Introduction – When GST Thinks You Meant It
In GST, some mistakes are just that — mistakes. Others look a lot like you meant to underpay or claim wrongly. That’s when Section 74 of GST Act steps in.
It’s the Essential rule for cases involving fraud, wilful misstatement, or suppression of facts to evade tax. Here, the stakes are higher, the timelines are longer, and the penalties can be as much as the tax itself.
What Section 74 of GST Act Says – In Simple Language
If tax is unpaid, short paid, refunded wrongly, or ITC is wrongly used because of fraud, wilful misstatement, or suppression of facts to evade tax, the GST officer can issue a notice within 5 years from the due date of the annual return.
Penalties here start at 15% of tax (if paid before notice) and can go up to 100% of tax if you miss all early payment deadlines.
When It Applies & Timelines
Section 74 of GST Act is triggered when:
- Tax is not paid or short paid,
- Refund is erroneously granted, or
- ITC is wrongly availed or utilised,
…and it involves fraud, wilful misstatement, or suppression of facts to evade tax.
Key timelines:
| Step | Time Limit |
|---|---|
| SCN issue | Within 5 years from the due date of the annual return for that FY (or from the date of erroneous refund) |
| Order issue | SCN must be issued at least 6 months before the order; order within the same 5-year window |
Penalty Rules & Early Payment Benefits
Section 74 penalties are steep — but you can still save big if you pay early.
| When You Pay | What You Pay | Penalty |
|---|---|---|
| Before SCN | Tax + Interest + 15% of tax | Reduced Penalty |
| Within 30 days of SCN | Tax + Interest + 25% of tax | Reduced Penalty |
| Within 30 days of Order | Tax + Interest + 50% of tax | Reduced Penalty |
| After 30 days of Order | Tax + Interest + 100% of tax | Full Penalty |
Essential takeaway: Fraud cases hurt. The earlier you settle, the less it stings. Miss all deadlines, and your penalty equals the tax amount.
Quick Practical Tip
If you get a notice under Section 74 of GST Act, the department is alleging fraud, wilful misstatement, or suppression of facts. Penalties here can match the tax amount — so speed matters.
But if your case truly lacks intent to evade, you may be able to push it into Section 73 of GST Act territory, where penalties are far lighter.
From FY 2024–25 onwards, both Sections 73 and 74 are replaced by Section 74A of GST Act.
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