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Section 73 and Section 74 of the CGST Act cover the same broad kinds of tax disputes—tax not paid or short paid, erroneous refunds, and wrongly availed or utilised input tax credit—but they are not interchangeable. Section 73 is the route for reasons other than fraud, wilful misstatement or suppression of facts to evade tax. Section 74 is reserved for a notice that alleges one or more of those culpable grounds. That allegation affects the limitation period, penalty exposure and payment options.
A notice must be tested against its facts, calculations, evidence, tax period and the law in force for that period. The section number printed on a notice is an allegation, not proof. This guide explains the statutory comparison; it does not decide which provision applies to an individual case.
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What is the difference between Section 73 and Section 74 in GST?
The principal difference is the reason alleged for the shortfall. Section 73 applies when tax was not paid, was short paid, an erroneous refund was issued, or input tax credit was wrongly availed or utilised for a reason other than fraud, wilful misstatement or suppression of facts to evade tax. Section 74 covers the same categories of demand when the notice alleges fraud, wilful misstatement or suppression of facts with the stated purpose of evading tax.
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The allegation must be supported by the notice’s facts and evidence. A department cannot establish fraud merely by selecting Section 74, and a taxpayer should not assume that a Section 73 notice is harmless without checking the amount, period, records and legal basis.
Side-by-side statutory comparison
| Issue | Section 73 | Section 74 |
|---|---|---|
| Alleged basis | Tax or credit discrepancy for a reason other than fraud, wilful misstatement or suppression of facts to evade tax. | Tax or credit discrepancy allegedly caused by fraud, wilful misstatement or suppression of facts to evade tax. |
| Transactions covered | Tax not paid or short paid, erroneous refunds, and wrongly availed or utilised input tax credit. | The same categories: tax not paid or short paid, erroneous refunds, and wrongly availed or utilised input tax credit. |
| Baseline order period | Three years from the due date for the annual return for the relevant financial year, or from the date of the erroneous refund. | Five years on the corresponding annual-return-due-date or erroneous-refund basis. |
| Minimum notice interval before the order deadline | At least three months before the Section 73(10) order deadline. | At least six months before the Section 74(10) order deadline. |
| Penalty after adjudication | Ten per cent of the tax or ₹10,000, whichever is higher, under Section 73(9), subject to the Act’s provisions and exceptions. | Section 74(1) specifies a penalty equivalent to the tax specified in the notice, with reduced-penalty payment routes at earlier stages. |
| Payment within 30 days after show-cause notice | Tax and interest paid within 30 days of issue of the notice: no penalty and deemed conclusion under Section 73(8), subject to the statutory exception. | Tax, interest and 25 per cent of the tax paid within 30 days of issue of the notice: deemed conclusion under Section 74(8). |
| Payment before notice | Tax and interest may be paid on the person’s own ascertainment or as ascertained by the officer, with written intimation, under Sections 73(5)–(7). | Tax, interest and 15 per cent penalty may be paid with written intimation under Sections 74(5)–(7). |
| Payment after order communication | No separate reduced-penalty route is stated in the supplied Section 73 comparison beyond the 30-day notice-stage rule. | Tax, interest and 50 per cent penalty paid within 30 days of communication of the order concludes proceedings under Section 74(11). |
These are baseline statutory figures from the CGST Act text identified by CBIC. Extensions, exclusions, special notifications, amendments and transition rules can alter a deadline or the applicable route. Use the wording of the notice and the law in force for the relevant period when calculating liability.
What should you check first in a GST demand notice?
Do not begin by paying the amount shown on the first page. Build a document-level checklist so that the allegation, period and computation can be tested together.
- Statutory provision: record whether the notice cites Section 73, Section 74, another provision, or more than one provision. Note every subsection cited.
- Tax period: identify the financial year, return periods, invoice dates and the date of any alleged erroneous refund. A limitation calculation depends on these dates.
- Tax head and jurisdiction: confirm whether the demand is CGST, SGST, IGST, UTGST or a combination, and whether the issuing officer has jurisdiction over the taxpayer and period.
- Demand components: separate tax, interest, penalty and any adjustment for payments or credits already made. Check whether wrongly availed credit is alleged to have been utilised, not merely recorded.
- Conduct alleged: list the acts said to constitute fraud, wilful misstatement or suppression, if Section 74 is cited. If those words appear without specific facts, identify that gap in the reply.
