Goods and Service Tax under Sec-73 and 74

[giri gattupalli]

Respected Sir,

One of my client is a works Contractor dealing in Govt. Civil works only. He has received during F.Y. 2025-26 he has received an amount of Rupees One Crore (Approx) and paid GST @ 12% as the work executed during F.Y.2018-19 and the bill received during 2025-26 after long pending with Government due to some legal issues with Govt. and now the Department issued notice u/s 74 asking to pay tax @ 18% in the above circumstances whether the notice u/s 74 is sustainable. Please discuss.

[giri gattupalli]

respected sir, i try to elaborate above query

1. taxable person is a govt works contractor.

2. around 1 cr received for works executed to govt.

3. GSTR-7 uploaded by contractee department and accepted by taxable person on gst website by filing tds returns.

4. turnover disclosed in gstr-3B and gst paid @12% .( and the contractee department awarded 12% gst only.)

5. turnover disclosed in ITR also.

and now the ellegation is 12% paid instead of 18%. and sec 74 notice issued.

please discuss whether notice under sec 74 sustainable as the turnover is disclosed in gst returns before issuence of notice

[Sanjeev Agarwal]

My preliminary view: the section 74 notice is strongly contestable, particularly on:

1. Time of supply - work was executed in FY 2018-19; payment in FY 2025-26 does not automatically determine the applicable rate.
2. Rate - if 12% was the applicable rate when the supply became taxable, 18% cannot ordinarily be imposed merely because payment was delayed.
3. Section 74 ingredients - mere rate dispute does not establish fraud/suppression with intent to evade tax.
4. Limitation - for FY 2018-19, this should be examined as a preliminary jurisdictional objection.

Before replying to the notice, please check the exact date of work completion, invoice date, date of filing of the relevant GSTR-1/3B, date of receipt of payment, date of annual return, and date of issue of the section 74 notice. These dates can determine whether the demand is time-barred altogether.

AI Summary

GST rate applicability for delayed government works-contract billing raises questions over tax demand sustainability under enforcement proceedings.
Sustainability of a GST demand under section 74 is questioned where a works contractor undertaking Government civil works received delayed payment in financial year 2025-26 for work executed in financial year 2018-19. GST was paid at 12%, while the department has sought tax at 18%. The issue concerns whether the higher rate demand is sustainable considering the period of execution, delayed billing and payment, and the rate already applied to the works-contract transaction.