, inspection or summons may explain why the department investigated, but it is not the ordinary limitation starting point stated in Sections 73(10) and 74(10). Use the statutory event and then account for valid exclusions.
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Assuming “Section 74” proves fraud
The allegation must be supported by the facts and evidence identified in the notice. Challenge conclusory wording and distinguish an inadvertent error or interpretive dispute from conduct intended to evade tax.
Using the five-year period after the fraud charge fails
Section 75(2) directs treatment as a Section 73 notice when the fraud, wilful misstatement or suppression ground is not established. Recheck whether the Section 73 notice period had already expired.
Ignoring the erroneous-refund rule
A refund demand uses the refund date as the statutory starting event. Substituting the annual-return due date can produce the wrong limitation result.
Paying tax without checking the statutory window
The reduced-payment routes have different percentages, deadlines and triggering events. Confirm whether the payment is after notice or after communication of the order, and retain proof of payment and electronic filing.
Relying on an old form description
Rule 142 forms and portal workflows may have been amended. Use the version and fields currently displayed for the notice, while preserving the original electronic record.
What a well-supported reply should cover
A response should be organized so the officer can match each objection to the demand:
- The notice number, tax period and provision invoked.
- A period-by-period reconciliation showing the taxpayer’s tax, credit, refund and payment figures against the department’s calculation.
- The annual-return due date or erroneous-refund date used for limitation.
- The notice issue and service dates, order deadline, notice lead-time calculation and any applicable exclusion.
- A specific response to each alleged act of fraud, wilful misstatement or suppression under Section 74.
- Documents supporting the transaction, return, invoice, credit eligibility, refund and correspondence.
- Details of earlier payments, replies, orders, appeals or overlapping proceedings.
- A separate submission on interest, penalty and eligibility for the statutory payment route.
Where a deadline is close, preserve the original records and obtain advice from a qualified GST professional familiar with the applicable central and State or Union Territory legislation. Limitation and payment consequences can turn on a single date or procedural order.
Bottom line for taxpayers
Section 73 is the ordinary, non-fraud track with a three-year order period, a three-month notice lead time and a 10% or ₹10,000 minimum penalty rule. Section 74 alleges fraud-related conduct, extends the ordinary order period to five years, requires six months’ notice lead time and exposes the taxpayer to a penalty equal to the tax unless a statutory reduced-payment route is used. If the Section 74 allegation is not established, Section 75(2) moves the determination to the Section 73 framework, where the shorter limitation can require the proceedings to be dropped. For financial year 2024-25 onward, check Section 74A and the applicable commencement and State or Union Territory rules before deciding which framework governs.
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