Section 74 GST Notice Reply
A Section 74 notice involves an allegation of fraud, suppression, or wilful misstatement. The stakes are higher — preparation matters more than ever.
What Is a Section 74 Notice?
Section 74 of the CGST Act applies when the tax authority alleges that tax has been evaded due to fraud, suppression of facts, wilful misstatement, or mis-declaration. This is the more serious of the two demand provisions (Section 73 covers non-fraud cases).
Because fraud is alleged, the penalty exposure is significantly higher and the limitation period for issuance of the SCN is extended to 5 years (instead of 3 years under Section 73).
What Are You Liable For?
| Component | Amount |
|---|---|
| Tax | Full amount of tax evaded or wrongly claimed |
| Interest | 18% per annum from the due date |
| Penalty (if paid before SCN order) | 15% of tax — reduced from 100% |
| Penalty (if paid within 30 days of SCN) | 25% of tax |
| Penalty (after order is passed) | Up to 100% of tax evaded |
Response Deadline
30 days from the date of service of the SCN to file a reply. An order must be issued by the officer within 5 years from the due date of the annual return for the relevant financial year.
Key Distinctions to Challenge
A Section 74 notice can sometimes be challenged on the threshold question of whether fraud was actually involved. If the discrepancy arose due to a genuine mistake, misunderstanding, or a difference in interpretation rather than intent to evade, you may have grounds to argue that Section 73 — not Section 74 — applies. This distinction carries a significant difference in penalty liability.
Documents You Will Need
- All GSTR filings for the disputed period.
- Sales and purchase registers with supporting invoices.
- Bank statements for the disputed period.
- Any correspondence with the tax department prior to this notice.
- A detailed written statement addressing each allegation in the notice.
- Legal provisions or precedents supporting your position, if any.
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