Section 74A of the Central Goods and Services Tax Act, 2017 ('CGST Act'), introduced by the Finance (No. 2) Act 2024, replaces the Sections 73/74 bifurcation for Financial Year 2024-25 onwards. CBIC Circular 254/11/2025-GST (27 October 2025) fills a critical gap: it assigns proper officers and fixes monetary jurisdiction limits for Section 74A demands, Section 75(2) re-determinations, and Section 122 penalty proceedings — and designates the officer competent to issue Rule 142(1A) DRC-01A pre-notices.
TL;DR for founders
From FY 2024-25 onwards, GST demand notices will arrive under Section 74A, not under Sections 73 or 74. Circular 254/2025 tells you which officer level can issue those notices: Superintendent for up to ₹10 lakh, Deputy/Assistant Commissioner for ₹10 lakh to ₹1 crore, and Additional/Joint Commissioner for above ₹1 crore. If a notice comes from an officer below the correct monetary threshold, jurisdiction is a live defence. The same limits apply to penalty proceedings under Section 122.
Background: Why Section 74A was needed
For periods up to FY 2023-24, CBIC's enforcement framework bifurcated demand proceedings: Section 73 CGST Act for cases without fraud, wilful misstatement, or suppression (5-year limitation, 10% penalty cap); Section 74 for cases involving those aggravated elements (5-year limitation from a different trigger point, 100% penalty cap). The bifurcation created a classification dispute at the outset of every notice — whether the invoking section was right.
The Finance (No. 2) Act 2024 inserted Section 74A CGST Act as a unified provision effective from FY 2024-25, eliminating the need to classify cases as fraud vs non-fraud at the notice stage. Section 74A carries a single demand procedure; the fraud/penalty distinction migrates to the adjudication stage. No equivalent unified section existed in earlier CBIC circulars, leaving a gap on proper officer assignment that Circular 254 now fills.
What Circular 254/11/2025 says
Section 74A — proper officer designation
Circular 254 assigns all three levels of Central Tax officer to the functions under sub-sections (1), (2), (3), (6), (7), (8), (9), and (10) of Section 74A, as well as to Section 122 and Rule 142(1A):
| Officer level | Functions assigned |
|---|---|
| Superintendent of Central Tax | Sub-sections (1)-(3), (6)-(10) of Section 74A; Section 122; Rule 142(1A) |
| Deputy or Assistant Commissioner of Central Tax | Same as Superintendent |
| Additional or Joint Commissioner of Central Tax | Same as Superintendent |
The assignment covers all three designations because each has monetary-limit jurisdiction that determines which level is the competent proper officer for a given case.
Section 74A — monetary limits for show cause notices and orders
The Circular fixes monetary jurisdiction in Table-II, with separate columns for Central Tax only (Column 3), Integrated Tax only (Column 4), and combined Central + Integrated Tax (Column 5):
| Officer level | Central Tax limit (Col 3) | Integrated Tax limit (Col 4) | Combined CT + IT limit (Col 5) |
|---|---|---|---|
| Superintendent | Up to ₹10 lakh | Up to ₹20 lakh | Up to ₹20 lakh |
| Deputy / Assistant Commissioner | Above ₹10 lakh, not exceeding ₹1 crore | Above ₹20 lakh, not exceeding ₹2 crore | Above ₹20 lakh, not exceeding ₹2 crore |
| Additional / Joint Commissioner | Above ₹1 crore, no upper limit | Above ₹2 crore, no upper limit | Above ₹2 crore, no upper limit |
Critical rule on combined-amount determination: Where a show cause notice involves demand of both Central Tax and Integrated Tax (including cess), the proper officer is determined on Column 5 (combined amount), regardless of whether individual Column 3 or Column 4 amounts fall within a lower bracket. A ₹80 lakh Central Tax + ₹1.5 crore Integrated Tax notice = ₹2.3 crore combined = Additional/Joint Commissioner jurisdiction.
Statement procedure under sub-sections (3) and (4)
Where a proper officer issues a show cause notice under Section 74A(1) and subsequently issues a statement covering a later tax period with a higher demand, the statement's competent officer is determined by the highest cumulative tax amount across all periods (the notice and all subsequent statements). If the escalated amount crosses into a higher bracket, the original officer must issue a corrigendum making the earlier notice answerable to the higher-level officer who is now competent.
