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.
Key points
- 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.
The provisions
73(1)–(4)Show cause notice and statements
Statutory text
(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.
(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.
(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.
(4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.
** Kindly also refer to Notification No. 13/2022 Central Tax dated 5th Jul, 2022 (w.e.f. 01.03.2020).
1. Inserted by section 136 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
- Rule 142, CGST Rules; Forms GST DRC-01A, DRC-01, DRC-03, DRC-06, DRC-07
73(5)–(8)Paying before or after the notice
Statutory text
(5) The person chargeable with tax may, before service of notice under subsection (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.
(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.
(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.
(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.
What it means
A taxpayer who pays the tax and interest before a notice, on its own ascertainment or the officer's, and informs the officer (Form DRC-03) is not served a notice for that amount or any penalty. If the amount paid falls short, a notice issues for the balance. Paying tax and interest within thirty days of the notice closes all proceedings with no penalty.
73(9)–(12)Order, penalty and time limit
Statutory text
(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.
**(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.
(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.
1[(12) The provisions of this section shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24.]
What it means
The order (DRC-07) determines tax, interest and a penalty of 10% of tax or Rs. 10,000, whichever is higher. It must issue within three years of the due date of the annual return for the year, or of the erroneous refund; otherwise the proceedings are deemed concluded (section 75(10)). Self-assessed tax or tax collected but not paid within thirty days of its due date attracts the penalty even if paid early (sub-section (11)).
For 2017-18 to 2019-20 the time limits were extended by Notifications 13/2022, 9/2023 and 56/2023-Central Tax under section 168A. The Gauhati and Madras High Courts set aside Notification 56/2023 (among other grounds, for want of a GST Council recommendation, or because it fixed dates rather than extending them); the Allahabad, Patna and Telangana High Courts upheld the extensions. The Supreme Court issued notice on the question in 2025.
- Notifications 13/2022, 9/2023 and 56/2023-Central Tax — extension of time limits under section 168A
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- What is the time limit for a GST demand under section 73?
- The order must be passed within three years from the due date of the annual return for the year concerned, and the notice at least three months before that. Section 73 applies to periods up to 2023-24; later periods fall under section 74A.
- Can penalty be avoided after a section 73 notice?
- Yes. Paying the tax and interest within thirty days of the notice concludes the proceedings with no penalty (section 73(8) CGST).
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The notice is served in Form GST DRC-01, with a summary uploaded electronically (Rule 142); before it, the officer may communicate the proposed demand in DRC-01A under rule 142(1A). That intimation has been optional since 15.10.2020, when "shall" became "may"; it is commonly issued, and for earlier periods High Courts are divided on whether it was mandatory. A later "statement" can extend a notice to other periods on the same grounds without a fresh notice (sub-sections (3) and (4)). The source of the demand may be scrutiny, audit, investigation or other material — section 61 scrutiny is not a precondition.