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For FY 2024-25 onwards, Sec 74A decides penalty. If paid with interest before the notice, there is no penalty in non-fraud cases and 15 percent in fraud cases; later payment stages carry higher reduced penalties.
GST
Sec 74A penalty on early payment of fake ITC demand
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Provisions
Sec 74A, CGST Act 2017; Sec 74A(8), CGST Act 2017
Analysis
Suppose ₹10 lakh ITC is alleged to be wrongly taken through fraud. Paying ₹10 lakh plus interest before the notice adds a penalty of ₹1.5 lakh. After the notice, within the time allowed, the penalty rate is higher, and after the order it rises again. If you have a genuine defence, weigh it against these savings with advice.
Close
- Confirm the period and whether Sec 74A or Sec 74 applies.
- Compute tax, interest and penalty at each stage.
- Weigh the strength of your evidence.
- If paying, use DRC-03 and inform the officer, linking via DRC-03A if a demand exists.
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