Section 74 of CGST Act 2017: Tax Discrepancy Due to Fraud and Misstatements

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 

Notice Issuance

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.

Notice Timing

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.

Deemed 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.

Voluntary Payment

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.

Early Settlement

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.

Order Issuance

After considering any representation from the person, the officer determines the final tax, interest, and penalty due and issues an order.

Time Limit

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.

Further Settlement

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.