The 53rd GST Council Meeting held on June 22, 2024 recommended amendments in Section 73 and Section 74 of the CGST Act and the insertion of a new Section 74A in the CGST Act, to provide for common time limit for issuance of demand notices and orders irrespective of whether case involves fraud, suppression, willful misstatement etc., or not.
Earlier, there was a different time limit for issuing demand notices and demand orders, in cases where charges of fraud, suppression, willful misstatement etc., are not involved, and in cases where those charges are involved but now to simplify the implementation of those provisions, the GST Council recommended to provide for a common time limit for issuance of demand notices and orders in respect of demands for FY 2024-25 onwards, irrespective of whether case involves fraud, suppression, willful misstatement etc., or not.
Also, the time limit for the taxpayers to avail the benefit of reduced penalty, by paying the tax demanded along with interest, was recommended to be increased from 30 days to 60 days in Section 74A of the CGST Act.
Based on the recommendations of the council, Section 74A was introduced in the CGST Act, which deals with the determination of tax not paid, short-paid, erroneously refunded, or input tax credit wrongly availed or utilized for any reason, applicable from the Financial Year 2024-25 onwards. The introduction of Section 74A reflects the Government’s intent to streamline the time limits for the issuance of show cause notices and the passing of orders for both fraud and non-fraud cases, by prescribing a uniform time limit for both.
For any tax determination relating to periods up to FY 2023-24, the provisions of Sections 73 or 74 of the CGST Act will continue to apply. However, for tax periods beginning from FY 2024-25, the provisions of Section 74A will govern the proceedings.
The CBIC vide Notification No. 17/2024–Central Tax dated September 27, 2024, notified the commencement dates for various provisions of the Finance (No. 2) Act, 2024.
Thus, Section 138 of Finance (No.2) Act, 2024, which inserts the new Section 74A into the CGST Act, will come into force from 1st November 2024.
Now:
The CBIC vide Notification No. 20/2024 – Central Tax dated October 08, 2024 notifies insertion of Section 74A of the CGST Act in various sections as mentioned below w.e.f. November 01, 2024:
“In the said rules, in rule 88B, in sub-rule (1), after the word and figures “or section 74”, the words, figures and letter “or section 74A” shall be inserted with effect from the 1st day of November, 2024.
In the said rules, in rule 88D, in sub-rule (3), after the words and figures “or section 74”, the words, figures and letter “or section 74A” shall be inserted with effect from the 1st day of November, 2024.
In the said rules, in rule 96B, in sub-rule (1), for the words and figures “section 73 or 74” the words, figures and letters “section 73 or section 74 or section 74A” shall be substituted with effect from the 1st day of November, 2024.
In the said rules, in rule 142 with effect from the 1st day of November, 2024,––
(a) in sub-rule (1),––
(i) in clause (a), after the words and figures “or section 74”, the words, figures and letter “or section 74A” shall be inserted;
(ii) in clause (b), after the words and figures “of section 74”, the words, brackets, figures and letter “or sub-section (3) of section 74A” shall be inserted;
(b) in sub-rule(1A), after the words and figures “of section 74”, the words, brackets, figures and letter “or subsection (1) of section 74A” shall be inserted;
(c) in sub-rule (2), for the words, brackets and figures “or, as the case may be, tax, interest and penalty in accordance with the provisions of subsection (5) of section 74”, the words, brackets, figures and letters “or clause (i) of sub-section (8) of section 74A, as the case may be, or tax, interest and penalty in accordance with the provisions of subsection (5) of section 74 or clause (i) of sub-section (9) of section 74A” shall be substituted;
(d) in sub-rule (2B), after the words and figures “or section 74”, the words, figures and letter “or section 74A” shall be inserted;
(e) for sub-rule (3), the following sub-rule shall be substituted, namely: ––
“(3) Where the person chargeable with tax makes payment of tax and interest under sub-section (8) of section 73 or under clause (ii) of sub-section (8) of section 74A, as the case may be, or tax, interest and penalty under sub-section (8) of section 74 or under clause (ii) of sub-section (9) of section 74A, as the case may be, within the period specified therein, or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within seven days of the notice issued under sub-section (3) of that Section but before the issuance of order under the said sub-section (3), he shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an intimation in FORM GST DRC-05 concluding the proceedings in respect of the said notice.”;
(f) in sub-rule (4), after the words and figures “of section 74”, the words, brackets, figures and letters “or subsection (6) of section 74A” shall be inserted.
(g) in sub-rule (5), after the words and figures “or section 74”, the words, figure and letters “or section 74A” shall be inserted”
Form:
The CBIC has also amended the Form GST DRC-01A (Rule 142 (1A), (2A)) which is as follows:
In the said rules, in FORM GST DRC-01A, with effect from the 1st day of November, 2024, ––
(a) in the heading, after the figures and brackets “73(5)/74(5)”, the figures, letters, and brackets “/74A (8)/ 74A (9)” shall be inserted;
(b) in PART A , ––
(i) in the subject, after the words, figures and brackets “section 73(5)/section 74(5)”, the figures, letters and brackets “/74A (8)/ 74A(9)” shall be inserted;
(ii) in the first paragraph, after the words, figures and brackets “under section 73(5) / 74(5)”, the figures, letters and brackets “/74A (8)/ 74A(9)” shall be inserted;
(iii) after the fourth paragraph, the following shall be inserted, namely: ––
“OR
You are hereby advised to pay the amount of tax as ascertained above along with the amount of applicable interest in full by ……., failing which Show Cause Notice will be issued under sub-section (1) of section 74A read with clause (i) of sub-section (5) of the said section.
OR
You are hereby advised to pay the amount of tax as ascertained above along with the amount of applicable interest and penalty in full by ……., failing which Show Cause Notice will be issued under sub-section (1) of Section 74A read with clause (ii) of sub-section (5) of the said section.”
(c) in PART B, in the first paragraph, after the words, figures and brackets “under section 73(5) / 74(5)”, the figures, letters and brackets “/74A (8)/ 74A (9)” shall be inserted.
Our Comments:
The insertion of Section 74A in the CGST Act, effective from November 1, 2024, marks a significant change aimed at simplifying and unifying the process for tax demand notices and orders. Previously, separate time limits applied to cases involving fraud, suppression, or willful misstatement, and those without such charges. With Section 74A, a common time limit will apply for issuing demand notices and orders, regardless of the nature of the case. This amendment streamlines the process for tax demands from FY 2024-25 onward and provides taxpayers with more clarity and predictability.
Additionally, the extension of the time limit from 30 to 60 days for taxpayers to avail reduced penalties by settling tax dues, along with interest, is a relief measure. It reflects the government’s intention to provide greater flexibility while ensuring compliance.
The corresponding amendments to various rules and forms (such as Rule 88B, 88D, 96B, 142, and GST DRC-01A) further align procedural aspects with the introduction of Section 74A, ensuring smooth implementation. This move is expected to reduce procedural complexities and enhance taxpayer convenience by providing a more standardized process across fraud and non-fraud cases.
The Notification can be accessed at: https://a2z-bucket.s3.ap-south-1.amazonaws.com/CBIC_notified_the_Central_Goods_and_Services_Tax_%28Second_Amendment%29_Rules%2C_2024..pdf