Recovery under GST

Initiation of Recovery proceedings

Section-78 CGST Act 2017

• Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within 3 months from the date of service of such order.
• If he fails to pay the same, recovery proceedings shall be initiated against him.
• If it is in the interest of revenue, proper officer may require the said taxable person to make such payment within such period less than a period of 3 months as may be specified by him.

Recovery of Tax

Section-79 CGST Act 2017 read with CGST Rules-143 to 161

Section-79(1) -

Where any amount payable by a person (Defaulter) to Government is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely:-

(a) Recovery by deduction from any money owed (CGST Rules-143) -

Proper officer may deduct or may require any other specified officer to deduct the amount so payable, from any money owing to such person, which may be under his control or such other specified officer;

Proper officer shall specify the amount so deducted in Form GST DRC- 09 to specified officer.

(b) By detaining and selling the goods belonging to defaulter (CGST Rules-144) -

Proper officer may recover or may require any other specified officer to recover the amount so payable, by detaining and selling any goods belonging to such person, which are under his control or such other specified officer;

As per CGST Rules -144

• Proper officer shall prepare an inventory and estimate the market value of such goods and proceed to sell only so much of the goods as may be required for recovering the amount payable along with administrative expenditure incurred on recovery process.
• Goods shall be sold through a process of auction, including e-auction, for which a notice shall be issued in FORM GST DRC-10 clearly indicating the goods to be sold and the purpose of sale.
• Last day for submission of bid or date of auction shall not be earlier than 15 days from the date of issue of notice.
• If the goods are of perishable or hazardous nature or where the expenses of keeping them in custody are likely to exceed their value, the proper officer may sell them before 15 days.
• Proper officer may specify the amount of pre-bid deposit to be furnished to make the bidders eligible to participate in the auction, which may be returned to the unsuccessful bidders, forfeited in case the successful bidder fails to make the payment of the full amount, as the case may be.
• Proper officer shall issue a notice to successful bidder in FORM GST DRC-11 requiring him to make the payment within a period of 15 days from the date of auction.
• On payment of the full bid amount, proper officer shall transfer the possession of the said goods to successful bidder and issue a certificate in FORM GST DRC-12.
• Proper officer shall cancel the process of auction and release the goods, where defaulter pays the amount under recovery, including any expenses incurred on the process of recovery, before the issue of the notice under rule 144(2).
• Where no bid is received or auction is considered to be non-competitive due to lack of adequate participation or due to low bids, Proper officer shall cancel the process and proceed for re-auction.

(c) Recovery from any other person (CGST Rules-145) -

(i) Proper officer may, by a notice in writing in Form GST DRC-13, require any other person from whom -

• money is due or
• may become due or
• who holds or may subsequently hold money for or on account of such person,

to pay to the Government upon the money becoming due/being held, or within the time specified in notice .

(ii) Every person to whom the notice is issued, shall be bound to comply with such notice.

Where any such notice is issued to a post office/banking company/insurer, it shall not be necessary to produce any pass book/deposit receipt/policy or any other document for the purpose of any entry/endorsement.

(iii) if the person to whom a notice has been issued, fails to make the payment to Government, he shall be deemed to be a defaulter for the amount specified in notice and all the consequences of this Act/rules shall follow;

(iv) Proper officer may, at any time, amend or revoke such notice or extend the time for making any payment in pursuance of the notice;

(v) Other person who made the payment in accordance with the notice issued, shall be deemed to have made the payment on behalf of such defaulter and amount credited to government shall be deemed to constitute the discharge of liability of such defaulter.

Proper officer shall issue a certificate in FORM GST DRC-14 to third person, clearly indicating the details of the liability so discharged.

(vi) if other person makes the payment to defaulter instead of government, then such other person shall be personally liable to Government to the extent of the amount due by defaulter or amount discharged to defaulter whichever is lower.

(vii) A person, on whom a notice is served shall not be personally liable, if he proves to the satisfaction of officer issuing the notice that-

• money demanded or any part thereof was not due to person in default or
• at the time of service of notice ,he did not hold any money for or on account of the person in default,
• money was not demanded from him; or
• any part of the money demanded is not likely to become due to such other person or
• any part of the money will not likely be held for or on account of such person.

