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.
Key points
- 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)).
The provisions
74(1)–(4)Notice in cases of fraud or suppression
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 by 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 equivalent to the tax specified in the notice.
(2) The proper officer shall issue the notice under sub-section (1) at least six 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 statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any wilful-misstatement or suppression of facts to evade tax, for periods other than those covered under subsection (1) are the same as are mentioned in the earlier notice.
*Enforced w.e.f. 1st July, 2017.
2. Inserted by section 137 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
- Rule 142, CGST Rules; Forms GST DRC-01, DRC-03, DRC-07
Cases on this provision
G.R. Infra Projects Ltd v State of Madhya Pradesh
Civil Appeal No. 11277 of 2026 · 19.08.2026 · Supreme Court, 2 Judges (J.B. Pardiwala, K. Vinod Chandran JJ.)
- Facts
- A show cause notice under section 74 was issued on 13.06.2025 for 2018-19. The time limit for an order under section 73 for that year, even with the extensions, had expired by then, so the notice was in time only if section 74 applied. The notice referred to "fraud or concealment of facts" without saying what facts showed it. The Madhya Pradesh High Court upheld the notice.
- Held
- Appeal allowed and the notice quashed. The extended period cannot be invoked by mechanically using the words fraud, wilful misstatement or suppression. The allegations that lead to an inference of fraud or suppression must come from the notice itself; the department cannot supply them later through a counter-affidavit. Without them the notice was governed by section 73 and was time-barred.
- Here
- A section 74 notice must say what was concealed or misstated, how it was detected, and why it shows intent to evade. A notice that does not is tested by section 73's time limits.
Uniworth Textiles Ltd v Commissioner of Central Excise, Raipur
(2013) 9 SCC 753 · 22.01.2013 · Supreme Court, 2 Judges (D.K. Jain, Madan B. Lokur JJ.)
- Facts
- An export-oriented unit imported furnace oil duty-free under a customs exemption and used it in a sister concern's captive power plant, after first asking the Development Commissioner whether it could. The department demanded duty under the extended period in the proviso to section 28 of the Customs Act, 1962, treating the non-payment itself as wilful misstatement or suppression.
- Held
- Mere non-payment of duty is not collusion, wilful misstatement or suppression; the assessee's own inquiry to the Development Commissioner showed good faith. The extended period needs a deliberate attempt to evade, and the burden of proving it lies on the department; the notice must make specific allegations so the assessee can meet them.
- Since then
- The principle applies to section 74, which uses the same words, and was applied by the Supreme Court in G.R. Infra Projects (2026).
- Here
- A shortfall, a mismatch or a contested interpretation is not suppression in itself; intent to evade must be shown.
74(5)–(8)Paying with a reduced penalty
Statutory text
(5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax 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), 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) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent. of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.
What it means
Before a notice, paying tax, interest and 15% penalty (Form DRC-03) ends the matter for that amount. Within thirty days of the notice, paying tax, interest and 25% penalty concludes all proceedings. Prosecution under section 132 is not covered by that conclusion (Explanation 1(i)).
74(9)–(12)Order, time limit and scope
Statutory text
(9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.
(10) The proper officer shall issue the order under sub-section (9) within a period of five 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 five years from the date of erroneous refund.
(11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent. of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.
2[(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 must issue within five years of the due date of the annual return, or of the erroneous refund; otherwise the proceedings are deemed concluded (section 75(10)). Paying tax, interest and 50% penalty within thirty days of the order concludes the proceedings. From 01.11.2024 (Finance (No. 2) Act, 2024; Notification 17/2024-Central Tax) the section is limited to periods up to 2023-24; section 74A governs later years.
74 Expl.Concluded proceedings; "suppression"
Statutory text
Explanation 1.- For the purposes of section 73 and this section,-
(i) the expression "all proceedings in respect of the said notice" shall not include proceedings under section 132;
(ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under 1[sections 122 and 125] are deemed to be concluded.
Explanation 2.- For the purposes of this Act, the expression "suppression" shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer.
1. Substituted (w.e.f. 1st January, 2022 vide Notification No. 39/2021-C.T., dated 21st December, 2021) by s. 113 of The Finance Act, 2021 (No. 13 of 2021) dated 28th March, 2021 for "sections 122, 125, 129 and 130".
What it means
Explanation 1 excludes prosecution from "all proceedings" and provides that once proceedings against the main person are concluded, proceedings against co-noticees for penalty under sections 122 and 125 are concluded too.
Explanation 2, defining "suppression", was omitted from this section by the Finance (No. 2) Act, 2024 with effect from 01.11.2024; the same definition now appears as Explanation 2 to section 74A, "for the purposes of this Act". The CBIC text still prints it here, followed by an editor's note recording the omission.
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
- When can GST demand be raised for five years?
- Under section 74 of the CGST Act, only where tax was evaded by fraud, wilful misstatement or suppression of facts. The notice must set out the facts showing this; the Supreme Court quashed a notice that merely recited the words (G.R. Infra Projects, 2026).
- What is the penalty under section 74?
- Equal to the tax, reduced to 15% if paid with interest before the notice, 25% within thirty days of the notice, or 50% within thirty days of the order.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The extended period depends on fraud, wilful misstatement or suppression with intent to evade tax. The burden is on the department, and the facts must be pleaded in the notice. A statement for other periods under sub-section (3) is treated as a notice under section 73, except where it rests on the fraud ground (sub-section (4)).