CGST Act · Chapter XV
Demands and Recovery
s. 73Determination of tax not paid - non-fraud
Section 73 is the ordinary route for recovering tax that was underpaid or credit wrongly taken without fraud or suppression. It applies to periods up to 2023-24; from 2024-25 section 74A takes over. The taxpayer can close the matter without penalty by paying the tax and interest within thirty days of the notice.
- Under section 73(1) of the CGST Act, 2017 the proper officer serves a show cause notice where tax has not been paid, short paid or erroneously refunded, or credit wrongly availed or utilised, for any reason other than fraud, wilful misstatement or suppression.
- The notice must issue at least three months before the time limit for the order (section 73(2)); the order must issue within three years of the due date of the annual return for the year, or of the erroneous refund (section 73(10)).
- Paying tax and interest before the notice ends the matter (section 73(5)–(6)); paying within thirty days of the notice ends it without penalty (section 73(8)).
- Otherwise the order imposes tax, interest and a penalty of 10% of tax or Rs. 10,000, whichever is higher (section 73(9)).
- From 01.11.2024 the section applies only to periods up to 2023-24 (section 73(12)); later periods fall under section 74A.
- Notifications 13/2022, 9/2023 and 56/2023-Central Tax under section 168A extended the time limits for 2017-18 to 2019-20. High Courts are divided on their validity, and the question is before the Supreme Court.
s. 74Determination of tax not paid - fraud
Section 74 is the demand provision for evasion: fraud, wilful misstatement or suppression of facts. It gives the department five years instead of three and carries a penalty equal to the tax. Because it is the harsher route, the courts insist that the notice itself set out the facts from which fraud or suppression is inferred — a bare recital of the words is not enough.
- Under section 74(1) of the CGST Act, 2017 the proper officer serves a notice where tax was not paid, short paid or erroneously refunded, or credit wrongly availed or utilised, by reason of fraud, wilful misstatement or suppression of facts to evade tax.
- The order must issue within five years from the due date of the annual return for the year, or of the erroneous refund; the notice at least six months before that (section 74(2), (10)).
- Penalty equals the tax, reduced to 15% if paid with interest before the notice, 25% within thirty days of the notice, and 50% within thirty days of the order (section 74(5), (8), (11)).
- From 01.11.2024 the section applies only to periods up to 2023-24; later periods fall under section 74A.
- In G.R. Infra Projects v State of Madhya Pradesh (2026) the Supreme Court quashed a section 74 notice that merely recited "fraud or concealment of facts" without the facts supporting the inference, and refused to let the department supply them by affidavit.
- If fraud or suppression is not established, the demand survives only as one under section 73, within its time limits (section 75(2)).
s. 74ACommon framework FA 2024
From 2024-25, section 74A replaces sections 73 and 74 with one procedure and one time limit for all demands. Fraud or suppression no longer buys the department more time; it only changes the penalty. The notice must be issued within forty-two months of the annual return due date, and the order within a year of the notice.
- Under section 74A of the CGST Act, 2017, for 2024-25 onward, the proper officer serves a notice where tax was not paid, short paid or erroneously refunded, or credit wrongly availed or utilised, for any reason — with or without fraud.
- No notice issues if the amount for a financial year is below Rs. 1,000 (proviso to section 74A(1)).
- The notice must issue within forty-two months from the due date of the annual return for the year, or of the erroneous refund (section 74A(2)); the order within twelve months of the notice, extendable by up to six months by the Commissioner or an authorised officer not below Joint Commissioner, for recorded reasons, before expiry (section 74A(7)).
- Penalty is 10% of tax or Rs. 10,000, whichever is higher, without fraud; equal to the tax with fraud, wilful misstatement or suppression (section 74A(5)).
- Without fraud, paying tax and interest within sixty days of the notice ends the matter with no penalty; with fraud, penalty falls to 15% before notice, 25% within sixty days of notice and 50% within sixty days of the order (section 74A(8)–(9)).
