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In fraud or suppression cases, paying before a notice still needs a penalty: 15 percent of the tax. For later stages the penalty is higher.
GST
Voluntary payment where fraud may be alleged
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Provisions
Sec 74(5), CGST Act 2017; Sec 74A(9), CGST Act 2017; Rule 142(2) and (3), CGST Rules 2017
Analysis
Sec 74(5) for periods up to FY 2023-24 and Sec 74A(9) from FY 2024-25 set 15 percent before notice and 25 percent within the time after a notice. Example: ₹2 lakh tax in a suppression case; paying before notice means ₹2 lakh tax, interest and ₹30,000 penalty. Take legal advice on whether the case is truly fraud before choosing the section.
Close
- Take advice on whether the facts are fraud or non-fraud.
- Calculate tax, interest and the penalty that applies.
- File DRC-03 under the right section.
- Pay interest and penalty in cash.
- Keep records of the payment.
Choosing the fraud section yourself can be treated as an admission, so decide with advice.
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