Demand and Recovery of GST under Section 74A

[K Balasubramanian]

1. Introduction: One of the major amendments in GST proposed in the Finance Bill dated 23/07/2024 is on Demand and Recovery of GST by way of insertion of a new Section 74A from the year 2024-25.  It is also proposed that Section 73 as well as section 74 shall be effective only up to the Financial Year 2023-24. This proposed change in law is a SIGNIFICANT ONE as it has far reaching consequences.

2. There are two different time limits applicable as of now on time limit for issuance of Show Cause Notice as well as for passing the Adjudication order as provided under Section 73 and Section 74. These timelines shall have limited application in force till  the New section 74A is enacted. The various timelines under 73, 74 and 74A are explained by way a table as below.

Section	73	74	74A
Time limit for issue of SCN	33 months	54 months	42 months
Time Limit for passing the Order	36 months	60 months	54, extendable to 60 months
Cases	Non Fraudulent	FRAUDULENT	ALL  CASES

3. The above time limits in months shall be applicable from the date due for filing the annual GST return or the actual date on which GST annual Return was filed, whichever is later.   Though the move shall greatly reduce the burden on the Department  to establish that there was a fraudulent intent of the taxpayer, the time limit for NON FRADULENT cases got extended by 9 months which is a burden on the genuine tax payer, as the Department has more time to issue SCN as well as to pass the Order,

4. Gains to taxpayer: By way of deletion of Section 74, there is an advantage in section 17(5) as ITC denial on Section 74 cases shall not be there once Section 74 is deleted.

5. Other Changes: The denial of ITC under Section 17(5) on cases covered under Section 129 and 130 is also being removed. Cases of detention and confiscation of goods during their movement are covered under 129 and 130.

6. The Section reference on 74A appears 40 times in the Finance Bill 2024 dated 23/07/2024, which itself describes the importance of this amendment.

7. Insertion of a new Section 11A is a good move as in cases where there  is non payment or short payment of GST due to practice which is prevalent in the industry, the Government has power to regularise such short collections based on subsequent developments.

8. Cases where SCN was issued under Section 74A and there is a fraud or wilful  misstatement or suppression of facts to evade tax, the penalty shall be equal to the tax amount. However, if it is established that there is no fraud or misstatement or suppression at the stage   of adjudication or appeal, the penalty shall be ten per cent of the tax subject to a minimum penalty of Ten Thousand.

9. The penalty shall be 15% when the tax and interest is paid before issuance of notice. It shall be 25% up to 60 days from date of issue of notice and 50% where tax and interest is paid within 60 days of passing the order.

10. Conclusion: Though GST is in force since 01.07/2017, this Finance Bill has 44 clauses on GST proposing many amendments in GST based on the recommendations of the GST Council.

Discussions to this article

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