Section 75(2) — fraud notice downgraded by appellate authority
Section 75(2) CGST Act provides that when an appellate authority or court holds a Section 74(1) notice unsustainable for failure to establish fraud, the proper officer re-determines tax as if the notice had been issued under Section 73(1). Circular 254 clarifies that the proper officer for this re-determination is the same officer who adjudicated the original Section 74(1) notice — preventing a separate officer from picking up the matter after the appellate stage.
Section 122 — penalty proceedings
Table-III in Circular 254 mirrors the Section 74A monetary-limit structure for penalty-only proceedings under Section 122 CGST Act:
| Officer level | Central Tax penalty limit | Integrated Tax penalty limit | Combined penalty limit |
|---|---|---|---|
| Superintendent | Up to ₹10 lakh | Up to ₹20 lakh | Up to ₹20 lakh |
| Deputy / Assistant Commissioner | Above ₹10 lakh, not exceeding ₹1 crore | Above ₹20 lakh, not exceeding ₹2 crore | Above ₹20 lakh, not exceeding ₹2 crore |
| Additional / Joint Commissioner | Above ₹1 crore, no upper limit | Above ₹2 crore, no upper limit | Above ₹2 crore, no upper limit |
The same combined-amount rule applies: where a penalty notice involves both Central Tax and Integrated Tax, Column 5 (combined) governs officer competence.
Who is affected
| Stakeholder | Impact |
|---|---|
| Taxpayers receiving FY 2024-25 demands | New Section 74A notices for FY 2024-25 onwards. Check officer designation matches monetary limits. |
| Defence lawyers / tax professionals | Jurisdictional challenge: if a Superintendent issues a Section 74A notice for ₹15 lakh Central Tax, the notice is ultra vires — proper officer should be Deputy/Assistant Commissioner. |
| DGGI-issued CBIC cases | Circular 250/07/2025-GST (24 June 2025) governs Common Adjudicating Authority review/appeal procedures; Circular 254 covers the proper-officer assignment. Both circulars apply together for DGGI-referred matters. |
| Field formations | Must recalibrate notice-issuance systems for FY 2024-25 SCNs to use Section 74A, not Section 73 or 74. |
Practical implications
Jurisdictional challenge is a live defence for FY 2024-25 onward notices: A Section 74A notice issued by an officer below the prescribed monetary threshold is subject to jurisdictional challenge under Section 107 CGST Act (appeal to Commissioner Appeals) or a writ before the High Court. Circular 254's Table-II amounts are not directory — they are the operative thresholds that define who the "proper officer" is under Section 2(91) CGST Act.
Rule 142(1A) DRC-01A pre-notice is now mandatory for Section 74A: The proper officer must issue Form GST DRC-01A before issuing a show cause notice under Section 74A. Omission of DRC-01A is one of the grounds to challenge the SCN — see the "top 15 grounds" analysis cross-referenced below.
Section 128A amnesty intersection: Section 128A CGST Act (waiver of interest and penalty for Section 73 demands FY 2017-18 to FY 2019-20) does not extend to Section 74A demands. Taxpayers with FY 2024-25 exposure have no amnesty route as of April 2026.
Transitional note — Sections 73/74 continue for prior periods: Circular 254 does not modify the existing proper-officer circular for Sections 73/74. Notices for periods up to FY 2023-24 continue under the Circular 31/05/2018-GST framework and its amendments. Practitioners handling multi-year audits spanning pre and post FY 2024-25 will face concurrent sets of notices under Sections 73/74 and Section 74A — keep separate case files.
Effective date and transitional provisions
Circular 254/11/2025-GST takes effect from 27 October 2025. Section 74A itself applies to FY 2024-25 onwards. Notices for FY 2024-25 issued before 27 October 2025 without a proper officer designation consistent with Circular 254's monetary thresholds may be contestable on jurisdictional grounds, though the strength of such a challenge depends on whether the predecessor circulars assigned any competent officer in the interim.
Founder checklist
- Identify your risk quantum for FY 2024-25: calculate the potential Section 74A demand exposure (Central Tax + Integrated Tax combined). This tells you which officer level will be issuing any notice.
