What Separates Section 73 from Section 74?

Section 73 of the Central Goods and Services Tax Act, 2017 applies where tax has not been paid, has been short paid, has been erroneously refunded, or input tax credit has been wrongly availed or utilised for any reason other than fraud, wilful misstatement or suppression of facts to evade tax.

Section 74 applies where the same consequences arise by reason of fraud, wilful misstatement or suppression of facts to evade tax.

The difference in GST Section 73 vs Section 74 is not simply a matter of the tax amount or the seriousness of the demand. It concerns the allegation of fraud, wilful misstatement or suppression of facts, which must be specifically established.

Section 73 vs Section 74 Under GST: Key Differences

The longer limitation window under Section 74 is the reason the section has been invoked more often than the facts sometimes warrant. Where a period is approaching the three-year limit under Section 73, invoking Section 74 extends the department’s reach by two years.

The requirement that fraud be pleaded and supported

This is the central defence.

An allegation of fraud, wilful misstatement or suppression of facts must be specifically stated in the notice and supported by material. It is not enough to recite the statutory words, or to infer intent from the fact of a short payment. Courts have repeatedly held that the ingredients must be made out on evidence placed before the taxpayer, and that a notice which merely asserts them without particulars does not sustain a demand under Section 74.

The Act itself provides the corrective. Section 75(2) provides that where the appellate authority, Appellate Tribunal or court concludes that a notice issued under Section 74(1) is not sustainable because fraud, wilful misstatement or suppression of facts to evade tax has not been established, the proper officer is to determine the tax payable as if the notice had been issued under Section 73.

The practical effect is that a successful challenge to the fraud allegation does not extinguish the demand, but it converts the matter into a Section 73 case — with the lower penalty and the shorter limitation that follows. Where the extended period has already been used, the demand for the earlier years may fall away entirely.

What changed for FY 2024-25 onwards

The framework above governs periods up to FY 2023-24. It does not govern current years.

Section 74A, inserted by the Finance (No. 2) Act, 2024 on the recommendation of the 53rd meeting of the GST Council held on 22 June 2024, applies from FY 2024-25 onwards and replaces both Sections 73 and 74 for those periods. The relevant provisions were brought into force with effect from 1 November 2024 by Notification No. 17/2024-Central Tax.

Section 74A unifies limitation regardless of whether fraud is alleged: the notice must be issued within forty-two months from the due date for furnishing the annual return for the year, or from the date of the erroneous refund, and the order within twelve months of the notice, extendable by up to six months by an officer of the rank the section specifies. It also introduces a de minimis threshold below which no notice is to be issued, and a longer cure period for settling a demand with reduced penalty than the thirty days available under the earlier provisions.

What Section 74A does not unify is penalty. The characterisation of the case as fraud or non-fraud continues to determine the penalty, and with it the prosecution risk and the litigation strategy. The fight over intent has therefore not disappeared; it has moved from the limitation question to the penalty question.

Checking that the right section was invoked

For FY 2024-25 and later, notices should be under Section 74A. Where a notice for such a period invokes Section 73 or 74 instead, High Courts have treated that as indicating non-application of mind or a jurisdictional infirmity. This is a threshold point worth taking in the reply.

For periods up to FY 2023-24, the question is whether Section 74 has been invoked without the ingredients being made out — and whether, if the fraud allegation fails, the demand is within the three-year window under Section 73 at all.

What this means in practice

The correct response to a GST notice depends on the section invoked and the financial year involved. Check the applicable Section 73, Section 74 or Section 74A, along with the limitation period, penalty and available payment or defence options.

If you receive a Section 73 notice, the early settlement options are valuable. Payment of tax with interest before the notice, or within thirty days of it, closes the matter without penalty. Where the liability is not seriously contested, that is usually the better commercial outcome.

If you receive a Section 74 notice, examine what has actually been alleged. Does the notice identify the specific conduct said to constitute fraud, wilful misstatement or suppression? Is material relied upon and disclosed? Is the invocation of the extended period explained? If the answer is no, that is the first ground of the reply, and Section 75(2) supplies the consequence.

If the period is FY 2024-25 or later, check the section invoked and the forty-two month computation before anything else.

FAQs

The key difference between Section 73 vs Section 74 under GST?

Section 73 applies where fraud, wilful misstatement or suppression is not alleged. Section 74 applies where such conduct is alleged.

Which has a longer limitation period, Section 73 or 74?

For periods up to FY 2023-24, Section 74 has a longer limitation period—five years compared with three years under Section 73.

Can a Section 74 notice be challenged?

Yes. If fraud, wilful misstatement or suppression is not properly alleged or supported, the taxpayer can challenge the invocation of Section 74.

What is Section 74A under GST?

Section 74A applies from FY 2024-25 onwards and replaces Sections 73 and 74 for those periods, while retaining different penalty consequences based on the nature of the case.

Legal Information Disclaimer

This article is published for general legal information and educational purposes only. It reflects the position of Indian law as researched up to 10 August 2026 and may not account for subsequent amendments, notifications, circulars or judicial developments. Limitation periods under the GST law have also been extended by notification for particular financial years, so the position for a specific year should be checked. It is not legal advice, does not take into account any individual’s particular facts or circumstances, and no advocate-client relationship arises from reading it. Readers dealing with an actual matter should obtain independent professional advice from a qualified advocate or tax professional of their own choosing before acting on any information contained here. Statutory provisions, notified figures, rules and case citations referred to in this article have been compiled from published legal materials and may contain errors or omissions, and may have changed since the date stated; no representation or warranty, express or implied, is given as to their accuracy, completeness or currency, and each should be independently verified against the official text or the official record before being relied upon. No liability is accepted for any loss arising from reliance on this article.

Sources / Authorities

• Central Goods and Services Tax Act, 2017 — Sections 73, 74, 74A and 75 (including sub-section (2)) — India Code, https://www.indiacode.nic.in
• Finance (No. 2) Act, 2024 — insertion of Section 74A, applicable from FY 2024-25, and restriction of Sections 73 and 74 to periods up to FY 2023-24
• Notification No. 17/2024-Central Tax — appointing 1 November 2024 as the date on which the relevant provisions come into force
• 53rd meeting of the GST Council, 22 June 2024 — recommendation for a common time limit for demand notices and orders
• Central Goods and Services Tax Rules, 2017 — Rule 142 and Forms DRC-01A, DRC-01, DRC-06 and DRC-07

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