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September 26, 2026
GST Section 74 Notice: Key Supreme Court Guidelines for Valid SCNs
Overview
A GST Section 74 notice is a serious GST communication because it may involve allegations of fraud, wilful misstatement or suppression of facts to evade tax. For tax periods up to FY 2023-24, Section 74 covers tax short payment, erroneous refund or wrongful ITC linked to such conduct.
In August 2026, the Supreme Court gave important guidance on what a valid GST Section 74 notice should contain. In G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors. and Tata Steel Limited v. Union of India, the Court made it clear that simply using words such as “fraud” or “suppression” is not enough. The notice itself should contain the basic facts that support the allegation.
For taxpayers, a GST Section 74 notice should be checked carefully before replying.
Quick Insights
- A GST Section 74 notice must contain clear facts supporting fraud, wilful misstatement, or suppression.
- Simply using words like “fraud” or “suppression” is not enough to justify Section 74.
- The Supreme Court in G.R. Infra Projects and Tata Steel stressed that foundational facts must appear in the SCN itself.
- Section 74 applies to tax periods up to FY 2023-24, while Section 74A applies from FY 2024-25 onward.
- Taxpayers should review the notice, limitation period, supporting facts, and tax demand before filing a reply.
What Is a GST Section 74 Notice?
A GST Section 74 notice is a show-cause notice for periods up to FY 2023-24 where the proper officer alleges tax short payment, erroneous refund or wrongful ITC because of fraud, wilful misstatement or suppression of facts to evade tax.
Section 73 deals with similar tax, refund or ITC issues where fraud, wilful misstatement or suppression is not involved. For a basic background, read our guide on the difference between Section 73 and Section 74 of the CGST Act.
Therefore, every tax mismatch cannot automatically become a GST Section 74 notice case. The notice should show why the Department believes the conditions of Section 74 are present.
Supreme Court Ruling in G.R. Infra Projects
In M/s G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors., the Supreme Court examined an SCN dated 13 June 2025 for FY 2018-19. The Court passed its order on 19 August 2026.
The Supreme Court found that the GST Section 74 notice only made a general statement about “fraud or concealment of facts” without explaining how either was found.
The Court held that where the Department wants to use the extended limitation under Section 74, the allegations leading to an inference of fraud, wilful misstatement or suppression must come from the notice itself. These words cannot be used mechanically without stating the facts that led the officer to that conclusion.
The Department also tried to explain the missing allegations through a counter-affidavit before the Court. The Supreme Court refused to use that later explanation to cure the GST Section 74 notice. It set aside the SCN and the High Court order that had upheld it.
Tata Steel Ruling Reinforces the Same Principle
The Supreme Court reinforced the same principle in M/s Tata Steel Limited v. Union of India on 25 August 2026. The matter covered FY 2018-19 to FY 2020-21.
The Court found that the GST Section 74 notice did not contain the foundational facts needed to show a deliberate device to evade tax or avail excess ITC. A general statement about suppression was not enough to justify the extended limitation period.
The Supreme Court set aside the SCN and consequential Order-in-Original, while allowing legally permissible fresh Section 74 proceedings with proper foundational facts and within limitation.
The ruling confirms that a GST Section 74 notice should explain the factual basis of the allegation in the notice itself.
What Should a Valid GST Section 74 Notice Contain?
A taxpayer should not judge a GST Section 74 notice only by words such as fraud, wilful misstatement or suppression. The notice should explain the facts behind them.
A taxpayer should be able to understand:
- what transaction, return entry, ITC claim, refund or omission is disputed;
- what specific conduct is alleged;
- why that conduct is being treated as fraud, wilful misstatement or suppression; and
- how it resulted in the proposed tax, refund or ITC demand.
The Supreme Court has not prescribed one fixed SCN format, but the factual foundation should be visible from the GST Section 74 notice itself.
If the dispute concerns ITC, also review the conditions for claiming Input Tax Credit under GST.
