Demands under Section 74A of the CGST Act, 2017: Limitation, Penalty and Settlement
This article explains Section 74A of the CGST Act, 2017, the single demand provision for tax periods from FY 2024-25, and how its limitation, penalty and settlement rules differ from Section 73 and Section 74. The position is stated as at 14 October 2026.
Notices for FY 2024-25 are now reaching assessees, and the first quarter-end outcomes depend on correct year classification, correct limitation dates and a considered choice between paying and contesting. Errors on any of these three points are expensive and difficult to reverse.
Provision by provision
Origin and commencement
Section 74A was inserted by Section 138 of the Finance (No. 2) Act, 2024 and brought into force on 1 November 2024 by Notification No. 17/2024-Central Tax dated 27 September 2024.
Scope
The section covers tax not paid or short paid, erroneous refund, and input tax credit wrongly availed or utilised. It applies whether or not fraud, wilful misstatement or suppression with intent to evade tax is alleged. There is therefore one demand route for fraud and non-fraud cases; what changes is the penalty.
Which years fall under it
Section 74A applies to periods from FY 2024-25. Sections 73 and 74 continue for periods up to FY 2023-24. The relevant year is the year of the alleged default, not the year in which the notice is issued. A review spanning several years must be tested year by year, since one notice may need to be examined under different provisions for different periods.