- Evidence and calculations: match each proposed addition to invoices, returns, e-way records, books, payment ledgers, refund applications or other documents cited in the notice. Reperform the arithmetic.
- Response deadline: diarise the date in the notice and any hearing or submission instruction. Preserve proof of electronic filing, delivery and payment.
The notice’s label does not replace a factual explanation. A proper response addresses the exact transaction and evidence rather than arguing only that the wrong section number was printed.
What is the penalty under Section 73 of GST?
Section 73(9) sets the baseline post-adjudication penalty at 10 per cent of the tax or ₹10,000, whichever is higher. The amount is a statutory formula, not an independent estimate of loss, and it operates subject to the Act’s provisions and exceptions. Interest remains a separate component of the demand.
Section 73 also creates a payment-based conclusion route. If the taxpayer pays the tax and applicable interest within 30 days from issue of the show-cause notice, the statute provides that no penalty is payable and proceedings for that notice are deemed concluded, subject to the exception in the Act. Before a notice is issued, Sections 73(5)–(7) allow payment of tax and interest on the taxpayer’s own ascertainment or on the officer’s ascertainment, accompanied by written intimation. The records should state which period and liability the payment settles.
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Paying under the 30-day rule is not automatically the best commercial or legal choice. A taxpayer may have a limitation objection, a calculation error, eligible credit, proof that tax was already paid, or a dispute about whether a refund was erroneous. Obtain a quantified reconciliation before accepting the demand; a payment made without an adequate allocation can leave part of the notice unresolved.
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Section 74 is the more serious route because the notice alleges fraud, wilful misstatement or suppression of facts to evade tax. Section 74(1) specifies a penalty equivalent to the tax specified in the notice. The allegation should identify conduct and evidence that meet the statutory words; a generic assertion that records were incomplete is not, by itself, an explanation of fraud or intent to evade.
The Act offers staged payment options with progressively higher penalty exposure as the matter moves from self-ascertainment to notice and then to order. The percentages and triggering dates are set out in the comparison table above. Each route requires payment of the stated tax and interest and, where applicable, written intimation or payment within the specified period. Keep challans, the intimation, acknowledgement and a copy of the calculation together.
Section 74 cases require a more detailed evidence review than a routine arithmetic correction. Assemble the return data, purchase and sales registers, tax invoices, credit-utilisation trail, correspondence, accounting entries and explanations for any mismatch. If a third-party supplier, system error or clerical mistake is relevant, document the chronology and the corrective action rather than leaving the officer to infer intent.
Can I avoid penalty by paying a GST demand notice within 30 days?
Payment within 30 days can change the penalty consequence, but the result depends on the section and on which event starts the clock. Under Section 73, payment of tax and interest within 30 days of issue of the notice gives the statutory no-penalty conclusion route. Under Section 74, the notice-stage route requires tax, interest and the specified 25 per cent penalty within the same type of 30-day window. Payment after an order has a different Section 74 route and percentage.
Before paying, verify four practical points:
- the date on which the notice was legally issued or communicated and the last day of the 30-day period;
- the tax and interest computation, including amounts already paid or adjusted;
- the correct government account, tax head and period for the challan; and
- the written intimation or electronic response required to link payment to the notice.
A payment does not cure an incorrect tax head, an overstatement or an unrelated period. If only part of the demand is accepted, identify the disputed balance and explain the allocation in the response. A professional review is sensible where the notice alleges deliberate evasion, involves several years or contains a large input-tax-credit reversal.
What is the time limit for a GST demand notice under Section 73 or 74?
The baseline order limitation under Section 73 is three years from the due date for the annual return for the relevant financial year, or three years from the date of an erroneous refund, as applicable. Section 74 uses five years on the corresponding basis. The notice must be issued at least three months before the Section 73(10) order deadline or at least six months before the Section 74(10) order deadline.
Work backwards from the statutory order date rather than counting only from the date printed on the notice. Record the annual-return due date used, the erroneous-refund date if relevant, and every exclusion or extension stated in a notification or court direction. A notice can raise a preliminary limitation issue even when the tax calculation appears correct.
Limitation is period-specific. A notice covering several financial years may have different last dates for each year, and a later amendment cannot automatically be applied to an earlier period. Ask the issuing authority to identify the calculation for each year and test it separately.
How does Section 75(2) affect a Section 74 notice?
Section 75(2) provides an important safeguard where the fraud, wilful-misstatement or suppression charge is not established. If an appellate authority, tribunal or court finds that the Section 74 ground was not proved, the proper officer may determine the tax by treating the notice as one issued under Section 73, in the circumstances stated in Section 75(2).