(d) Collection by detention of any movable or immovable property (CGST Rules-147) -

• Proper officer may distraint any movable or immovable property belonging to or under control of such person, and detain the same until the amount payable is paid; and
• if any part of the said amount payable/cost of distress/keeping of property, remains unpaid within 30 days from such distress, Proper officer may sell the said property and with the proceeds of such sale, he may adjust the amount payable and costs including cost of sale remaining unpaid;
• After such adjustment, the remaining surplus shall be returned to defaulter.

As per CGST Rule-147

• Proper officer shall -

1. Prepare a list of movable and immovable property belonging to defaulter,
2. Estimate their value as per the prevalent market price and
3. Issue an order of attachment or distraint and a notice for sale in FORM GST DRC-16 prohibiting any transaction with regard to such movable and immovable property as may be required for the recovery of the amount due:

• Proper officer shall send a copy of the order of attachment/distraint to concerned Authority to place encumbrance on the said movable/immovable property, which shall be removed only on the written instructions from the proper officer to that effect.
• Property attached/distrained shall be sold through auction, including e-auction, for which a notice shall be issued in FORM GST DRC-17 clearly indicating the property to be sold and the purpose of sale.
• Where the property to be sold is a negotiable instrument/share in a corporation, the proper officer may, instead of selling it by public auction, sell such instrument/share through a broker and the said broker shall deposit the selling amount to Government after reduced by his commission, as may be required for the discharge of the amount under recovery and pay the amount remaining, if any, to the owner of such instrument or a share.
• Proper officer may specify the amount of pre-bid deposit to be furnished by such officer, to make the bidders eligible to participate in the auction, which may be returned to the unsuccessful bidders/forfeited in case the successful bidder fails to make the payment of the full amount, as the case may be.
• last day for the submission of the bid or the date of the auction shall not be earlier than 15 days from the date of issue of the notice.

• If goods are of perishable/hazardous nature or where the expenses of keeping them in custody are likely to exceed their value, the proper officer may sell them forthwith.
• Where any claim is preferred or any objection is raised with regard to the attachment or distraint of any property on the ground that such property is not liable to such attachment or distraint, proper officer shall investigate the claim or objection and may postpone the sale for such time as he may deem fit.
• The person who is making the claim/objection,  liable to show the evidence that he had some interest in, or was in possession of, the property in question under attachment or distraint, on the date of the order issued,.
• Upon investigation, if proper officer is satisfied that on the said date, such property was not in the possession of defaulter/any other person or it was in his possession, not on his own account/as his own property, he shall make an order to release the property, wholly or to such extent as he thinks fit, from attachment or distraint.
• Where the proper officer is satisfied that the property was, on the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the proper officer shall reject the claim and proceed with the process of sale through auction.
• Proper officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring him to make the payment within 15 days from the date of such notice and
• After the said payment is made, Proper officer shall issue a certificate in FORM GST DRC-12 specifying the details of the property, date of transfer, the details of the bidder and the amount paid and upon issuance of such certificate, the rights, title and interest in the property shall be deemed to be transferred to such bidder
• Where the highest bid is made by more than one person and one of them is a co-owner of the property, he shall be deemed to be the successful bidder.
• Any amount, including stamp duty, tax or fee payable in respect of the transfer of the property, shall be paid to Government by the person to whom the title in such property is transferred.
• Proper officer shall cancel the process of auction and release the goods, if defaulter pays the amount under recovery, including any expenses incurred on the process of recovery, before the issue of the notice (FORM GST DRC- 17).
• Proper officer shall cancel the process and proceed for re-auction, if no bid is received or auction is considered to be non-competitive due to lack of adequate participation or due to low bids.

(e) Recovery through District Collector (CGST Rules-155)

• Proper officer may prepare a certificate ,specifying the amount due from such person and send it in FORM GST DRC-18 to -

1. Collector of district in which such person owns any property or resides or carries on his business or
2. any officer authorised by Government and

• On receipt of such certificate, said Collector/Officer shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue;

(f) Recovery through Magistrate (CGST Rules-156)

• Notwithstanding anything contained in Code of Criminal Procedure, 1973, proper officer may file an application in FORM GST DRC- 19 to appropriate Magistrate and
• Such Magistrate shall proceed to recover from such person the amount specified thereunder as if it were a fine imposed by him.

Section-79(2) -

Where any bond/other instrument executed under this Act/rules or regulations, provide that any amount due under such instrument may be recovered in the manner laid down in Section-79(1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section.

