Published 13 October 2026
A demand under GST usually arrives in stages. There may first be an intimation that the officer has worked out an amount. Then comes a show cause notice proposing a demand with interest and penalty, then an opportunity to reply and be heard, and finally an order. At each stage the person receiving it can pay and close the matter, and at each stage the cost of doing so is different.
The rules governing all this changed for periods from 2024-25. Demands for 2017-18 to 2023-24 are made under section 73 or section 74 of the CGST Act, depending on whether fraud is alleged. Demands for 2024-25 onwards are made under a single provision, section 74A. The Finance (No. 2) Act, 2024, which created section 74A, also confined sections 73 and 74 to the earlier years. The first thing to establish about any notice is which regime it falls under.
Two regimes, divided by financial year
Sections 73 and 74 each now end with a sub-section (12). It provides that the section “shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24”. Section 74A(12) provides that it applies “for determination of tax pertaining to the Financial Year 2024-25 onwards”.
The test is the year the tax relates to, not the date of the notice. A notice issued in 2027 about 2022-23 is under section 73 or 74. A notice issued in 2027 about 2025-26 is under section 74A.
The pre-notice intimation: DRC-01A
Rule 142(1A) of the CGST Rules allows the proper officer, before issuing a show cause notice under section 73, 74 or 74A, to “communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A”.
Two features matter. First, the intimation is now optional. Sub-rule (1A) was inserted on 9 October 2019 by Notification No. 49/2019-Central Tax with the word “shall”, and Notification No. 79/2020-Central Tax changed it to “may” from 15 October 2020. For notices since then, High Courts have held that the absence of a DRC-01A does not by itself invalidate the notice. For periods before the change the courts are divided, as Before a Notice: DRC-01A and Paying Voluntarily sets out.
Second, the intimation is an opportunity, not a demand. The person may pay the amount, wholly or partly, through FORM GST DRC-03, or reply in Part B of DRC-01A. The officer may then accept the payment or submissions in Part C. Payment at this stage falls under the pre-notice payment provisions described below, at their lower cost.
The show cause notice: DRC-01
The notice itself is served with a summary in FORM GST DRC-01, under rule 142(1). Where the officer extends a notice to further periods on the same grounds, the extension is a “statement” served with a summary in FORM GST DRC-02. Under section 73(4), 74(4) and 74A(4), a statement is deemed to be service of notice for those periods. The reply to a notice is filed in FORM GST DRC-06. The final order is uploaded in summary in FORM GST DRC-07, and that order “shall be treated as the Notice for recovery”.
Up to 2023-24: section 73 or section 74
The choice between the two sections turns on one allegation. Section 74 applies where tax was short paid, or credit wrongly taken, “by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax”. Section 73 applies “for any reason, other than” those.
The consequences differ at every stage.
| Section 73 | Section 74 | |
|---|---|---|
| Penalty in the order | Ten per cent of tax or Rs 10,000, whichever is higher | Equal to the tax |
| Pay before notice | Tax and interest; no penalty | Tax, interest and 15 per cent penalty |
| Pay within 30 days of notice | Tax and interest; no penalty | Tax, interest and 25 per cent penalty |
| Pay within 30 days of order | No reduction | Tax, interest and 50 per cent penalty |
| Notice must issue | At least three months before the order deadline | At least six months before the order deadline |
| Order must issue | Within three years of the annual return’s due date | Within five years of the annual return’s due date |
Two provisions cut across the table. Section 73(11) makes the penalty payable despite early payment where “self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date”. A person who collected tax and kept it gets no penalty relief under section 73. And section 75(2) provides that if fraud or suppression under section 74 is not established on appeal, the tax is redetermined “as if the notice were issued under sub-section (1) of section 73”.
Suppression had its own definition, in Explanation 2 to section 74: “non-declaration of facts or information which a taxable person is required to declare in the return … or failure to furnish any information on being asked for, in writing”. Section 137(iii) of the Finance (No. 2) Act, 2024 provides that “the Explanation 2 shall be omitted” from section 74. That took effect on 1 November 2024, under Notification No. 17/2024-Central Tax. The same definition, “for the purposes of this Act”, now sits in section 74A. CBIC’s published text of section 74 still prints Explanation 2 with no note of its omission; the gazetted Act is the authority.
From 2024-25: section 74A
Section 74A replaces the two sections with one. Fraud no longer decides which provision applies. It still decides the penalty and the cost of settling.
