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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →A GST shortfall and an allegation of tax evasion are not the same thing. Under the legacy Sections 73 and 74 of India’s CGST Act, a tax or input tax credit (ITC) dispute alone does not establish the fraud-related grounds for a Section 74 demand. The department must support the statutory ground it invokes; if that ground is not established, Section 75(2) provides for redetermination as if the notice had been issued under Section 73, subject to the limitation rules that apply to the tax period.
First identify which law applies to your tax period
This comparison concerns the Indian central GST framework and the legacy Sections 73 and 74 of the CGST Act, 2017. State GST provisions are generally parallel, but the relevant state law and proceeding should be checked. The CBIC-hosted Act page reproduces the familiar legacy wording; it should not be treated by itself as confirmation of the rules for every later period. In particular, do not assume that legacy penalties or deadlines apply to a proceeding governed by later amendments, Section 74A, or transition provisions. CBIC: The Central Goods and Services Tax Act
Before comparing a demand or penalty, note the financial year or tax period stated in the notice, the section cited, and the version of the law applicable to that period. The penalty route and time limits can change with that choice.
What separates a Section 73 demand from a Section 74 demand?
Both legacy provisions address tax not paid or short paid, erroneous refunds, and ITC wrongly availed or utilised. The distinction is the alleged reason for the issue: Section 73 covers cases for reasons other than fraud, wilful misstatement, or suppression of facts to evade tax; Section 74 is the fraud-track provision, requiring the issue to be by reason of one of those grounds. A disputed calculation or credit entry may support a tax demand, but it does not, by itself, establish the additional Section 74 grounds. CBIC: The Central Goods and Services Tax Act
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| Question | Legacy Section 73 | Legacy Section 74 |
|---|---|---|
| What kind of issue is covered? | Tax not paid or short paid, erroneous refund, or ITC wrongly availed or utilised for a reason other than the Section 74 grounds. | The same broad kinds of tax or credit issue, allegedly caused by fraud, wilful misstatement, or suppression of facts to evade tax. |
| What must the department support? | The basis and amount of the tax or credit issue under the applicable provision. | The tax or credit issue and the invoked fraud-related ground connecting it to that issue. |
| Does a penalty automatically disappear on the Section 73 track? | No. Section 73 is not a “no penalty” route; statutory interest and penalty provisions may apply. | The legacy text provides for a penalty equivalent to the tax specified, subject to statutory payment provisions. |
| What if the Section 74 grounds are not established? | Not applicable as a conversion from Section 74. | Section 75(2) provides for redetermination as if the notice had been issued under Section 73, subject to applicable limitation rules. |
The table describes the legacy framework, not a universal current-period comparison. Section 74’s legacy penalty and the Section 75(2) consequence appear in the statutory text and GST Council materials. CBIC Act text; GST Council: 53rd GST Council Meeting
What do fraud, wilful misstatement, and suppression mean for a notice?
These are the grounds the department invokes to put a legacy demand on the Section 74 track. The notice and the record need to support the ground alleged and explain its connection to the tax, refund, or ITC issue. Merely naming a ground does not resolve whether it is supported; equally, a notice does not fail simply because it lacks a particular “magic phrase.” The relevant statutory text, allegations, supporting material, and controlling judgments must be considered together.
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- Fraud: Identify the conduct the notice characterises as fraudulent and the material it relies on to connect that conduct to the disputed tax or credit.
- Wilful misstatement: Check what statement is alleged to be false, why it is said to be wilful, and how it relates to the amount demanded.
- Suppression to evade tax: Examine what fact the notice says was suppressed and how the alleged suppression was for the purpose of evading tax.
For example, a Delhi High Court matter from 2025 involved allegations concerning purported bogus invoices and ITC. It illustrates a fact-specific dispute, not a universal rule about what evidence proves or disproves every Section 74 case. Delhi High Court, W.P.(C) 4853/2025
Does a tax demand prove evasion?
No. The tax calculation and the evasion-related allegation are separate questions. A notice may allege that tax was short paid or ITC was wrongly claimed; the department must also support the fraud, wilful-misstatement, or suppression ground it relies on for the legacy Section 74 route. A challenge to that ground does not automatically settle whether any tax or interest is payable. The calculation should therefore be checked independently from the basis for the penalty route.
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What happens if the Section 74 grounds are not established?
Under Section 75(2), if an appellate authority, tribunal, or court concludes that the fraud, wilful-misstatement, or suppression charge in a Section 74 notice was not established, the proper officer redetermines the tax as if the notice had been issued under Section 73. This can change the applicable penalty route. It does not guarantee that the underlying tax demand disappears: the ordinary-track limitation period may matter, along with the merits and computation. GST Council: 53rd GST Council Meeting
How do legacy penalties and deadlines compare?
For the earlier framework, GST Council material describes an order period of three years under Section 73 and five years under Section 74, counted from the relevant annual-return due date. The former provisions also required the show-cause notice to precede the order deadline by a prescribed interval. These are descriptions of the prior framework, not deadlines to apply automatically to a later tax period. Check the applicable statutory version and the dates in the notice before relying on a calculation. GST Council: 53rd GST Council Meeting; GST Council: Detailed Agenda Note, Volume 1 – 48th GST Council Meeting
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In the legacy Section 74 wording, the stated penalty is equivalent to the tax specified, but statutory early-payment options can alter the amount payable in specified circumstances. A Karnataka High Court judgment summarises legacy provisions allowing a 15% penalty for payment before notice and 25% for payment within 30 days after notice. Those figures describe the legacy statutory mechanics discussed in that judgment; they are not current universal rates or advice for every notice. Verify the version applicable to the tax period and the conditions for the particular payment option. Karnataka High Court, Sri J Ramesh Chand vs Union Of India, 13 October 2025
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to review a GST demand notice
- Fix the period and legal route. Record the tax period, the section cited, the date of the notice, and the statutory version that governs the proceeding. Do not use legacy time limits or penalty figures until that is checked.
- Reconcile the demand. Compare the tax, refund, or ITC calculation with the relevant returns, credit records, and documents. Separate disputes about the amount from disputes about the alleged conduct.
- Break out each factual allegation. Note what the notice says happened, which Section 74 ground it invokes, and how it links that ground to the tax or credit issue.
- Locate the relied-on material. Match each allegation to the documents or other material identified in the notice, and note any factual gap or inconsistency relevant to your response.
- Calendar the response and later deadlines. Use the dates and instructions in the notice, and check the applicable law for any order, appeal, or payment deadline. Missing a procedural date can affect available options.
- Check for a specific relief provision. Section 128A was a conditional waiver regime for certain Section 73 demands for FY 2017–18, FY 2018–19, and FY 2019–20. CBIC’s circular described a notified payment date of 31 March 2025 and procedures for qualifying applications; that original payment date has passed, so the provision should not be treated as a generally available new waiver. Whether it matters depends on the particular demand and circumstances. CBIC Circular No. 238/32/2024-GST, 15 October 2024
Because a notice may involve substantial tax, interest, penalty, and procedural deadlines, consider having a GST professional review the period-specific law and record before responding.
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