Question ID :
44912
PENALTY UNDER SECTION 74 OF GST ACT
Our client has received a GST notice under Section 74 of the CGST Act for reversal of input tax credit on purchases made from a bill trader (non-existent dealer). On receipt of the statement in Form DRC-01A, the client has already discharged the tax along with applicable interest and a penalty of 15%, as provided under Section 74(5).
However, the Proper Officer is now insisting on payment of 100% penalty. Plz Clarify
Posted by
PONNUSAMY R
on
Aug 21, 2025
Filed Under
GST
Since your client already paid tax + interest + 15% penalty upon receipt of DRC-01A (pre-notice intimation), the officer is not empowered to demand 100% penalty. Proceedings for that transaction stand concluded under Section 74(6).
Posted by
CA. SURAJ KUMAR CHOUDHARY on
Aug 27, 2025
Answer ID :
85997
As per Section 74(5) of the CGST Act, if the taxpayer pays the tax, interest, and a penalty of 15% before the issuance of a Show Cause Notice (upon receipt of DRC-01A), the proceedings in respect of that transaction are concluded under Section 74(6). The Proper Officer is not empowered to demand a 100% penalty in such cases. You may clarify this to the officer and, if required, submit a written representation quoting Section 74(6) to conclude the matter
Posted by
CA NIKHIL JAIN on
Sep 02, 2025