Section 75 of CGST Act Explained: General Provisions Relating to Determination of Tax

The GST law is highly technical and intricate, especially concerning tax determination, penalties, and adjudication proceedings. Section 75 of CGST Act provides general provisions that apply to both cases of tax shortfall with and without fraud, while Sections 73 and 74 deal with cases of tax shortfall with and without fraud.

To find out what Section 75 of CGST Act actually means for taxpayers and why it is so crucial, let’s examine each clause in detail.

1. Exclusion of Stay Period (Section 75(1) of CGST Act)

(1) Where the service of notice or issuance of order is stayed by an order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74 ²[or sub-sections (2) and (7) of section 74A], as the case may be.

This means that the law sometimes recognises that proceedings are stayed by order of a court or tribunal. In such an instance, the time during which the stay is in place will not count toward the periods set in Section 73 or 74.

The practical implication is that if you obtain a stay from the High Court or Tribunal, the officer shall have balance time available to him for passing order once the stay is lifted. This ensures that neither party is prejudiced; the taxpayers continue enjoying the stay while timelines do not lapse on account of the department.

2. When Fraud Charges Are Not Established (Section 75(2) of CGST Act)

(2) Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.

Now let’s assume that the department issues a notice under section 74 (alleging fraud and suppression or wilful misstatement). If at a later stage, the appellate authority or the court holds that fraud is not established, the notice would then automatically be deemed to have been issued under section 73. This is important because section 74 penalties are higher, potentially up to 100% of tax. Section 73 applies in cases where there is no fraud and penalties are less stringent. This safeguard is meant to protect honest taxpayers from being penalized under Section 74.

3. Orders After Directions of Higher Authority (Section 75(3) of CGST Act)

(3) Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction.

This means that when an appellate authority or court directs the tax officer to pass a fresh order, it must be issued within 2 years from the end of financial year in which the said direction is communicated. Without it, the process could be delayed indefinitely. The law ensures finality and protects a taxpayer from being in indefinite limbo.

4. Right to Personal Hearing (Section 75(4) of CGST Act)

(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.

This is one of the most taxpayer-friendly provisions. The law explicitly states that a personal hearing must be granted if the taxpayer requests it in writing, and courts have sometimes ruled that it is necessary even without such a request. Or if the officer intends to issue an unfavourable ruling.

Now imagine being accused of a tax shortfall and not even being given a chance to explain yourself. Section 75(4) prevents that. It embodies the natural justice principle that no one should be penalized without being given a chance to be heard.

5. Adjournments During Hearing (Section 75(5) of CGST Act)

(5) The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing:

Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.

The law permits taxpayers to apply for adjournments in case of sickness, lack of access to documents, and other valid grounds. However, no more than three adjournments will be granted. It ensures balance in the application of justice. It also prevents taxpayers from misusing adjournments while allowing flexibility when a genuine need arises.

6. Orders Must State Facts and Reasons (Section 75(6) of CGST Act)

(6) The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

When an officer issues an order, it must adequately document the pertinent facts and the rationale behind the decision.

Why it matters is because “one-line order” demanding tax payment cannot stand. The taxpayer must understand why they are being asked to pay. This transparency makes it easier to challenge the orders if they are unfair.

7. No Excess Demand Beyond Notice (Section 75(7) of CGST Act)

(7) The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.

The officer cannot demand more tax, interest, or penalty than what was stated in the show cause notice (SCN). Similarly, the order cannot be based on grounds not mentioned in the notice. As an example, say if your SCN said ₹5 lakh is payable, the final order cannot suddenly raise it to ₹10 lakh without notice. This ensures fairness and prevents “surprise” liabilities.

8. Automatic Adjustment of Interest and Penalty (Section 75(8) of CGST Act)

(8) Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified.

If an appellate authority modifies the tax amount (say, reduces it), then the interest and penalty will also be adjusted automatically.

Real-world example is if your tax demand is cut from ₹10 lakh to ₹6 lakh by a tribunal, you don’t need a separate order for reducing interest and penalty, they will automatically recalculate on the reduced tax.

