CBIC notifies S. 74A under GST Act for issuance of Notices w.e.f. November [Read Notification]

The Central Board of Indirect Taxes and Customs ( CBIC ) has notified the inclusion of Section 74A in the Goods and Services Tax ( GST ) Act, effective from November 1, 2024.

This new provision aims to streamline the process of issuing tax demand notices, bringing about uniformity across different cases, including those involving fraud, suppression, or willful misstatement.

Read Also: What Section 74A means for GST Adjudication: Merging Sections 73 & 74

Previously, separate time limits applied to these types of cases and those without such accusations, but Section 74A consolidates the timeframe for issuing notices regardless of the case nature.

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The key changes include amendments to various rules under the Central GST Act, such as Rule 88B, 88D, 96B, and 142, to incorporate references to Section 74A. For example, sub-rule (2B) now includes Section 74A alongside Section 74, and sub-rule (3) clarifies procedures for payment of tax, interest, and penalties under the revised provisions.

Form GST DRC-01A has also been updated to reflect the changes brought by Section 74A, adding clauses (8) and (9) under this section to the form’s heading, subject lines, and body text.

SECTION 74A EXPLAINED The newly introduced Section 74A of the GST Act mandates the issuance of demand notices for any reason, including non-payment, short payment, erroneous refund, or incorrect input tax credit utilization, from FY 2024-25 onwards.

This provision supersedes Sections 73 and 74, which will only apply till FY 2023-24. That is this section has merged both the Section 73 and 74, which confused and harassed the taxpayers by the GST department.

The new section clarifies that no notice will be issued if the amount involved is less than Rs 1,000.

The proper officer must issue a notice within 42 months from the due date of the annual return or erroneous refund, and may also issue a statement detailing issues for additional periods.

The penalty structure under Section 74A includes 10% of tax due or Rs 10,000 for reasons other than fraud or willful misstatement, and equivalent to tax due for fraud or willful misstatement as similar to the penalty under Section 73.

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The GST payers can pay tax and interest before receiving a notice to avoid penalties, and payment within specified timelines can conclude proceedings. The section also outlines the consequences of payment, including the conclusion of proceedings against all individuals liable for penalties under Sections 122 and 125.

Read More: [BREAKING] GST Demand Notices to be Issued under newly Inserted Sec. 74A Starting FY 2024-25 for 'Any Reason': Finance Bill 2024 [Read Bill]

The time limit for taxpayers to settle their tax dues with a reduced penalty has also been extended from 30 to 60 days, providing more flexibility and relief to taxpayers. This extension reflects the government's intention to ensure compliance while offering leniency for timely payments.

The Notification stated as follows: –

“In exercise of the powers conferred under the section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on the recommendations of the Council, hereby notifies the following special procedure for rectification of order, to be followed by the class of registered persons (hereinafter referred to as the said person), against whom any order under section 73 or section 74 or section 107 or section 108 of the said Act has been issued confirming demand for wrong availment of input tax credit, on account of contravention of provisions of sub-section (4) of section 16 of the said Act, but where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the said Act, and where appeal against the said order has not been filed, namely:–

2. The said person shall file, electronically on the common portal, within a period of six months from the date of issuance of this notification, an application for rectification of an order issued under section 73 or section 74 or section 107 or section 108 of the said Act, as the case may be, confirming demand for wrong availment of input tax credit, on account of contravention of provisions of sub-section (4) of section 16 of the said Act, but where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of section 16 of the said Act, and where appeal against the said order has not been filed.

3. The said person shall, along with the said application, upload the information in the proforma in Annexure A of this notification.

4. The proper officer for carrying out rectification of the said order shall be the authority who had issued such order, and the said authority shall take a decision on the said application and issue the rectified order, as far as possible, within a period of three months from the date of the said application.

5. Where any rectification is required to be made in the order referred to in paragraph 1 and, the said authority has issued a rectified order thereof, then the said authority shall upload a summary of the rectified order electronically– (i) in FORM GST DRC-08, in cases where rectification of an order issued under section 73 or section 74 of the said Act is made; and (ii) in FORM GST APL-04, in cases where rectification of an order issued under section 107 or section 108 of the said Act is made.

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6. The rectification is required to be made only in respect of demand of such input tax credit which has been alleged to be wrongly availed in contravention of provisions of sub-section (4) of section 16 of the said Act, but where such input tax credit is now available as per the provisions of sub-section (5) or sub-section (6) of the said section 16.

7. Where such rectification adversely affects the said person, the principles of natural justice shall be followed by the authority carrying out such rectification.”

To Read the full text of the Order CLICK HERE

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