Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Indirect Tax Laws

GST Assessment, Audit, Demand, Appeals and Offences for CA Final

Updated 5 October 2026 · Fact-checked

This topic covers how the GST department checks and confirms tax: assessment, audit, demand and recovery, appeals, advance ruling, penalties and prosecution. To solve a question, identify the stage, check whether the case is non-fraud (section 73) or fraud-type (section 74), apply the time limit, penalty and appeal route, then conclude.

Understand GST Assessment, Audit, Demand, Appeals and Offences

GST works on self-assessment. You calculate your own tax and file returns. The department steps in only when something looks wrong. Everything in this topic is the department's toolkit and your remedies, in the order a dispute normally runs.

Assessment has several forms: self-assessment, provisional assessment (when the value or rate is uncertain, you pay on a provisional basis against a bond and security), scrutiny of returns, assessment of non-filers and unregistered persons (best judgment), and summary assessment (urgent, to protect revenue). Audit is by the department, or a special audit by a CA or cost accountant when the case is complex. Inspection, search and seizure collect evidence.

Demand and recovery is the heart of the topic. Sections 73 and 74 apply when tax is short-paid, not paid, wrongly refunded or ITC is wrongly availed or utilised. Section 73 covers cases without fraud, wilful misstatement or suppression. Section 74 covers cases with fraud, wilful misstatement or suppression of facts to evade tax. The difference shows up in the time limits and the penalty. Note that for demands relating to FY 2024-25 onwards, section 74A applies in place of both. Sections 73 and 74 continue for earlier periods, so always check the period in the question.

If you disagree with an order, you appeal: first to the Appellate Authority, then the Appellate Tribunal, then the High Court, then the Supreme Court. Each stage has a time limit and a pre-deposit. Advance ruling is a different tool: you ask in advance how GST applies to a proposed or current activity.

Finally, penalties are monetary and apply to wrong conduct. Prosecution is for serious offences such as tax evasion or fake invoices above set thresholds. At CA Final, Paper 6 tests this through a case: you read facts, pick the provision, and conclude.

Key rules to remember

Section 73 time limits: Notice: at least 3 months before the order deadline. Order: within 3 years from the due date of the annual return for the year.; Non-fraud cases. Applies to periods before FY 2024-25; section 74A governs later periods.
Section 74 time limits: Notice: at least 6 months before the order deadline. Order: within 5 years from the due date of the annual return for the year.; Fraud, wilful misstatement or suppression cases. Same period caveat as above.
Section 73 penalty: No penalty if tax and interest are paid before notice or within 30 days of notice. If not, penalty is the higher of 10% of tax or ₹10,000.; Interest is payable in all cases. Check the exact conditions in the bare Act text given in your exam.
Section 74 penalty ladder: Penalty equals 15% of tax if paid before notice, 25% if paid within 30 days of notice, 50% if paid within 30 days of the order, otherwise 100% of tax.; Section 74 carries a much higher penalty, rising up to 100% of tax. Section 73 penalty is only 10% of tax or ₹10,000, whichever is higher. Check the exact percentages against the bare Act text if it is supplied.
First appeal: To the Appellate Authority within 3 months of communication of the order. Pre-deposit: 10% of disputed tax plus the admitted tax.; The 10% is capped at ₹25 crore each under CGST and SGST (₹50 crore in total). The Appellate Authority can condone a delay of up to one further month.
Appeal to Appellate Tribunal: Within 3 months of communication of the order. Further pre-deposit: 20% of disputed tax, over and above the amount paid earlier.; The 20% is capped at ₹50 crore each under CGST and SGST (₹100 crore in total). The Tribunal's powers to condone delay are limited to a further three months.
High Court appeal: Within 180 days of the Tribunal's order. Only if a substantial question of law is involved.; Then the Supreme Court.
Advance ruling: Applicant asks the Authority for Advance Ruling. Appeal to the Appellate Authority for Advance Ruling within 30 days.; The ruling binds the applicant and the jurisdictional officer, for the specific question asked. It covers matters such as classification, time and value of supply, ITC admissibility and registration liability.
Prosecution thresholds (tax evasion): Above ₹5 crore: up to 5 years and fine. Above ₹2 crore up to ₹5 crore: up to 3 years and fine. Above ₹1 crore up to ₹2 crore: up to 1 year and fine.; Issuing invoices without supply, or availing ITC on such invoices (section 132(1)(b) and (c)), is punishable with up to 5 years and fine where the tax exceeds ₹5 crore. Lower slabs apply to lower amounts, so it does not always fall in the top slab. Prosecution needs Commissioner's sanction.

