This guide explains the law on GST demand and recovery under Chapter XV of the CGST Act, 2017 (Sections 73 to 84) and Rules 142 to 161 of the CGST Rules, 2017: which section applies to which year, time limits, penalties, how to close a notice early, and the modes of recovery.
Law stated as on November 2026, including amendments made by Notification No. 05/2026-Central Tax and the Finance Act, 2026 provisions in force from 1 November 2026. Section numbers refer to the CGST Act, 2017 and rule numbers to the CGST Rules, 2017; the SGST/UTGST Acts contain identical provisions.
🗣️ Saral bhasha mein samjhein
- FY 2023-24 tak ke liye notice Section 73 (bina fraud) ya Section 74 (fraud) mein aata hai. FY 2024-25 se sab Section 74A mein.
- 74A mein notice ki limit annual return ki due date se 42 mahine hai, aur order notice ke 12 mahine mein (6 mahine aur badh sakta hai).
- Bina fraud ke case mein notice ke 60 din mein tax + interest bhar dein, toh penalty zero.
- Fraud ke case mein bhi jaldi bharne par penalty 15% / 25% / 50% tak ghat jaati hai.
- Recovery order (DRC-07) ke 3 mahine tak normally recovery nahi hoti, isliye us dauran appeal file kar dein.
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1. Which Section Applies?
| Period | Non-fraud cases | Fraud, wilful misstatement or suppression |
|---|---|---|
| FY 2017-18 to 2023-24 | Section 73 | Section 74 |
| FY 2024-25 onwards | Section 74A (single section, with different penalties) | |
A demand can arise from tax not paid or short paid, erroneous refund, or ITC wrongly availed or utilised. Common triggers are return scrutiny (Section 61, ASMT-10), audit (Sections 65, 66), inspection and search (Section 67), and mismatches such as GSTR-1 vs GSTR-3B or GSTR-3B vs GSTR-2B.
2. Time Limits
| Section | Last date for show cause notice | Last date for order |
|---|---|---|
| 73 | 3 months before the order deadline | 3 years from the due date of the annual return |
| 74 | 6 months before the order deadline | 5 years from the due date of the annual return |
| 74A | 42 months from the due date of the annual return (or from the erroneous refund) | 12 months from the notice, extendable by up to 6 months by a senior officer |
For example, for FY 2024-25 (GSTR-9 due 31 December 2025), a Section 74A notice can be issued up to 30 June 2029. No notice is issued under Section 74A where the amount for a year is below ₹1,000.
3. Penalties and How to Reduce Them
| Stage of payment (tax + interest) | Non-fraud (s.73 / s.74A(8)) | Fraud (s.74 / s.74A(9)) |
|---|---|---|
| Before notice (after DRC-01A intimation or on own ascertainment) | Nil | 15% of tax |
| Within 60 days of notice (30 days under old s.73/74) | Nil | 25% of tax |
| Within 60 days of the order (30 days under old s.74) | 10% of tax or ₹10,000, whichever is higher | 50% of tax |
| After that | 10% of tax or ₹10,000, whichever is higher | 100% of tax |
Even in non-fraud cases, the 10% penalty applies where self-assessed tax or tax collected was not paid within 30 days of its due date (Section 74A(11)). Closure under these provisions does not end prosecution under Section 132.
4. Procedure: Section 75 and Rule 142
- DRC-01A (pre-notice intimation, optional in most cases) lets the taxpayer pay or object before a formal notice.
- DRC-01 is the show cause notice; for other periods on the same grounds, a statement in DRC-02 is deemed to be a notice.
- The reply is filed in DRC-06. A personal hearing must be given where requested or where an adverse decision is contemplated, and not more than three adjournments are allowed (Section 75(4), 75(5)).
- The order is issued in DRC-07. It cannot confirm tax, interest or penalty beyond the amount or grounds in the notice (Section 75(7)), and must be a reasoned order.
- If a Section 74 charge of fraud is not sustained by the appellate forum, the demand is re-computed as if issued under Section 73 (Section 75(2)).
Relief for old years: Section 128A waived interest and penalty on Section 73 demands for FY 2017-18 to 2019-20 where the tax was paid by the notified date.
5. Recovery: Sections 78 to 84
- Section 78: confirmed dues must be paid within three months of service of the order; earlier recovery is allowed only for reasons recorded in writing.
- Section 79 (Rules 143 to 157): modes of recovery include deduction from amounts due to the taxpayer, detention and sale of goods, garnishee notice to debtors and banks (DRC-13), attachment and sale of movable and immovable property, and recovery as arrears of land revenue.
- Section 80 and Rule 158: the Commissioner may allow payment in up to 24 monthly instalments, except for self-assessed tax in returns, with interest.
- Section 83 and Rule 159: provisional attachment of property, including bank accounts, during proceedings, by the Commissioner on recorded reasons; the order lapses after one year and the taxpayer may object within 7 days of attachment.
- Section 79(1)(c) recoveries from banks must stop once an appeal with pre-deposit is filed, since the balance demand stands stayed (Sections 107(7), 112(9)).
6. Tax Collected but Not Paid: Section 76
Any amount collected as tax from a customer must be paid to the Government even if the supply was not taxable; demand for such amounts can be raised at any time, with penalty equal to the amount.
Quick Reference
| Stage | Section | Rule | Form |
|---|---|---|---|
| Pre-notice intimation | 73(5), 74(5), 74A | 142(1A) | DRC-01A |
| Notice and statement | 73, 74, 74A | 142(1) | DRC-01, DRC-02 |
| Voluntary payment | 73-74A | 142(2) | DRC-03, DRC-04 |
| Reply and order | 75 | 142(4), (5) | DRC-06, DRC-07 |
| Recovery | 78, 79 | 143-157 | DRC-09 to DRC-17 |
| Instalments / attachment | 80, 83 | 158, 159 | DRC-20, DRC-22 |
Received a DRC-01A, DRC-01 or DRC-07? Reply with the right grounds within time. Our advocate-led GST notice reply service handles replies, hearings and appeals.