- The section applies from 01.11.2024 to demands for 2024-25 onward (Finance (No. 2) Act, 2024; Notification 17/2024-Central Tax).
s. 75General provisions relating to determination
Section 75 sets the ground rules for every demand under sections 73, 74 and 74A: how time limits are computed, what happens when a fraud allegation fails, the right to be heard, the limits of the order, and when proceedings lapse.
- Under section 75(1) of the CGST Act, 2017 any period during which a court or the Tribunal stays the notice or order is excluded from the time limits.
- If an appellate authority or court finds that fraud or suppression is not established, the tax is redetermined as if under section 73 (section 75(2)); under section 74A only the lower penalty survives (section 75(2A)).
- An opportunity of hearing must be granted where the person asks for it in writing or where an adverse decision is contemplated (section 75(4)); the Allahabad High Court has repeatedly held that a personal hearing is mandatory in the second case even without a request.
- No more than three adjournments may be granted (section 75(5)); the order must set out the facts and basis (section 75(6)) and cannot exceed the amount or go beyond the grounds in the notice (section 75(7)).
- If the order is not issued within the time limit, the proceedings are deemed concluded (section 75(10)).
- Self-assessed tax shown in a return, or in GSTR-1, but not paid is recovered directly under section 79 without a notice (section 75(12)).
s. 76Tax collected but not paid
Section 76 stops anyone keeping money collected in the name of GST. Whatever was collected as tax must reach the Government, even if the supply turns out not to have been taxable, and the customer who bore it can claim a refund.
- Under section 76(1) of the CGST Act, 2017 a person who collects any amount as tax must pay it to the Government forthwith, whether or not the supplies were taxable, notwithstanding any order of an appellate authority or court.
- If unpaid, the proper officer issues a notice, hears the person on written request, and orders payment within one year of the notice (excluding any stay), with interest under section 50 from the date of collection.
- The amount paid is adjusted against tax on the supplies; any surplus goes to the Consumer Welfare Fund or is refunded under section 54 to the person who bore the incidence.
s. 77Tax wrongfully collected and paid
Section 77 deals with tax paid under the wrong head. A supplier that treated an inter-State supply as intra-State (or the reverse) pays the correct tax and gets back what it wrongly paid, without interest on the correct tax.
- Under section 77(1) of the CGST Act, 2017 a registered person who paid CGST and SGST (or UTGST) on a supply later held to be inter-State is refunded those taxes in the prescribed manner.
- Under section 77(2) a person who paid IGST on a supply later held to be intra-State need not pay interest on the CGST and SGST now payable. Section 19 of the IGST Act is the mirror provision.
- The refund claim is made within two years from the date of payment of the correct tax (Rule 89(1A), from 24.09.2021; for earlier payments, within two years of that date).
s. 78Initiation of recovery proceedings
Section 78 gives the taxpayer three months after an order to pay — or to appeal and obtain the stay that comes with the pre-deposit — before recovery proceedings can begin.
- Under section 78 of the CGST Act, 2017 an amount payable under an order must be paid within three months of its service; recovery proceedings follow if it is not.
- The proper officer may require payment within a shorter period if he considers it expedient in the interest of revenue, for reasons recorded in writing (proviso).
- An appeal with the pre-deposit under section 107(6) stays recovery of the balance (section 107(7)).
s. 79Recovery of tax
Section 79 is the department's toolkit for recovering dues that have become payable and are unpaid: it can set off money it owes the taxpayer, sell goods it holds, require banks and customers to pay it instead of the taxpayer, attach and sell property, or recover through the Collector as arrears of land revenue.
- Under section 79(1) of the CGST Act, 2017 the proper officer recovers unpaid amounts by one or more of: deduction from money owed to the person; detention and sale of the person's goods under his control; notice to a bank, debtor or other person holding money for the defaulter (garnishee, Form DRC-13); distraint and sale of property; a certificate to the District Collector for recovery as arrears of land revenue; or an application to a Magistrate.
