Section 74 GST Notice explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A section 74 notice alleges that tax was not paid, or credit was wrongly taken, by reason of fraud, wilful misstatement or suppression of facts to evade tax. The consequence is a penalty equal to the tax, but the law also gives you a ladder of cheaper exits if you pay early. Where you are on the ladder decides what you pay.
Section 74 applies to periods up to FY 2023-24. The notice must be issued at least six months before the order deadline, and the order must be passed within five years from the due date of the annual return. The penalty is 15% of tax if you pay before the notice, 25% within 30 days of the notice, 50% within 30 days of the order, and an amount equal to the tax otherwise, plus interest under section 50. For FY 2024-25 onwards, section 74A applies, with 60-day windows.
When section 74 (and not 73) is used
Section 74 is the extended-period route. The proper officer serves a notice where tax has not been paid, short paid or erroneously refunded, or ITC has been wrongly availed or utilised, by reason of fraud or any wilful misstatement or suppression of facts to evade tax. The notice demands the tax, interest under section 50 and a penalty equal to the tax. The non-fraud equivalent is covered in section 73 time limits, and the comparison in section 73 vs section 74.
The Background Material reproduces CBIC Instruction No. 05/2023-GST dated 13.12.2023: section 74(1) cannot be invoked merely because GST was not paid. There must be material evidence of fraud, wilful misstatement or suppression with intent to evade tax, and that evidence should be part of the show cause notice. If your notice simply says "tax not paid" with no evidence of intent, say so in the reply. Dates and evidence should be checked before any reply is filed, and our GST notices and litigation team can do that review for you.
A point on "suppression". The commentary refers to a special definition of suppression in Explanation 2. The statutory text in the same material shows Explanation 2 as omitted by the Finance (No. 2) Act 2024, effective 1 November 2024, and the section itself now reads only "fraud, or any wilful misstatement or suppression of facts to evade tax". The omitted wording covered non-declaration of facts required to be declared in a return, or failure to furnish information asked for in writing. Follow the statutory text for current notices, but note that this wording was the law for earlier notices.
The penalty ladder
| When you pay tax, interest and penalty | Penalty | Provision |
|---|---|---|
| Before notice is served | 15% of tax | 74(5) |
| Within 30 days of issue of the notice | 25% of tax | 74(8) |
| Within 30 days of communication of the order | 50% of tax | 74(11) |
| Any other case | Equal to the tax | 74(1) |
Illustration: tax of Rs. 10,00,000 is alleged to be short paid by suppression. Interest under section 50 is extra in every row.
| Stage of payment | Penalty |
|---|---|
| Before notice | Rs. 1,50,000 |
| Within 30 days of notice | Rs. 2,50,000 |
| Within 30 days of order | Rs. 5,00,000 |
| After that | Rs. 10,00,000 |
Paying before the notice on your own ascertainment, or on the officer's, is reported in DRC-03, acknowledged in DRC-04, and no notice is then served for that tax or any penalty on it. If the officer thinks the payment is short, he can issue a notice for the shortfall. Paying tax, interest and 25% penalty within 30 days of the notice concludes the proceedings (intimation in DRC-03, closure by DRC-05). Your reply to the notice goes in DRC-06, and the order summary is uploaded in DRC-07.
The section also carries an Explanation: concluded proceedings against the main person do not include section 132 (prosecution), and where the main person's proceedings are concluded, proceedings against the other persons named in the same notice and liable to penalty under sections 122 and 125 are deemed concluded. The text printed in the material carries a bracketed reference to sections 129 and 130 as well, so read the Act for the exact wording.
The two clocks
| Item | Section 74 |
|---|---|
| Notice (74(2)) | At least 6 months before the order deadline |
| Order (74(10)) | Within 5 years from the due date of the annual return for the year, or 5 years from the date of erroneous refund |
| Later periods (74(3)) | Statement with DRC-02, deemed notice if grounds are the same (except the fraud/suppression ground) |
| Applies to | Periods up to FY 2023-24 (74(12)) |
The "except the ground of fraud" carve-out in section 74(4) is worth reading: for later periods covered by a statement, the grounds other than fraud must match the earlier notice.
Section 74A for FY 2024-25 onwards
For FY 2024-25 and later, demands go under section 74A. The Background Material shows the penalty structure for the fraud case as the same percentages, with longer windows:
| Payment | Section 74 | Section 74A |
|---|---|---|
| Before notice | 15% | 15% |
| After notice | 25% within 30 days | 25% within 60 days |
| After order | 50% within 30 days | 50% within 60 days |
| Otherwise | Equal to tax | Equal to tax |
Section 74A also sets a notice deadline of 42 months from the annual return due date (or from an erroneous refund), an order deadline of 12 months from notice (extendable by up to 6 months with recorded reasons), and no notice where the tax for a financial year is under Rs. 1,000. See section 74A: 42 months and the Rs. 1,000 floor for the detail.
What to check first in a section 74 notice
- Evidence of intent. Is there material showing fraud, wilful misstatement or suppression, or just a computation difference?
- Limitation. Order within five years of the annual return due date and notice at least six months earlier.
- Whether a cheaper exit is still open. The 25% window closes 30 days after the notice; the 50% window closes 30 days after the order.
- Grounds. The order cannot travel beyond the notice.
- Who is the proper officer under the monetary limits in Circular 31/05/2018-GST.
Need help with a fraud-suppression notice?
These notices turn on evidence, dates and choosing the right exit window. We can review the notice, test limitation and intent, and prepare the reply or the payment route through GST notices and litigation. If you may also need to reverse or correct credit, our ITC reconciliation advisory can help identify the exposure.
Key takeaways
- Section 74 is the fraud, wilful misstatement and suppression route, for periods up to FY 2023-24.
- Notice at least 6 months before the order deadline; order within 5 years of the annual return due date.
- Penalty ladder: 15%, 25%, 50% of tax, then an amount equal to the tax, plus interest.
- Instruction 05/2023-GST: non-payment alone is not enough to invoke section 74(1).
- From FY 2024-25, section 74A applies, with 60-day windows instead of 30.
Read next
- Section 73 GST Notice: Time Limits for FY 2017-18 to 2023-24
- Section 74A Penalties: Four Windows and What Each Costs
- Penalty for Fake Invoices and Beneficiaries: Section 122(1A)
- The GST Demand Limitation Map: Sections 73, 74 and 74A
Disclaimer: Positions stated as on 30 September 2026, based on the CGST and IGST Acts and Rules as amended, the Finance Act 2026, and the ICAI Background Material on GST (14th Edition, July 2026). Verify current notifications before acting.