How to Review a GST Section 74 Notice
A taxpayer should review a GST Section 74 notice step by step instead of looking only at the amount demanded.
1. Check the Tax Period: First, identify the financial year. Section 74 applies to determination of tax for periods up to FY 2023-24. For FY 2024-25 onward, Section 74A is the relevant demand provision.
2. Read the Actual Allegations: Check what the officer has actually alleged. A GST Section 74 notice should contain facts supporting the allegation of fraud, wilful misstatement or suppression.
3. Compare the SCN With GST Records: Match the notice with invoices, ledgers, GSTR-1, GSTR-3B, GSTR-2B and other relevant records. Our guide on GST return filing for GSTR-1 and GSTR-3B explains how key return data is reported.
4. Check the Link With the Demand: A tax mismatch by itself does not prove fraud. The GST Section 74 notice should explain why the alleged conduct is connected with the tax, refund or ITC amount being demanded.
5. Check Limitation: Limitation means the legal time limit for proceedings. If the Department relies on Section 74 after the normal non-fraud period has expired, the factual basis for Section 74 becomes especially important.
6. Check for Allegations Added Later: Compare the original SCN with later communications. G.R. Infra Projects makes it clear that a missing factual foundation cannot simply be supplied later through a counter-affidavit to save a deficient GST Section 74 notice.
Does a Defective Section 74 Notice Automatically Remove the Tax Demand?
No. A defect in a GST Section 74 notice does not automatically mean that no tax can ever be payable.
Section 75(2) covers a situation where an Appellate Authority, Appellate Tribunal or court finds that a Section 74 notice is not sustainable because fraud, wilful misstatement or suppression of facts to evade tax has not been established. The proper officer then determines tax as if the notice had been issued under Section 73.
However, limitation and other legal requirements still have to be checked. So a taxpayer should separately examine whether Section 74 was validly invoked and whether the underlying tax, refund or ITC demand is correct.
Why Limitation Matters for a GST Section 74 Notice
Limitation was important in G.R. Infra Projects. For FY 2018-19, the Supreme Court calculated that the Section 73 limitation, after the COVID-related exclusion, ended on 28 February 2025. The SCN was issued on 13 June 2025.
This made the legal basis for the GST Section 74 notice critical. The Department could not obtain the extended Section 74 period merely by using words such as fraud or suppression without supporting facts.
Regular reconciliation and a GST compliance checklist can help businesses identify mismatches before they develop into disputes.
Section 74 vs Section 74A: Important Change From FY 2024-25
Sections 73 and 74 apply to determination of tax for periods up to FY 2023-24. For FY 2024-25 onward, Section 74A provides the demand framework for tax not paid or short paid, erroneous refunds and ITC wrongly availed or utilised.
Therefore, before applying these Supreme Court rulings to a GST Section 74 notice, check the financial year covered by the SCN. If the demand relates to FY 2024-25 or later, Section 74A should be examined instead.
Fraud, wilful misstatement and suppression remain relevant under Section 74A, particularly for penalty consequences, but the demand framework has changed.
What Should You Do After Receiving a Section 74 SCN?
If you receive a GST Section 74 notice, do not ignore it. Save the complete SCN, annexures and relied-upon documents. Check the reply deadline and match the demand with your books and GST returns.
Ebizfiling’s GST return filing services can assist with regular GST compliance and return records.
For a quick rate or billing check, use Ebizfiling’s free GST Calculator. It can calculate GST-inclusive or GST-exclusive amounts, but it cannot decide liability under a GST Section 74 notice, which may also involve ITC, interest, penalty and multiple periods. For another practical example of notice handling, read our guide on how to respond to a GST notice.
A reply to a GST Section 74 notice should address both the legal basis for invoking Section 74 and the underlying tax or ITC issue on facts.
GST Section 74 Notice Received? Respond with the Right Strategy
A GST Section 74 notice may involve allegations of fraud, wilful misstatement or suppression, along with tax, interest and penalty exposure. A weak or incomplete response can make the matter more difficult.