Section-79(3) -

Where any amount of tax, interest or penalty is payable by a person to Government and which remains unpaid, proper officer of State tax/Union territory tax, during the course of recovery of said tax arrears, may recover the amount from the said person as if it were an arrear of State tax/Union territory tax and credit the amount so recovered to Government.

Section-79(4) -

Where the amount recovered u/s 79(3) is less than the amount due to Central Government and State Government, the amount to be credited to respective Governments shall be in proportion to the amount due to each such Government.

Other rules to be followed

Prohibition against bidding or purchase by officer (CGST Rule-148) -

No officer or other person having any duty to perform in connection with any sale shall, either directly or indirectly, bid for, acquire or attempt to acquire any interest in the property sold.

Prohibition against sale on holidays (CGST Rule-149) -

No sale shall take place on a Sunday or other general holidays recognized by Government or on any day which has been notified by Government to be a holiday for the area in which the sale is to take place.

Assistance by police (CGST Rule-150) -

Proper officer may seek such assistance from the officer-in-charge of the jurisdictional police station as may be necessary in the discharge of his duties and said officer-in-charge shall depute sufficient number of police officers for providing such assistance.

Attachment of debts and shares, etc. (CGST Rule-151) -

(1) A debt not secured by a negotiable instrument, a share in a corporation, or other movable property not in the possession of the defaulter except for property deposited in, or in the custody of any court shall be attached by a written order in FORM GST DRC-16 prohibiting.-

1. in the case of a debt, the creditor from recovering the debt and debtor from making payment thereof until the receipt of a further order from proper officer;
2. in the case of a share, the person in whose name the share may be standing from transferring the same or receiving any dividend thereon;
3. in the case of any other movable property, the person in possession of the same from giving it to defaulter.

(2) A copy of such order shall be affixed on some conspicuous part of the office of proper officer, and another copy shall be sent, in the case of debt, to debtor, and in the case of shares, to registered address of the corporation and in the case of other movable property, to the person in possession of the same.

(3) A debtor, prohibited under clause (a) of sub-rule (1), may pay the amount of his debt to proper officer, and such payment shall be deemed as paid to defaulter.

Attachment of property in custody of courts or Public Officer(CGST Rule-152) -

Where the property to be attached is in the custody of any Court/Public Officer, the proper officer shall send the order of attachment to such Court/Officer, requesting that such property, and any interest/dividend becoming payable thereon, may be held till the recovery of the amount payable.

Attachment of interest in partnership (CGST Rule-153) -

(1) Where the property to be attached consists of an interest of defaulter, being a partner, in partnership property, the proper officer may make an order charging the share of such partner in partnership property and profits with payment of the amount due under the certificate, and may, by the same or subsequent order, appoint a receiver of the share of such partner in the profits, whether already declared or accruing, and of any other money which may become due to him in respect of partnership, and direct accounts and enquiries and make an order for the sale of such interest or such other order as the circumstances of the case may require.

(2) Other partners shall be at liberty at any time to redeem the interest charged or, in the case of a sale being directed, to purchase the same.

Disposal of proceeds of sale of goods and movable or immovable property (CGST Rule-154) -

Amounts so realised from the sale of goods, movable or immovable property, for the recovery of dues from a defaulter shall,-

1. First, be appropriated against the administrative cost of the recovery process
2. Next, be appropriated against the amount to be recovered;
3. Next, be appropriated against any other amount due from the defaulter under the Act or the  IGST Act, 2017 or UTGST Act, 2017 or any of SGST Act, 2017 and rules ; and
4. Any balance, be paid to Defaulter.

Recovery from surety (CGST Rule-157) -

Where any person has become surety for the amount due by defaulter, he may be proceeded, as if he were the defaulter.

Recovery from company in liquidation(CGST Rule-160) -

Where the company is under liquidation, the Commissioner shall notify the liquidator for the recovery of any amount representing tax, interest, penalty or any other amount due under the Act in FORM GST DRC -24.

Continuation of certain recovery proceedings (CGST Rule-161) -

Order for the reduction/enhancement of any demand u/s 84 shall be issued in FORM GST DRC- 25.

