GST Basics #21: Sections 73 and 74 — When the Department Says You Owe Tax

Sections 73 and 74 are the two routes by which a GST officer turns a view that you underpaid into a demand. The difference is your conduct, not the amount — and it decides how far back the department can go.

Most GST disputes begin the same way. An officer takes the view that you paid less tax than you should have, claimed credit you were not entitled to, or received a refund you should not have received. Sections 73 and 74 of the CGST Act are the two doors through which that view becomes a demand.

What separates them is your conduct, not the amount. Section 73 is the ordinary route, for a shortfall arising for any reason other than fraud — a wrong classification, an arithmetical slip, credit taken on an invoice that turns out to be defective. Section 74 is the serious route, for a shortfall the department attributes to fraud, wilful misstatement, or suppression of facts to evade tax. Section 74 gives the department a considerably longer period to act and carries a heavier penalty. In both sections the penalty steps down the earlier you settle: least if you pay the tax and interest before any notice issues, more if you pay within the time allowed after the notice, most if you contest and lose. Read the exact percentages and periods in the sections themselves before relying on them.

One period is officially settled. Under Section 73(10) the order must be passed within three years of the due date for the annual return for that year, and under Section 73(2) the notice must reach you at least three months earlier — in CBIC's own words, "within 2 years and 9 months from the due date of furnishing of annual return". That is Circular No. 185/17/2022-GST: https://cbic-gst.gov.in/pdf/circular-185.pdf

The same circular explains Section 75(2). Where an appellate authority, tribunal or court finds the charge of fraud or suppression was not made out, the officer must recompute the tax "deeming as if the notice was issued under sub-section (1) of section 73". The tax survives. The extended period and the heavier penalty do not.

Who signs your notice depends on the amount. Circular No. 31/05/2018-GST puts central tax demands up to Rs. 10 lakh with the Superintendent, above that up to Rs. 1 crore with the Deputy or Assistant Commissioner, and anything above Rs. 1 crore with the Additional or Joint Commissioner: https://cbic-gst.gov.in/pdf/circularno-31-cgst.pdf

Note one change. Sections 73 and 74 now govern years up to 2023-24. From the financial year 2024-25 a new Section 74A takes over, as the GST Council Secretariat's own newsletter records: https://gstcouncil.gov.in/sites/default/files/2025-11/october_issue.pdf

In practice the notice reaches you as Form GST DRC-01 under Services > User Services > View Notices and Orders. Reply there by the due date; two adjournments are allowed; pay voluntarily at any stage in Form GST DRC-03. The portal's own guide is at https://tutorial.gst.gov.in/userguide/audit/Manual_audit.htm

See also #18 on DRC-03 and the ledgers, #19 on the annual return that starts this clock, and #11 on the credit conditions most demands turn on.

Topics:section 73 cgstsection 74 cgstgst demand noticedrc-01drc-03show cause noticesection 74asection 75(2)gst limitationproper officergst basicschennai gst

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