- A garnishee who receives a notice must pay; one who pays the defaulter instead becomes personally liable (section 79(1)(c)(vi)).
- Unpaid SGST or UTGST dues may be recovered as if they were CGST dues, with the amount shared in proportion (section 79(3)–(4)).
- From 01.02.2019 "person" includes distinct persons with the same PAN, so dues of one registration may be recovered from another (Explanation).
s. 80Payment in instalments
Section 80 gives a taxpayer facing a large demand a way to pay over time. The Commissioner may extend time or allow monthly instalments, with interest, but self-assessed tax shown in a return must be paid in full.
- Under section 80 of the CGST Act, 2017 the Commissioner may, on application and for recorded reasons, extend time or allow payment in monthly instalments not exceeding twenty-four, with interest under section 50.
- Self-assessed tax due under a return is excluded.
- If one instalment is missed, the whole outstanding balance becomes payable at once and may be recovered without further notice (proviso).
- Rule 158 sets conditions: the application is in Form DRC-20; instalments are not allowed where the amount is below Rs. 25,000, or where the person has already defaulted on an amount for which recovery is in progress, among other conditions.
s. 81Transfer of property to be void
Section 81 stops a debtor taxpayer from moving assets out of reach. Transfers made after the dues arose, to defraud the Government, are void as against it; genuine buyers for value without notice are protected.
- Under section 81 of the CGST Act, 2017, where a person creates a charge on or parts with property after any amount has become due from him, with the intention of defrauding the Government revenue, the charge or transfer is void as against any claim for tax or other dues.
- The transfer is not void if made for adequate consideration, in good faith and without notice of the pending proceedings or the dues, or with the previous permission of the proper officer (proviso).
s. 82Tax to be first charge on property
Section 82 gives GST dues priority over other claims on a taxpayer's property — except in insolvency, where the Insolvency and Bankruptcy Code fixes the order of payment.
- Under section 82 of the CGST Act, 2017 any amount payable by a taxable person or any other person on account of tax, interest or penalty is a first charge on that person's property, notwithstanding any other law.
- The charge is subject to the Insolvency and Bankruptcy Code, 2016: in a corporate insolvency or liquidation, government dues rank as the Code provides (section 53 of the Code), not first.
s. 83Provisional attachment
Section 83 lets the Commissioner freeze a taxpayer's property — most often bank accounts and receivables — while proceedings are pending, so that any eventual demand can be collected. The Supreme Court has called it a draconian power and laid down strict conditions for its use.
- Under section 83(1) of the CGST Act, 2017, from 01.01.2022, after initiation of any proceeding under Chapter XII (assessment), XIV (inspection, search, seizure, arrest) or XV (demands and recovery), the Commissioner may provisionally attach any property, including a bank account, of the taxable person or of a person liable to penalty under section 122(1A), if he is of the opinion that it is necessary to protect the revenue.
- The attachment ceases after one year from the order (section 83(2)).
- In Radha Krishan Industries v State of Himachal Pradesh (2021) the Supreme Court held that the opinion must rest on tangible material showing the taxpayer is likely to defeat the demand; proceedings must be pending against that person; and the objection and hearing under Rule 159(5) are mandatory.
- An attachment may be challenged by writ petition, since no appeal lies against it.
s. 84Continuation and validation of recovery
Section 84 keeps recovery on track when an appellate or revisional order changes a demand. A reduction simply reduces the recovery; an enhancement needs a fresh notice of demand for the extra amount only.
- Under section 84 of the CGST Act, 2017, where a demand served on a person is the subject of an appeal, revision or other proceeding and is enhanced, a notice of demand for the enhanced part must be served, while recovery already begun continues for the original amount.
- Where the demand is reduced, a fresh notice is not needed; the proper officer informs the person of the reduction and recovery continues for the reduced amount.