Ebizfiling can help you review the notice, identify key legal and factual issues, examine GST records and prepare a structured response based on the facts of your case.
Need assistance with a GST Section 74 notice? Connect with Ebizfiling experts today.
Conclusion
The Supreme Court rulings in G.R. Infra Projects and Tata Steel make an important point clear: a GST Section 74 notice cannot rely only on labels such as fraud, wilful misstatement or suppression to justify extended limitation. The factual basis for those allegations should come from the SCN itself.
A taxpayer receiving a GST Section 74 notice should check the tax period, allegations, supporting facts, connection with the demand and limitation before replying. When reviewing any GST Section 74 notice, remember that Section 74 applies to periods up to FY 2023-24, while Section 74A governs the demand framework from FY 2024-25 onward.
Frequently Asked Questions
1. Which form is used to reply to a GST Section 74 notice?
A reply to a GST Section 74 notice is generally furnished electronically in Form GST DRC-06 under Rule 142(4) of the CGST Rules. The form allows the taxpayer to provide a written reply, upload supporting documents and indicate whether a personal hearing is requested.
2. Is a personal hearing mandatory before an adverse order is passed?
Yes, an opportunity of hearing must be provided where the taxpayer requests it in writing or where an adverse decision is contemplated. This requirement comes from Section 75(4) of the CGST Act. A taxpayer can also indicate the request for personal hearing while submitting Form GST DRC-06.
3. Can the final GST order demand more tax than the amount mentioned in the SCN?
No. Under Section 75(7), the amount of tax, interest and penalty demanded in the final order cannot exceed the amount specified in the show-cause notice. The adjudicating authority also cannot confirm a demand on grounds different from those stated in the notice.
4. Can a taxpayer settle a Section 74 matter before the show-cause notice is issued?
Yes. For proceedings governed by Section 74, a taxpayer may pay the tax, applicable interest and a penalty equal to 15% of the tax before service of the notice. Where the requirements of Section 74(5) and (6) are satisfied, no notice is to be issued for the amount so paid.
5. Can Section 74 proceedings be concluded after the SCN has already been issued?
Yes. If the taxpayer pays the tax, applicable interest and a penalty equal to 25% of the tax within 30 days of issue of the notice, Section 74(8) provides that proceedings in respect of that notice are deemed to be concluded for the amount covered by the payment.
6. Is a reduced penalty available after an order under Section 74 is passed?
Yes. Where an order under Section 74 is passed, the taxpayer can pay the determined tax, applicable interest and a penalty equal to 50% of the tax within 30 days of communication of the order. Section 74(11) provides for conclusion of proceedings in respect of the tax so paid when these conditions are met.
7. Which GST DRC forms are commonly involved in Section 74 proceedings?
Several DRC forms may be relevant. DRC-01 contains the electronic summary of the SCN, DRC-03 is used for specified voluntary payments, DRC-04 acknowledges qualifying pre-notice payment, DRC-05 concludes proceedings in applicable cases, DRC-06 is used for the reply, and DRC-07 contains the electronic summary of the adjudication order.
8. Can a taxpayer appeal against an adverse order passed after Section 74 proceedings?
Yes. A person aggrieved by an appealable adjudication order may file an appeal before the Appellate Authority under Section 107, generally within three months from the date the order is communicated. The appeal is filed in Form GST APL-01 and is subject to the applicable statutory requirements, including prescribed pre-deposit conditions.
9. Can Ebizfiling help businesses review and respond to a GST tax notice?
Yes. Ebizfiling’s tax consultancy services cover GST-related queries and notices received from tax authorities. Professional support can help businesses understand the notice, review relevant documents and records, and determine an appropriate compliance or response approach based on the facts of the case.
10. Can Ebizfiling help reconcile GST returns before responding to a tax notice?
Yes. Ebizfiling provides GST return filing services covering returns such as GSTR-1 and GSTR-3B, along with GST payable computation and related compliance support. Reviewing return data, invoices and ITC records can help businesses identify mismatches relevant to a GST notice before preparing their response.
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