Section 74A of CGST Act: GST Demand Provisions
While most of the country turned to their TV screens to learn about the personal income tax changes in the budget, there have been some benchmark amendments to the GST Act. One such move is the introduction of Section 74A in the GST covering demand. This would replace the current Sections 73 & 74, causing a significant change in how the GST demand procedure is conducted. Let's dive right in to learn about these changes in detail.
What is Section 74A of the CGST Act?
Section 74A of the CGST Act has been inserted to determine the tax liability and penalty in the following cases:
- General Cases (Earlier covered by Section 73)
- Cases containing Fraud, Willful Misstatement or Suppression of Facts (Earlier Covered by Section 74)
- The penalty is chargeable in both the above cases if:
- Tax is not paid
- Tax is short-paid
- Tax is erroneously refunded
- ITC (Input Tax Credit is wrongly availed or utilised
Changes in GST Sections 73 and 74
Sections 73 & 74 of the CGST Act will continue to determine the demand for cases up to Financial Year 2023-24. So, the new Section 74A of the CGST Act is applicable from the Financial Year 2024-25 onwards.
To give you a hint, the most significant changes you will see in Section 74A of the CGST Act compared to Sections 73 & 74 are:
- New time-frames: The period for issuing notices has been increased to 42 months from 3 years.
- Proportional Penalties: Penalties have been set depending on the degree of error. More penalties are applicable in cases of fraud than general errors.
Key Objectives of Introducing Section 74A
Before learning the provisions of Section 74A of the CGST Act, you should understand its need. Here's why this section was inserted:
- To simplify and consolidate the provisions of Sections 73 & 74.
- To extend and establish clear time-frames for issuing demand notices, helping both taxpayers and authorities.
- To provide relief in penalty for cases where no intentional fraud or wilful misrepresentation is involved.
Provisions of Section 74A of the CGST Act
Here are the details about the provisions of Section 74A of the CGST Act.
Sections | General Cases | Cases involving Fraud or Wilful Misstatement |
Section 74A(1) - Demand Notice Issuance | The proper officer can serve demand notice (for tax and interest u/s 50) to the taxpayer in the following cases only if the demand amount is more than Rs. 1,000 for a financial year:
| |
Section 74A(2) - Time Limit for issuing notices | The notice should be served within 42 months of:
| |
Section 74A(3) - Issuance of Statement | The proper officer may issue a statement containing details of the tax demand for periods other than those covered in the notice under Section 74A(1). | |
Section 74A(4) - Condition for Deemed Notice | The statement issued u/s 74A(3) will be considered as deemed notice if the grounds of default are the same as covered by the notice u/s 74A(1). | |
Section 74A(5) - Penalty | 74A(5)(i) - 10% of the tax due or Rs. 10,000, whichever is higher. | 74A(5)(ii) - Equivalent to the amount of tax due. |
Section 74A(6)—Determination of Demand | After listening to the taxpayer's representation, the proper officer determines the amount of tax, interest, and penalty and issues an order. | |
Section 74A(7) - The time limit for issuing the order | Order under Section 74A(6) should be issued within 12 months from the notice issuance date. This period can be extended by a maximum of 6 months with approval. | |
Section 74A(8) & (9) - Voluntary Payment | 8(i) Before Notice: No notice or penalty is charged if tax and interest are paid before notice and informed to the officer. 8(ii) Within 60 days of Notice: No penalty is charged for tax and interest paid within 60 days of notice. | 9(i) Before Notice: No notice is served if the taxpayer pays tax + interest + penalty @ 15% of tax before the notice and the officer is informed: 9(ii) Within 60 days of Notice: No further proceedings are carried on if tax + interest + 25% penalty of tax is paid within 60 days of notice. 9(iii) Within 60 days of Order: No further proceedings are carried out if tax + interest + 50% penalty on tax is paid within 60 days of the order. |
Section 74A(10) - Shortfall in Payment | If the amount paid u/s 74A(8)(i) is less than the payable amount, notice for the shortfall will be served in the due course. | If the amount paid u/s 74A(9)(i) is less than the payable amount, notice for the shortfall will be served in the due course. |
Section 74A(11) - Shortfall in Payment | Overriding all other clauses of Section 74A(8), the penalty will be charged if the tax collected or self-assessed tax is not paid within 30 days from the due date of tax payment. | Not Applicable |
Section 74A(12) - Applicability | Section 74A is applicable from Financial Year 2024-25 onwards. | |
Section 74A of CGST Act Case Laws
Section 74A of the CGST Act was proposed by the 53rd GST Council meeting held in June 2024. Based on the recommendations, Section 74A has been newly introduced by Finance Minister Smt. Nirmala Sitharaman through the Finance Bill 2024-25. As the provisions have just become active, no case laws exist for reference.
Related Articles:
Section 74A vs 73 & 74 of CGST Act
Section 73 & 74 of CGST Act
Frequently Asked Questions
Quick Summary
Section 74A has been introduced in the GST Act to determine tax liabilities and penalties for general cases and those involving fraud. It replaces Sections 73 & 74 and brings changes like extended timeframes and proportional penalties. The section aims to simplify provisions, establish clear timeframes, and provide relief in penalties where no fraud is involved. It applies from the financial year 2024-25 onwards.
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