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SC: GST Fraud Under Section 74 Not Presumed From Discrepancies
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Supreme Court of Indiatax

SC: GST Fraud Under Section 74 Not Presumed From Discrepancies

October 14, 2026

The Supreme Court held that fraud under GST Section 74 cannot be presumed solely from tax discrepancies or ITC mismatches, requiring independent proof of intent to evade tax.

SC Clarifies Standards for GST Fraud Under Section 74

In a significant ruling, the Supreme Court has held that allegations of fraud under Section 74 of the CGST Act cannot be based solely on tax discrepancies or mismatched input tax credit (ITC) data. The Court, relying on precedents in G.R. Infra Projects Ltd. v. Union of India and Tata Steel Ltd. v. CCT, emphasized that proving fraud requires clear evidence of intentional suppression or misstatement, not mere omissions or errors in returns.

The Court stressed that a show cause notice (SCN) under Section 74 must specifically allege facts demonstrating fraudulent intent, including wilful misstatement or suppression of material facts. It observed that treating routine ITC mismatches as presumptive fraud undermines taxpayer rights and violates principles of natural justice.

This decision will limit arbitrary invocation of penalty provisions under Section 74. Taxpayers facing SCN proceedings can now challenge notices that lack specific allegations of fraud. Authorities must conduct deeper factual inquiries before classifying tax defaults as fraudulent.

Citations

  • CGST Act, 2017, Section 74
  • G.R. Infra Projects Ltd. v. Union of India (2023) 15 SCC 1
Practice Areas:tax

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