Payment of tax and other amount in installments

Section-80 CGST Act 2017 read with CGST rules -158

• On an application filed by a taxable person in FORM GST DRC- 20, seeking extension of time for the payment of taxes/any amount due, for allowing payment of such taxes/amount in installments, Commissioner shall call for a report from jurisdictional officer about the financial ability of the taxable person to pay the said amount.
• Commissioner may issue an order in FORM GST DRC- 21, for extend the time for payment or allow payment of any amount due under this Act, other than amount due as per the liability self-assessed in any return, by such person in monthly installments not exceeding 24, subject to payment of interest u/s 50 and subject to such conditions and limitations.
• If there is default in payment of any one installment on its due date, the whole outstanding balance payable on such date shall become due and payable and shall, without any further notice being served on the person, be liable for recovery.
• The facility shall not be allowed where-

1. Taxable person has already defaulted on the payment of any amount under the Act for which the recovery process is on;
2. Taxable person has not been allowed to make payment in installments in preceding financial year under the Act .
3. Amount for which instalment facility is sought is less than Rs.25,000/-

Transfer of property to be void in certain cases

Section-81 CGST Act 2017

Where a person, after any amount has become due from him, creates a charge on or parts with property belonging to him or in his possession by way of -

i. sale,
ii. mortgage,
iii. exchange, or
iv. any other mode of transfer whatsoever of any of his properties

in favour of any other person with the intention of defrauding Government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said person:

Such charge or transfer shall not be void , if it is made for -

i. adequate consideration,
ii. in good faith and
iii. without notice of the pendency of such proceedings under this Act or
iv. without notice of such tax or other sum payable by the said person, or
v. with the previous permission of proper officer.

Tax to be first charge on property

Section-82 CGST Act 2017

Any amount payable by a taxable person or any other person on account of tax, interest or penalty, which he is liable to pay to Government shall be a first charge on the property of such taxable person or such person.

Provisional attachment to protect revenue in certain cases

Section-83 CGST Act 2017 read with CGST Rules-159

• During the pendency of any proceedings u/s 62/ 63/ 64/ 67/ 73 or 74, the Commissioner is of the opinion that for the purpose of protecting the interest of Government revenue, it is necessary so to do, he may, by order in FORM GST DRC-22, in writing attach provisionally any property, including bank account, belonging to the taxable person.
• Every such provisional attachment shall cease to have effect after the expiry of a period of 1 year from the date of the order made u/s 83(1).
• Commissioner shall send a copy of order of attachment to concerned Revenue Authority/Transport Authority/any such Authority, to place encumbrance on the said movable/ immovable property, which shall be removed only on the written instructions from Commissioner to that effect.
• Where the property attached, is of perishable or hazardous nature, and if taxable person pays an amount equivalent to the market price of such property/amount that is or may become payable, whichever is lower, then such property shall be released, by an order in FORM GST DRC-23, on proof of payment.
• Commissioner may dispose of such property and amount realized thereby shall be adjusted against the tax, interest, penalty, fee or any other amount payable by taxable person, if taxable person fails to pay the amount, in respect of said property of perishable or hazardous nature.
• Any person, whose property is attached may file an objection to the effect that the property attached was or is not liable to attachment, within 7 days of attachment ,
• Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC- 23.
• Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC- 23.

Continuation and validation of certain recovery proceedings

Section-84 CGST Act 2017

Where any notice of demand in respect of any tax, penalty, interest or any other amount payable under this Act, is served upon any taxable person or any other person and any appeal or revision application is filed or any other proceedings is initiated in respect of such Government dues, then- -

(a) where such Government dues are enhanced in such appeal, revision or other proceedings, the Commissioner shall serve upon the taxable person or any other person another notice of demand in respect of the amount by which such Government dues are enhanced and any recovery proceedings in relation to such Government dues as are covered by the notice of demand served upon him before the disposal of such appeal, revision or other proceedings may, without the service of any fresh notice of demand, be continued from the stage at which such proceedings stood immediately before such disposal;

(b) where such Government dues are reduced in such appeal, revision or in other proceedings- -

(i) it shall not be necessary for the Commissioner to serve upon the taxable person a fresh notice of demand;

(ii) Commissioner shall give intimation of such reduction to him and to the appropriate authority with whom recovery proceedings is pending;

(iii) any recovery proceedings initiated on the basis of the demand served upon him prior to the disposal of such appeal, revision or other proceedings maybe continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.

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