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Section 74A of the CGST Act — Why It Matters Before Filing GSTR-9 & 9C

  • Writer: Bhagya Lakshmi
    Bhagya Lakshmi
  • Oct 30, 2025
  • 3 min read

A New Chapter in GST Demand & Recovery

The Goods and Services Tax law has taken a major structural shift with the introduction of Section 74A, which merges the provisions of Sections 73 and 74.From FY 2024-25 onward, all cases of tax short-payment, erroneous refund, or wrong ITC availment — whether due to error or fraud — will now be governed under this single section.

This simplification aims to bring uniform timelines, rational penalty structure, and early compliance opportunities for genuine taxpayers.


Why Section 74A Is Important Now, Before Filing GSTR-9 & 9C

Most businesses are currently preparing for annual return (GSTR-9) and reconciliation statement (GSTR-9C) for FY 2024-25.This is precisely the right time to identify any missed liabilities, excess ITC, or refund mismatches, because:

  • Under Section 74A, Show Cause Notices (SCNs) can be issued within 42 months from the due date of the annual return.

  • Once the SCN is issued, the penalty clock starts ticking — but if tax and interest are paid voluntarily before the SCN, the entire penalty can be avoided.

  • Even if payment is made within 60 days of receiving the SCN, penalty is waived for non-fraud cases.


👉 Hence, reconciling before filing GSTR-9 & 9C is no longer optional — it’s a safeguard against future litigation and penalties.


Key Highlights of Section 74A

1. Unified Approach for All Types of Cases

Section 74A covers both:

  • Non-fraud cases (genuine errors, inadvertent omissions), and

  • Fraud/suppression cases (intentional misstatements).


2. Time Limits

Stage

Time Limit

Issue of SCN

Within 42 months from due date of annual return or date of erroneous refund

Passing of Order

Within 12 months from SCN date (extendable by 6 months)


3. De-minimis Limit

No SCN will be issued if the total disputed amount in a financial year is less than ₹1,000.


4. Penalty Structure

Case Type

If paid before SCN

If paid within 60 days of SCN

If paid after order

Non-Fraud

No penalty (only tax + interest)

No penalty

Penalty = 10% of tax or ₹10,000 (whichever is higher)

Fraud / Suppression

15% of tax

25% of tax

50% of tax (within 60 days of order); 100% thereafter


Notification & Rule Amendments

  • Notification No. 20/2024 – Central Tax (dated 8 October 2024) formally incorporated Section 74A across GST Rules (Rules 88B, 88D, 96B, 142, etc.) effective 1 November 2024.

  • The Finance Act 2024 inserted Section 74A through Section 138, creating a consolidated procedure for determination and recovery of tax.

  • Circular No. 254/11/2025-GST (27 October 2025) clarified the monetary limits and designated officers for proceedings under this new section.




Why This Change Is a Wake-Up Call

Before Section 74A, the system under Sections 73 and 74 often created confusion — which section applied, different time limits, different penalty stages.Now, authorities have one streamlined process and clear timelines, meaning notices can be issued faster and penalties determined more systematically.

For taxpayers, this means:

  • Proactive reconciliation is more important than ever.

  • Paying tax voluntarily before SCN can save not just penalties but also the stress of prolonged proceedings.

  • Documentation and internal control on ITC, reverse charges, and refunds will directly affect the outcome of any scrutiny.


Practical Steps Before Filing GSTR-9 & 9C

  1. Reconcile ITC — match 2B with books, check reversals and ineligible credits.

  2. Review outward supplies — ensure all invoices, debit notes, and amendments are reflected.

  3. Verify advances, exports, and refunds — reconcile with bank statements and FIRC/BRC.

  4. Check interest & late fee — pay voluntarily if any missed.

  5. Document voluntary payments — if any tax/interest paid before SCN, maintain DRC-03 copies.

  6. Keep communication trail — proof of correspondence can later establish absence of fraud intent.


Conclusion

Section 74A is not just another amendment — it’s a signal that the GST compliance regime is tightening while also offering relief to timely, honest taxpayers.

As the due date for GSTR-9 & 9C filing approaches, this is the last window to reconcile and make voluntary corrections before the SCN period begins.Doing so ensures:

  • Clean compliance record

  • Avoidance of penalty under 74A

  • Reduced litigation risk for the next 3–4 years


In short — spend time reconciling today, to save time and cost tomorrow.

 
 
 

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