This provision does not mean every Section 74 notice automatically becomes Section 73, nor does it erase the tax or interest that may be payable. It means the classification can change when the statutory culpable ground fails. In a reply, address both the underlying tax issue and the evidence for the Section 74 allegation so that the record distinguishes an accounting or interpretive error from intentional evasion.
How to respond: a practical workflow
1. Preserve the notice and establish the clock
Download the complete notice, annexures and electronic receipt. Note the issue or communication date, response deadline, tax periods, cited subsections and the officer’s contact or portal instructions. Do not rely on a screenshot of only the summary page.
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2. Reconcile the demand to primary records
Prepare a year-wise schedule showing turnover, output tax, eligible and ineligible input tax credit, refunds, payments, interest and the department’s proposed figures. Tie every line to a return, invoice, ledger or bank record. Mark disputed, duplicated and already-paid items.
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For a Section 73 notice, check that the alleged reason is outside the fraud, wilful-misstatement and suppression grounds. For Section 74, require the notice to connect the alleged conduct, intention to evade and amount with specific evidence. Check that the law and amendments cited were in force for the period.
4. Calculate every available payment option
Use the statutory routes in the comparison table and calculate tax, interest and penalty for each possible payment date. Include the amount that would remain disputed and the consequence of accepting or contesting it. Do not assume that the lowest percentage is available after its triggering deadline.
5. Prepare a fact-led written response
Answer allegation by allegation, attach indexed evidence and explain any correction already made. If the notice is time-barred, show the annual-return or refund-date calculation. If the Section 74 allegation lacks factual particulars, say exactly which element is missing and why the records do not support it.
6. File, pay and preserve proof
Submit the response through the channel specified in the notice, make any accepted payment under the correct tax head, and retain acknowledgement numbers, challans and uploaded files. Send written intimation where the relevant subsection requires it.
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Monitor the portal and registered communications for the adjudication order. Compare the final order with the notice and with payments already made, and obtain advice promptly on any statutory remedy or further deadline.
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Common mistakes that increase GST demand risk
- Treating the section number as a finding: Section 74 is an allegation of a specified culpable ground, not conclusive proof.
- Using a generic reply: A response that does not match invoices, returns and calculations leaves factual discrepancies unanswered.
- Missing the payment trigger: The 30-day period is tied to the event stated in the statute, and the notice-stage and order-stage routes are different.
- Ignoring tax-head allocation: A payment under the wrong head may not settle the cited liability.
- Combining financial years: Limitation and evidence must be tested year by year.
- Assuming old law applies to a current period: Check amendments, commencement notifications, extensions and transition rules before relying on a historical subsection.
- Paying without a written record: Preserve the intimation and challan so the payment can be matched to the notice.
Historical Section 128A waiver: what the 2024 circular did—and did not—do
CBIC Circular 238/32/2024-GST describes a conditional waiver of interest or penalty, or both, under Section 128A for specified Section 73 demands relating to financial years 2017–18, 2018–19 and 2019–20. The route discussed in that circular identified 31 March 2025 as the notified payment date.
That date has passed. The circular is therefore historical context, not an open deadline for a new claim. Check the circular’s conditions and any later clarification when reviewing an old case; do not represent the waiver as generally available to current notices.
Section 74A and current-law checks
The available statutory material does not establish the enacted text, commencement date or transition rule for Section 74A. Before relying on Sections 73 or 74 for a current financial year, confirm the amended CGST Act, commencement notification and any applicable rules or extensions from an authoritative government source. Do not assume that a provision used for an older period is the universal route for every current demand.
Apply the same check to the corresponding SGST, IGST or UTGST legislation and to any special notice format. The relevant edition of the Act and the notification in force for the tax period control the analysis.
When professional review is warranted
Consider a qualified tax professional or lawyer when the notice alleges fraud or suppression, covers multiple years, involves a substantial input-tax-credit reversal or refund, raises limitation questions, or requires a choice between payment and a contested reply. Give the adviser the complete notice, annexures, return data, ledgers, payment proofs and a year-wise reconciliation. A reviewer can test the statutory classification and evidence; no adviser can safely choose a section from the heading alone.
A current CGST Act bare-act or GST law reference book can help you read the underlying provisions, but verify that its edition includes amendments and commencement notifications applicable to your tax period. The legally controlling text is the Act and notifications in force for the relevant jurisdiction and date.
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