What is Section 73 of CGST Act?
Section 73 of CGST Act 2017 is used when tax has not been paid, short-paid, or ITC has been wrongly availed due to an error and not because of fraud or deliberate misstatement.
Some of the Examples are:
- Missing an entry while filing GSTR-3B
- Incorrectly claiming ITC due to mismatch
- Wrong classification of goods/services
- Calculation mistakes in outward or inward supplies
Unlike Section 74 (fraud cases), Section 73 focuses on recovery without alleging intent to deceive.
Applicability of Section 73 in FY 2024-25
In FY 2024-25, Section 73 is applicable in cases such as:
- ITC mismatch between GSTR-3B and GSTR-2A/2B
- Inadvertent over-reporting or under-reporting of turnover
- Genuine clerical errors in returns
- Wrong tax payment under the incorrect GST head
- Late reversal of ineligible ITC
Due to increased GST data analytics, many notices issued in FY 2024–25 relate to ITC mismatches and reconciliation issues, but only when no fraud is detected.
Time Limit for Section 73 of the CGST ACT
The time limits are clearly prescribed:
Issue of Show Cause Notice (SCN)
A notice must be issued at least 3 months before passing the final order.
Final Order — Section 73(10) of the CGST Act
As per section 73 10 of cgst act, the officer must issue the final order within 3 years from:
- The due date of filing the annual return for the relevant financial year, or
- The date of erroneous refund
This 3-year time limit differentiates Section 73 (non-fraud cases) from Section 74, which allows 5 years for fraud cases.
How to Reply to a Demand Notice u/s73 of the CGST Act?
Taxpayers must respond carefully and support their position with documents. Here’s the ideal approach:
Read the Notice Thoroughly
Understand the discrepancy, the financial year, and the tax amount demanded.
Reconcile Data
Verify:
- GSTR-1 vs. GSTR-3B
- GSTR-2A/2B vs. purchase register
- ITC ledger entries
- Tax payments and challans
Prepare a Point-by-Point Reply
Explain the error and attach supporting documents such as invoices, agreements, delivery challans, and ledgers.
Submit Reply on the GST Portal
Use the reply tab under the “Notices and Orders” section on the GST portal.
Attend the Personal Hearing (If Given)
Clarify mismatches or differences directly with the officer.
Pay Voluntarily If You Agree
Early payment reduces penalties significantly.
Penalty Under Section 73 of the CGST Act
Penalties under Section 73 are minimal compared to fraud cases:
- If paid before SCN:
Only tax + interest — no penalty.
- If paid within 30 days of SCN:
Penalty of 10% of tax or ₹10,000 (whichever is higher).
- If paid after order:
Penalty remains 10% of tax.
There is no 100% penalty under Section 73 because it covers only non-fraud cases.
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