- Watch for DRC-01A: any Section 74A enforcement starts with a Rule 142(1A) DRC-01A communication — this is your first signal of a demand proceeding. Respond within the prescribed period to document your position before the formal show cause notice.
- Check officer designation on any FY 2024-25 notice: verify that the designating officer matches the monetary limits in Table-II. A Superintendent issuing a ₹50 lakh combined notice is acting outside competence.
- Section 73/74 vs 74A: for audits or assessments spanning FY 2023-24 and FY 2024-25, confirm which provision governs each year's demand. Do not conflate — the limitation periods and penalty provisions differ.
- DGGI matters: if a notice originated from DGGI and was assigned to a Common Adjudicating Authority, read Circular 250/07/2025-GST for the review and appeal hierarchy before responding.
FAQ
Q: Can a Superintendent issue a Section 74A notice for a ₹25 lakh Integrated Tax demand? A: No. Under Circular 254, a Superintendent's Integrated Tax limit is up to ₹20 lakh. A ₹25 lakh Integrated Tax demand must be issued by a Deputy or Assistant Commissioner of Central Tax. A notice issued by a Superintendent for a ₹25 lakh demand exceeds the Superintendent's monetary jurisdiction and is challengeable on that ground.
Q: What is the difference between Section 74A and Sections 73/74 for FY 2024-25 proceedings? A: Sections 73 and 74 CGST Act apply to periods up to FY 2023-24. Section 74A, inserted by Finance (No. 2) Act 2024, applies from FY 2024-25 onwards as a unified demand provision — it eliminates the need to classify the case as fraud or non-fraud at the notice issuance stage. The penalty consequences (10% for non-fraud, 100% for fraud) continue to apply but are determined at the adjudication stage, not at the notice stage.
Q: If a show cause notice is initially issued by a Deputy Commissioner for ₹80 lakh and a subsequent statement raises the demand to ₹1.5 crore, what happens? A: The Deputy Commissioner must issue a corrigendum making the earlier notice answerable to the Additional or Joint Commissioner, who is the competent proper officer for the combined amount exceeding ₹1 crore (Central Tax column) or ₹2 crore (combined column). The proper officer is determined by the highest cumulative amount across all statements, per Circular 254 paragraph 5.3.
Q: Is Section 128A amnesty available for Section 74A demands? A: No. Section 128A CGST Act provides for waiver of interest and penalty for demands under Section 73 for FY 2017-18 to FY 2019-20. Section 74A applies from FY 2024-25 onwards. There is no corresponding amnesty provision for Section 74A as of April 2026.
Q: Does Circular 254/2025 apply to DGGI-issued show cause notices? A: Circular 254 assigns proper officers for Section 74A, Section 75(2), and Section 122. For show cause notices issued by DGGI and adjudicated by Common Adjudicating Authorities, Circular 250/07/2025-GST (24 June 2025) separately governs the review, revision, and appeal hierarchy. Both circulars apply to DGGI-related Section 74A matters — Circular 254 for the proper officer designation and monetary limits; Circular 250 for the post-adjudication appellate procedure.
Q: What is Rule 142(1A) DRC-01A and why does it matter for a Section 74A proceeding? A: Rule 142(1A) CGST Rules requires the proper officer to issue a communication in Form GST DRC-01A before issuing any show cause notice under Sections 73, 74, or 74A. This pre-notice communication is the taxpayer's first opportunity to explain discrepancies or settle the liability before a formal SCN is raised. Omission of DRC-01A is a recognised procedural ground to challenge the validity of a subsequent show cause notice.
Sources
- Circular No. 254/11/2025-GST dated 27 October 2025, CBIC: cbic-gst.gov.in
- Circular No. 250/07/2025-GST dated 24 June 2025, CBIC (CAA review/appeal procedure): cbic-gst.gov.in
- Section 74A, Central Goods and Services Tax Act, 2017 (inserted by Finance (No. 2) Act 2024): indiacode.nic.in
- Circular No. 3/3/2017-GST and Circular No. 31/05/2018-GST (predecessor proper-officer circulars): cbic-gst.gov.in
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