How to solve GST Assessment, Audit, Demand, Appeals and Offences questions

Use this order for any case on assessment, demand, appeals or offences. It keeps your answer in provision-facts-conclusion form.

1Read the facts and mark the stage: assessment, audit, inspection, demand, appeal, advance ruling or offence.
2Check the period. If the demand is for FY 2024-25 or later, section 74A applies. For earlier periods decide between section 73 and section 74.
3Look for words showing intent: fraud, wilful misstatement, suppression of facts. Their presence points to section 74. Their absence points to section 73.
4Compute the time limit: take the due date of the annual return and add 3 years (section 73) or 5 years (section 74). Subtract 3 or 6 months for the notice deadline.
5Work out tax, interest and penalty. Apply the ladder or the 10% rule, and check whether payment before notice or within 30 days changes the result.
6For appeals, name the forum, the time limit and the pre-deposit. For offences, compare the tax amount with the thresholds.
7State your conclusion in one line and write the provision, facts and conclusion in separate short paragraphs.

Quickest way: Three-question filter

When to use it: Use it when a case is long and you have under ten minutes for 10 to 15 marks.

Question 1: What stage is this? Assessment, demand, appeal, advance ruling or offence.
Question 2: Is there fraud or suppression? If yes, section 74 (or 74A for later periods). If not, section 73.
Question 3: What is the clock? Write the time limit, then the pre-deposit or penalty percentage.
Write the answer in three lines: rule, application to facts, conclusion. Add numbers only where the facts give amounts.

Common mistakes in GST Assessment, Audit, Demand, Appeals and Offences

Treating section 73 and section 74 as interchangeable.
Both deal with short payment, so students memorise one set of limits.
Fix: Remember the pairs: no fraud means 3 months and 3 years. Fraud means 6 months and 5 years. Note the intent words in the facts first.
Applying section 73 or 74 to FY 2024-25 demands without checking the period.
Older notes do not mention section 74A.
Fix: Read the financial year in the question. For FY 2024-25 onwards, flag section 74A as applicable. For earlier years, use sections 73 and 74.
Computing the pre-deposit on total demand, including interest and penalty.
Students assume the whole order amount is the base.
Fix: The pre-deposit is a percentage of the disputed tax, plus the admitted tax that must be paid. Do not include interest and penalty in the base unless the text says so.
Forgetting that the second pre-deposit is additional, not total.
The 20% figure looks like a replacement for 10%.
Fix: Tribunal stage: 20% more over what you paid at the first appeal. Total is 30% of disputed tax, subject to the caps.
Treating advance ruling as binding on everyone.
Students confuse it with a precedent.
Fix: It binds the applicant and the jurisdictional officer for the question and the supply asked. State this in your answer.
Quoting prosecution for every default.
Penalty and prosecution are mixed up.
Fix: Penalty is monetary and arises from the default. Prosecution needs a specified offence, usually with a tax threshold, and sanction. Check the amount against the slabs.

Worked examples

Example 1

Moonrise Traders, a registered person, short-paid GST of ₹4,00,000 for FY 2021-22 by wrongly classifying goods. There is no fraud or suppression. The due date of the annual return for FY 2021-22 was 31 December 2022. By when must the department issue the notice and the order?

