Awareness on section 74 of CGST Act 2017 required  amongst all concerned

There are few sections under CGST Act 2017 which are carefully drafted by legislature to protect the interest of the common taxpayers. Examples include 73, 74, 75, 129 and 130 etc. A careful reading of the above few sections would reveal that while the interest of the Revenue is duly protected, the possible misuse of these sections by field formation has also been considered well. Despite this clear legal position, often section 74 is applied in inappropriate manner to ensure longer period for raising the demand as well as to levy huge penalties.

Observing that section 74 is mostly applied in inappropriate manner, CBIC was forced to issue instructions on 13/12/2023 to issue show cause notices under section 74 only after the department is convinced that there was an intention to evade the payment of tax by the taxpayer.   Unfortunately, awareness was not sufficient amongst taxpayers as well as tax professionals on the above instruction number 05/2023 GST which led the Government to do away with the different treatments for time limit to issue show cause notices under 73 and 74. Accordingly, both the sections 73 as well as 74 are applicable only for the tax period up to 31/03/2024.

Effective from 01/04/2024 onwards, Show Cause Notice can be issued only under the new section 74A.

Let us have a quick look on issuance of SCN Under section 73 up to 31/03/2024.

As on date, SCN possible for only 2022-23 as well as 2023-24 as the last date for issuing SCN for 2021-22 lapsed on 30/09/2025 itself.

Similarly, no show cause notice under section 74 is possible for the period up to 31/03/2020 as the last date permissible lapsed on 30/09/2025 itself.  This is the most important issue which is the crux of this article.

The period from 01/04/2020 up to 31/03/2021 can be covered for issuing SCN only under 74 up to 31/08/2026 as SCN under 73 is possible now only for 2022-23 as well as 2023-24 as discussed above. In order to take advantage of the two financial years 2020-21 and 2021-22 for covering under the SCN, the department at state level as well as central level is going to issue Show Cause Notices under 74, even though the same is impermissible as per norms in most of the cases, except the fraudulent intention cases.

Even when a case where section 74 is applied inappropriately, the GSTAT or the Jurisdictional High Court is only going to either set aside or even quash the orders passed under section 74 or order by first appellate authority which confirms that 74 is invoked in right manner, whereas the officer who has issued notice under section 74 may be even promoted for raising huge demands.

Under the above circumstances, awareness is a must amongst all taxpayers as well as tax professionals that we should not continue to be a silent spectator of misuse of Section 74 by the field formation and must act SHREWD.

In order to achieve the above, the following points may be taken to account.

1. Whenever any SCN is issued under section 74, it has only a bleak chance of appropriate invocation. Ensure that it pertains only to 2020-21 and subsequent 3 years as other than for these four years, 74 is not applicable.
2. Compare with the allegations/ contentions as to whether the same are in line with CBIC Instructions 05/2023 GST. Enclose a copy of the instruction in reply.
3. The Calcutta High Court on 01/12/2025 ruled in WPA 10056 of 2025 in the matter of M/s Silverton Metals Pvt. Ltd. & Anr. Versus Joint Commissioner, Central Tax, Haldia CGST & CX Commissionerate & Ors. - 2026 (1) TMI 1388 - CALCUTTA HIGH COURT that each and every contentions raised in SCN must pass the test of 74. The final verdict in the above case is expected in February 2026. Accordingly, in case there are 7 contentions and 74 is applicable only for 2 contentions, for remaining contentions only 73 applies which can cover only 2022-23 and 2023-24 as all other years are outside the purview of section 73 as on date.
4. Mere short payment/ non payment of GST or availing of ITC due to interpretational issues are not sufficient to invoke 74. It is for the Revenue to prove that the taxpayer had fraudulent intentions to evade payment of tax.

To sum up, it may be concluded that both taxpayers as well as tax professionals must be fully aware of the applicability or otherwise of the Section 74 of the CGST Act so as to achieve the intentions of that section which the legislature had in mind during enactment.