GST Liability under SARFAESI Bank Auction

Check the auction 'terms and conditions' released by Bank. Or get its copy before any bid.

Thanks for the quick response

In the latest advt for auction, bank mentions as below
Details of Encumbrences known to Bank - "Not Known"

In an auction notice paper advt last year for same property, bank had mentioned outstanding amount under below 3 categories
1) Society Dues - XXX
2) Property Tax - XXX
3) GST - XXX

So after several failed auction attempts, bank has decided to remove the amounts from their Sale Notice and instead mentioned "Not Known".

NOT KNOWN  means the liability whaterver it be lies over the bidder.

Key protections and risks for the buyer:

• SARFAESI Sec 26E (from 2016): secured creditors' dues have priority over government dues (including GST and income-tax) once the security interest is registered with CERSAI. SC and HC rulings have applied this, and Sec 82 CGST was also made "subject to" the IBC/SARFAESI provisions.

• A buyer at a SARFAESI auction acquires the property free of the borrower's unsecured statutory dues, unless the department had attached the property earlier (registered attachment) or the sale notice discloses encumbrances that the buyer accepts.

• Read the auction terms: "as is where is, as is what is, whatever there is" typically puts known encumbrances on the buyer. Ask the bank for an encumbrance certificate, a CERSAI search, and any GST or income-tax attachment orders (Sec 281/281B IT; Sec 83/79 GST). Get a written statement of disclosed dues.

• GST on the sale itself: sale of immovable property isn't a supply, so no GST. If the bank sells movables (plant), GST may apply under RCM by the buyer (Notf 4/2017 entry for goods sold by a bank's recovery agent).

• TDS: Sec 194-IA (1%) on the purchase consideration, with the borrower company as seller.

A SARFAESI auction does not, by itself, make the purchaser liable for the seller company’s GST or income-tax dues. Those are generally the company’s liabilities, not liabilities that automatically follow the property. But the bank’s verbal assurance is not enough: statutory recovery rights, existing charges, attachments and the sale terms must be checked before bidding.

• Under GST, section 82 makes a first charge for amounts payable by a taxable person, subject to the stated exceptions. Whether it affects this property depends on the facts, including when the dues arose and whether a charge or recovery action was created or recorded. Income-tax recovery can also involve attachment or other enforcement against the property. Do not assume that a bank’s security interest or auction automatically defeats every statutory claim.
• Obtain and review the sale notice and sale certificate, the bank’s security documents and title search, and searches for revenue attachments, encumbrances and pending recovery proceedings. Seek written confirmation from the bank identifying any known claims and stating what it will discharge or clear from sale proceeds; verify the position with the relevant authorities where a specific charge or attachment appears.
• Check whether the company is in insolvency or liquidation proceedings, since that can affect the sale and claims process. The final view depends on the property records, dates and nature of the tax claims, and the auction documents.

Tax-charge and title checks should be part of the pre-bid due-diligence workflow, not left to post-auction resolution. Manual property and tax searches are difficult to coordinate, and automation can reduce repetitive work while professional judgment remains in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. For a walkthrough tailored to your workflow, connect with us on WhatsApp https://wa.me/message/3HVOZ7HIY4ESC1.