Show the solution

Facts show a classification error with no fraud, wilful misstatement or suppression. The period is before FY 2024-25. So section 73 applies.
Order time limit: 3 years from the due date of the annual return. 31 December 2022 plus 3 years is 31 December 2025.
Notice time limit: at least 3 months before the order deadline. 31 December 2025 minus 3 months is 30 September 2025.
If Moonrise pays the tax and interest before the notice or within 30 days of it, no penalty is imposed.

Answer: Section 73 applies. Notice must be issued by 30 September 2025 and the order passed by 31 December 2025.

Example 2

Orion Ltd receives an order confirming GST of ₹60,00,000 (CGST ₹30,00,000 and SGST ₹30,00,000). Orion disputes the full amount and admits no tax. It wants to appeal to the Appellate Authority and, if needed, then to the Appellate Tribunal. Compute the pre-deposits and name the time limits.

Show the solution

First appeal goes to the Appellate Authority within 3 months of communication of the order.
First pre-deposit: 10% of disputed tax is ₹60,00,000 × 10% = ₹6,00,000 (₹3,00,000 CGST and ₹3,00,000 SGST). The cap is ₹25 crore each under CGST and SGST, so ₹3,00,000 each is well below it.
If it loses, the appeal to the Appellate Tribunal is also within 3 months of the Appellate Authority's order.
Second pre-deposit: 20% of disputed tax is ₹60,00,000 × 20% = ₹12,00,000 (₹6,00,000 CGST and ₹6,00,000 SGST), over and above the first payment. The cap is ₹50 crore each, so ₹6,00,000 each is well below it.
Total deposited by the Tribunal stage: ₹6,00,000 + ₹12,00,000 = ₹18,00,000, which is 30% of the disputed tax.

Answer: ₹6,00,000 for the first appeal and a further ₹12,00,000 for the Tribunal appeal, totalling ₹18,00,000. Both are below the caps. Both appeals are due within 3 months of the relevant order.

Exam tips

Always start your answer with the provision and period, such as section 73 for pre-FY 2024-25 non-fraud cases. Marks follow the structure.
In MCQs, look for intent words. 'Suppressed' or 'fake invoices' signals section 74 or prosecution, not section 73.
Write time limits as pairs and show the date arithmetic in one line. It earns method marks even if the date is off.
In Paper 6, link the topic to other areas, such as an ITC denial in a case on supply and credits, and then explain the consequence in demand and appeal.
If the question supplies bare Act text, use its exact wording and amounts. Do not rely on memory over the text provided.

Practice questions from Indirect Tax Laws

GST Assessment, Audit, Demand, Appeals and Offences in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

GST Assessment, Audit, Demand, Appeals and Offences: frequently asked questions

What is the main difference between section 73 and section 74 of GST?

Section 73 applies where there is no fraud, wilful misstatement or suppression. Section 74 applies where there is. Section 73 has a 3-year order limit and a notice at least 3 months before it. Section 74 has a 5-year limit and notice at least 6 months before it. The penalty is also heavier under section 74.

Does section 74A replace sections 73 and 74?

For demands relating to FY 2024-25 onwards, section 74A applies in place of both. Sections 73 and 74 continue to apply for earlier periods. Always check the financial year in the question before choosing the provision.

What is the appeal route under GST?

The first appeal goes to the Appellate Authority, then to the Appellate Tribunal, then to the High Court on a substantial question of law, and finally to the Supreme Court. Each stage has a time limit, and the first two require a pre-deposit of disputed tax.

Who is bound by an advance ruling?

The applicant and the jurisdictional officer are bound, for the question and supply covered by the ruling. It is not a general precedent. If you are aggrieved, you may appeal to the Appellate Authority for Advance Ruling within 30 days.

When can a person be prosecuted under GST?

Prosecution applies to specified offences such as tax evasion, issuing invoices without supply, or wrongly availing ITC, mainly when the tax involved crosses stated thresholds. Sanction is needed. Smaller defaults usually attract only penalty.