Section 74 of the CGST Act 2017 deals with the determination of tax discrepancies, such as unpaid or underpaid taxes, erroneous refunds, or wrongly claimed input tax credit. These discrepancies must be due to fraud, wilful misstatements, or the suppression of facts to evade taxes.
The demand for Tax under Sections 74 of the CGST Act 2017 are
The proper officer can issue a notice to the person responsible for such tax discrepancies, asking them to explain why they shouldn't pay the specified tax amount, along with interest and a penalty equal to the tax amount mentioned in the notice.
The notice must be issued at least six months before the time limit specified for issuing an order.
Statement for Other Periods
The officer can also serve a statement to the person, detailing the tax discrepancies for periods other than those covered in the notice.
The statement is considered as a notice under Section 73 if the grounds for tax discrepancies are the same as those mentioned in the earlier notice, except in cases of fraud or wilful misstatement.
The person can voluntarily pay the tax, interest, and a penalty of 15% of the tax amount before receiving the notice, and inform the officer in writing.
No Notice After Payment
If the person pays as mentioned in point 6, no further notice will be served regarding the tax, interest, or penalty for the mentioned period.
Shortfall in Payment
If the officer believes the payment is insufficient, they can proceed to issue a notice for the remaining amount.
If the person pays the tax, interest, and a penalty of 25% of the tax within 30 days of receiving the notice, all proceedings for that notice are concluded.
After considering any representation from the person, the officer determines the final tax, interest, and penalty due and issues an order.
The officer must issue the order within five years from the due date for filing the annual return for the relevant financial year or within five years from the date of erroneous refund.
If the person pays the tax, interest, and a penalty of 50% of the tax within 30 days of receiving the order, all proceedings for that notice are concluded.