9. Interest Payable Even if Not Mentioned (Section 75(9) of CGST Act)

(9) The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.

Even if an order does not specifically mention interest, it will still be payable on tax that was short-paid or unpaid. Key takeaway here is that you cannot avoid paying interest by pointing out that it was “missing from the order.” Interest under GST is statutory as it applies by default.

10. Time Limit for Concluding Proceedings (Section 75(10) of CGST Act)

³[(10) The adjudication proceedings shall be deemed to be concluded, if the order is not issued within the period specified in sub-section (10) of section 73 or in sub-section (10) of section 74 or in sub-section (7) of section 74A.]

If an order is not issued within the prescribed timelines that is usually 3 years under Section 73, or 5 years under Section 74 then the proceedings are deemed concluded automatically. But always take into consideration the extended periods notified by the Government. It is a huge relief for taxpayers as this ensures the department cannot keep cases pending forever. If they miss the deadline, the case dies.

11. Exclusion of Appeal Pending Time (Section 75(11) of CGST Act)

(11) An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in subsection (10) of section 73 or sub-section (10) of section 74 ²[or sub-sections (2) and (7) of section 74A] where proceedings are initiated by way of issue of a show cause notice under the said sections.

When a similar issue is already pending before higher courts, the time taken in that litigation is excluded from the limitation period for other cases on the same issue. The purpose here is this prevents contradictory outcomes. For example, if a High Court ruling on a particular GST issue is under challenge in the Supreme Court, the department can wait for the final verdict before proceeding further in other cases.

12. Recovery of Self-Assessed Tax (Section 75(12) of CGST Act)

(12) Notwithstanding anything contained in section 73 or section 74 ²[or section 74A], where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.

^{1[Explanation.-For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.]}

If a taxpayer declares tax in their GSTR-3B return (Section 39) but fails to pay it, the unpaid amount can be directly recovered under Section 79 (recovery proceedings). An explanation was added in 2021, clarifying that even tax shown in GSTR-1 (outward supplies) but not included in GSTR-3B counts as self-assessed tax.

Practically many taxpayers upload invoices in GSTR-1 but forget to pay the corresponding liability in GSTR-3B. This provision allows the department to recover such amounts without issuing a demand notice under Sections 73 or 74.

13. No Double Penalty (Section 75(13) of CGST Act)

(13) Where any penalty is imposed under section 73 or section 74 2[or section 74A], no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.

If a penalty is already imposed under Section 73 or Section 74, no other penalty for the same act or omission can be imposed under any other provision of the Act. Thus, you cannot be punished twice for the same default. This protects taxpayers from excessive penalisation.

Why Section 75 of CGST Act Matters

Section 75 of CGST Act is not merely procedural, and it assures that:

-Taxpayers obtain due process and natural justice.

– Officers adhere to timelines and formats.

– Tax based on facts, reasons and evidence; not arbitrary power.

For taxpayers, understanding these provisions can mean the difference between accepting a flawed order and successfully challenging it. For professionals, section 75 of CGST Act is the rule book of the adjudication mechanism.

Conclusion

Section 75 of CGST Act strikes a balance between protecting the interests of revenue and safeguarding the rights of taxpayers. From ensuring that personal hearings are granted to making sure that the reasoning for making the adverse decision is included in the order and limiting the demand to what was originally noticed, etc., fairness principles have been incorporated.

It also equips the department with specifics regarding exclusions, interest recovery, and timelines for compliance. In short, Section 75 of CGST Act is the heart of procedural provisions relating to GST demand. If sections 73 and 74 are the bones, Section 75 of CGST Act is the muscle that keeps the system alive in practice.

Taxpayers and professionals alike should be aware of this, because knowing your rights and obligations is the first step to staying compliant and defending yourself.

Author Details-Apoorva Lamba (3rd Year Student Madhav Mahavidyalya, Jiwaji University, Gwalior)

Link to similar articles: https://jpassociates.co.in/section-73-vs-section-74-of-cgst-act/