If your GST notice is for FY 2024-25 or a later year, it will cite Section 74A of the CGST Act rather than Section 73 or 74. Section 74A is not just a renumbering. It puts fraud and non-fraud demands on one timeline, gives the department longer to issue notices than Section 73 did, and doubles the window for closing a case by paying early. This post explains how it works and how a reply should be built around it.
What is a Section 74A GST notice?
A Section 74A notice is a show-cause notice demanding tax not paid or short paid, erroneously refunded, or input tax credit wrongly availed or used, for FY 2024-25 onwards. It replaces the separate Section 73 (non-fraud) and Section 74 (fraud) routes with a single provision: one 42-month notice window and a 12-month order deadline, with the penalty depending on whether fraud is alleged and proved.
Section 74A was inserted by the Finance (No. 2) Act, 2024. The text is available in the CGST Act on cbic-gst.gov.in. Notices for FY 2023-24 and earlier still follow Sections 73 and 74, so the first check on any notice is whether the right section has been used for the year involved.
How does Section 74A compare with Sections 73 and 74?
| Point | Section 73 (to FY 2023-24) | Section 74 (to FY 2023-24) | Section 74A (FY 2024-25 onwards) |
|---|---|---|---|
| Type of case | No fraud, wilful misstatement or suppression | Fraud, wilful misstatement or suppression | Both, in one provision |
| Order deadline | 3 years from the annual return due date | 5 years from the annual return due date | 12 months from the notice, extendable by up to 6 months |
| Notice deadline | At least 3 months before the order deadline | At least 6 months before the order deadline | 42 months from the annual return due date (or erroneous refund date) |
| Penalty | 10% of tax or Rs 10,000, whichever is higher | Equal to the tax | Non-fraud: 10% of tax or Rs 10,000, whichever is higher. Fraud: equal to the tax |
| Pay after notice to close | Within 30 days: no penalty | Within 30 days: 25% penalty | Within 60 days: no penalty (non-fraud) or 25% penalty (fraud) |
| Pay after order to close | Not available | Within 30 days: 50% penalty | Fraud cases: within 60 days, 50% penalty |
| Minimum amount | No specific floor in the section | No specific floor in the section | No notice if the amount for the year is below Rs 1,000 |
How are the Section 74A time limits worked out?
Start from the due date of the annual return (GSTR-9) for the year concerned. For FY 2024-25 that due date was 31 December 2025, so 42 months later takes the notice deadline to 30 June 2029. For an erroneous refund, the 42 months run from the date of the refund instead.
Once the notice is issued, the officer has 12 months to pass the order. That can be extended by up to six months, but only by an officer senior to the proper officer, for reasons recorded in writing before the 12 months run out. An extension granted after the deadline, or without recorded reasons, is a point worth raising.
| Financial year | Provision | Annual return due date | Last date for notice |
|---|---|---|---|
| FY 2023-24 | Section 73 or 74 | Per the GSTR-9 due date for that year | Linked to the 3-year or 5-year order deadline |
| FY 2024-25 | Section 74A | 31 December 2025 | 30 June 2029 |
| FY 2025-26 onwards | Section 74A | Check the notified GSTR-9 due date | 42 months from that due date |
A longer window for non-fraud cases cuts both ways. The department has more time, but so does a well-organised business, because reconciliations for FY 2024-25 can be prepared now, before any notice arrives.
Why does the fraud allegation matter so much?
Under Section 74A the timeline is the same whether or not fraud is alleged, so the real difference is the penalty and the cost of settling early. A non-fraud demand can be closed with no penalty by paying tax and interest within 60 days of the notice. A fraud demand cannot: the minimum is a 25% penalty within 60 days of the notice, or 15% if paid before a notice is issued.
The burden is on the department to show fraud, wilful misstatement or suppression with evidence. Notices sometimes invoke fraud because the mismatch is large, without pointing to any intent. Your reply should separate the two questions: whether tax is short paid at all, and, if it is, whether the facts show anything more than a bona fide error. If the officer cannot sustain fraud, the order should apply the non-fraud penalty.
How should you reply to a Section 74A notice?
- Check the section against the year. A Section 74A notice for FY 2023-24 or earlier, or a Section 73 or 74 notice for FY 2024-25, is defective on its face.
- Check limitation. Compute 42 months from the annual return due date, and diarise 12 months from the notice for the order.
- Read the DRC-01 summary and the notice together. The amount, period and grounds should match. Note anything in the notice that has no supporting working.
- Decide on the 60-day window early. If part of the demand is correct, paying that part through DRC-03 within 60 days can remove or reduce the penalty on it, while you contest the rest.
- Answer each ground with documents. Reconciliations of GSTR-1, GSTR-3B and GSTR-2B, invoices, ledgers and supplier confirmations carry more weight than general denials. Our guide to ITC mismatch notices covers the reconciliation side in detail.
- Contest fraud separately. Show why the facts do not support intent, so that even an adverse order applies the lower penalty.
- File in DRC-06 and ask for a hearing. File within the time stated in the notice, usually 30 days, and request a personal hearing in writing.
For the first steps after a notice lands, see what to do in the first 48 hours. For help drafting the reply, see our GST notice reply service in Chennai.
What happens if the order goes against you?
An adverse Section 74A order (in Form DRC-07) can be appealed to the Appellate Authority in Form APL-01 within three months, with a pre-deposit of 10% of the disputed tax. A second appeal lies to the GST Appellate Tribunal, which in Tamil Nadu sits at Chennai, Coimbatore and Madurai. Our step-by-step guide on filing a GSTAT appeal in Tamil Nadu covers that stage, and the GST litigation page sets out the full appeal ladder. Businesses in the western districts can also see GST litigation in Coimbatore.
If you have received a notice citing Section 74A and want it reviewed before the reply date, contact our Anna Nagar office.