GST Demand, Recovery, Offences and Arrest: Radhika Agarwal

Where tax has not been paid or credit has been wrongly taken, the GST law provides for a demand, recovery and penalties, and in serious cases prosecution and arrest. The demand provisions were restructured from 2024-25, and in 2025 the Supreme Court set out the safeguards that govern arrest. This note covers demands, recovery, penalties, offences and arrest under the CGST Act.

1. Demands

Figure 1: Sections 73, 74 and 74A

• Sections 73 and 74. For periods up to 2023-24: s.73 for tax unpaid, short paid, erroneously refunded or credit wrongly availed for reasons other than fraud, and s.74 where fraud, wilful misstatement or suppression is involved, with longer time limits and higher penalty.
• Section 74A. From 2024-25, a single provision for both kinds of case: the notice must issue within 42 months of the due date of the annual return, and the order within 12 months of the notice, extendable by 6 months.
• Penalty. In non-fraud cases, 10 per cent of the tax or Rs 10,000, whichever is higher, with no penalty if tax and interest are paid before or within 60 days of the notice; in fraud cases, a penalty equal to the tax, reduced to 15, 25 or 50 per cent depending on how early it is paid.

2. Recovery, Attachment and Penalties

Figure 2: Recovery, penalties and prosecution

• Recovery, s.79. Confirmed demands are recovered by deduction from amounts due, detention and sale of goods, notice to persons owing money to the defaulter, attachment and sale of property, and as arrears of land revenue.
• Provisional attachment, s.83. In Radha Krishan Industries v State of H.P. (2021), the Supreme Court held that provisional attachment is a drastic power, to be exercised only on tangible material showing it is necessary to protect revenue, and not as a routine measure.
• Penalty, s.122. Specified offences, such as supply without invoice, issuing invoices without supply, wrongful availment of credit and fraudulent refunds, attract penalty.

3. Offences and Arrest

Figure 3: Radhika Agarwal v Union of India

• Offences, s.132. Punishment is graded by the amount of tax evaded or credit wrongly taken; specified serious offences involving more than Rs 5 crore are cognizable and non-bailable, while others are non-cognizable and bailable.
• Arrest, s.69. The Commissioner may authorise arrest where he has reasons to believe a person has committed specified offences punishable under s.132.
• Radhika Agarwal v Union of India (27 February 2025). A three judge bench led by Chief Justice Sanjiv Khanna upheld the arrest and summons powers, but held that reasons to believe must rest on material, not suspicion, grounds of arrest must be communicated, the safeguards of criminal procedure apply, anticipatory bail is available even before an FIR, and threatening arrest to force payment violates fundamental rights.

4. Frequently Asked Questions

Can a person seek anticipatory bail in a GST case before an FIR is registered?

Yes. In Radhika Agarwal v Union of India (2025), the Supreme Court held that anticipatory bail can be sought even before an FIR, where there is reasonable apprehension of arrest.

When are GST offences cognizable and non-bailable?

Specified serious offences, such as supply without invoice, fake invoicing and fraudulent credit, are cognizable and non-bailable where the amount involved exceeds Rs 5 crore; other offences are non-cognizable and bailable.

5. Related Topics

• Topic 29: Input Tax Credit. Wrongly availed credit.
• Topic 30: Registration, Returns and Payment. Interest on delayed tax.
• Topic 32: Advance Ruling, Appeals and the GST Appellate Tribunal. Challenging demands.