One notice provision. Under section 74A(1), the officer serves notice “where it appears … 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. A proviso bars a notice where the amount for a financial year “is less than one thousand rupees”.
One timetable. The notice must issue “within forty-two months from the due date for furnishing of annual return” for the year, or from the date of an erroneous refund. The order must issue “within twelve months from the date of issuance of notice”. A Commissioner, or an officer not below Joint Commissioner, may extend that by up to six months, recording the reasons before the twelve months expire.
Two penalties. Section 74A(5) fixes the penalty at:
- for reasons other than fraud, wilful misstatement or suppression, ten per cent of tax due or Rs 10,000, whichever is higher
- for fraud, wilful misstatement or suppression, an amount equal to the tax due
Settlement windows. Sub-sections (8) and (9) keep the structure of the old sections, with longer periods:
| Non-fraud case | Fraud or suppression case | |
|---|---|---|
| Pay before notice | Tax and interest; no penalty | Tax, interest and 15 per cent penalty |
| Pay within 60 days of notice | Tax and interest; no penalty | Tax, interest and 25 per cent penalty |
| Pay within 60 days of order | No reduction | Tax, interest and 50 per cent penalty |
As under section 73, sub-section (11) withholds penalty relief where self-assessed tax or tax collected was not paid within thirty days of its due date.
New section 75(2A) mirrors section 75(2). If an appellate authority holds that fraud or suppression was not established, the penalty falls to the non-fraud rate under section 74A(5)(i).
Rules common to all three
Section 75 applies to every demand under sections 73, 74 and 74A.
- Hearing. “An opportunity of hearing shall be granted where a request is received in writing … or where any adverse decision is contemplated”. Adjournments are capped at three.
- Reasons. The order “shall set out the relevant facts and the basis of his decision”.
- The notice limits the order. The order “shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice”. The grounds in the notice therefore mark the limits of the case, because the order cannot add new ones.
- Time bar. Under section 75(10), if the order is not issued within the time limit in section 73(10), 74(10) or 74A(7), “the adjudication proceedings shall be deemed to be concluded”.
- Stays. Periods during which a court or the Appellate Tribunal has stayed the notice or order are excluded from the time limits.
- One penalty. A penalty imposed under section 73, 74 or 74A bars another penalty “for the same act or omission” under any other provision.
Self-assessed tax is different
Section 75(12) carves out one category from the notice process altogether. Where “self-assessed tax in accordance with a return furnished under section 39 remains unpaid”, it “shall be recovered under the provisions of section 79”, without a show cause notice. The Explanation extends “self-assessed tax” to tax on supplies declared in GSTR-1 but not in GSTR-3B. This is why the rule 88C intimation, described in the guide on GSTR-1 and GSTR-3B, can lead straight to recovery.
The waiver for 2017-18 to 2019-20
Section 128A, also inserted by the Finance (No. 2) Act, 2024, offered a one-time waiver for the first three years of GST. It covered demands under section 73 for the period 1 July 2017 to 31 March 2020. Where the full tax was paid by a notified date, “no interest under section 50 and penalty under this Act, shall be payable”. The waiver did not extend to section 74 demands, except those redetermined under section 73 after an appellate finding. It did not cover erroneous refunds, and did not cover cases where the person’s own appeal was pending and not withdrawn.
Notification No. 21/2024-Central Tax fixed the date for payment as 31 March 2025. Where a section 74 notice is redetermined under section 73 after an appellate finding, the date is six months from the order redetermining the tax. As of October 2026, no extension of the general date has been notified. For most demands the window has closed.
Responding to a notice
The order of analysis is:
- Identify the financial year the notice concerns. Up to 2023-24 it is under section 73 or 74. From 2024-25 it is under section 74A.
- Check the time limits: whether the notice was issued in time, and when the order must issue. For section 74A, the notice must be within forty-two months of the annual return’s due date.
- If fraud, wilful misstatement or suppression is alleged, identify the facts relied on. The penalty, and the cost of settling, depend on whether the allegation stands.
- Payment is possible at each stage: before notice, within the window after notice, or within the window after order. The penalty differs at each stage.
- If contesting, file the reply in DRC-06, ask in writing for a hearing, and confine the officer to the grounds in the notice.
- If an order is passed, the time to appeal begins on its communication. The next guide covers that appeal.
The next guide covers appeals to the Appellate Authority under section 107, and the pre-deposit required before one can be heard.