Recovery of Tax under GST

Last Update Date : May 03, 2019
Estimated Read Time: 6 min

Tax evasion is a major headache for every economy around the globe. Therefore, tax laws are designed to curb evasions and recover taxes where there is evasion. The GST Act has also got provisions to empower the tax authorities to demand and recover the tax from tax evaders.

In our previous guide, we discussed how and when tax authorities can raise demand for tax from defaulters and penalties for default. In continuation to that, we will discuss the legal provisions related to the recovery of tax under GST.

When the tax authorities pass an order demanding tax, the defaulter gets 3 months from the date of issue such order to pay the due tax, interest and penalty. However, the Proper officer has the authority to reduce the time allowed if he considers it expedient in the interest of revenue.

Modes of Recovering Tax under GST

The tax department can start recovery proceedings if the demand for the tax is not met. The GST Act empowers the Proper officer to recover due tax by one or more of the following modes:

Recovery from any Other Amount Owed by Defaulter

GST Act empowers the Proper officer or any other specified officer to recover the unpaid tax by deducting the amount due from any other amount paid in excess by the defaulting assessee which may be under the control of the Proper officer or specified officer.

Recovery through Detention or Sale of Goods

The Proper officer or any other specified officer has been given the power to recover unpaid tax by detaining or selling any goods belonging to defaulter but under the control of the officer.

Recovery from any other Person

The proper officer also has the power to recover the unpaid tax from any person who owes money to the defaulter of tax. A proper officer can issue a notice to such person asking him to pay the defaulter’s tax due by deducting it from the money he owes to the deductor. A proper officer can issue a notice to ask for payment and notify when it should be paid. The amount is payable when it becomes due or held within the time specified in the notice. However, the time mentioned in the notice cannot be earlier than the date on which the payment becomes due or is held.

Recovery through Detention or Sale of Property

Another way the proper officer can recover tax is by detaining any movable or immovable property belonging to or controlled by defaulter. The officer can keep the property detained until the time defaulter pays the tax due. If the amount is not paid within 30 days from the date on which property was detained, the officer may sell the property to recover the amount due and pay any excess amount from the sale to the defaulter.

Recovery through Collector

The proper officer can also recover tax of the defaulter through the collector of the relevant district. The officer can send a certificate to the collector stating the amount to be recovered. The collector can recover the tax by treating it as an arrear of land revenue.

Recovery through Magistrate

The Proper officer can also ask the appropriate magistrate to recover the tax. The concerned magistrate can then recover the tax by considering it a fine imposed by him.

Recovery of CGST by State or Union Territory

A Proper officer of state government or union territory can recover any CGST while recovering any SGST or UTGST by considering the former as an arrear of later and pay it to the central government.

[ Read: Types of GST ]

In case the recovered amount is less than the amount due, then such amount is distributed among the central government and state government or union territory in the proportion it is due to each government.

Recovery of Tax Notice under GST - Managed Services by H&R Block

Recovery of Tax in Instalments

The defaulter of tax may get an extension to pay the due amount by filing an application to the commissioner. He can get permission to pay CGST along with interest in monthly instalments not exceeding 24 months.

This facility is not available for payment of amount die as per the liability self-assessed in any return.

If the assessee fails to pay any of the instalments, the whole outstanding balance becomes due and payable in one go and the tax department can take recovery action on it without further notice.

Interest to be paid from the date of tax became due till the date of actual payment.

Recovery under Bond

Any bond or other instrument was executed under this act or rules or regulation thereunder and that bond or instrument provides that any amount due under such instrument may be recovered in the manner prescribed under such sub-section, then the amount without prejudice to the other mode of recovery will be recovered.

Void Property Transactions of Defaulter

If a person who has tax due, creates a charge or parts with his property through sale, mortgage, exchange or any other way of transfer in favour of any other person with the intention of defrauding government revenue, then such transfer or charge will be considered void in order to facilitate recovery of unpaid tax.
Above mentioned charge or transfer will not be considered void if:

  • it is made with adequate consideration in good faith or without notice of pendency of such proceedings under the act
  • or without notice of such tax or other sums payable by the said person
  • or with the previous permission of the proper officer

When shall the Tax Due be the First Charge

The amount payable as tax, interest, a penalty by the taxable person or any other person shall be the first charge on the property of such taxable or another person, notwithstanding anything contrary contained in any other law for the time being in force, save as otherwise provided in Insolvency and Bankruptcy code 2016.

Provisional Attachment during Proceedings

Commissioner may, if necessary in the interest of Government revenue, by order in writing, attach provisionally any property belonging to the taxable person during the pendency of any proceeding in case of:

  • Assessment of non-filers of returns
  • or, Assessment of unregistered persons
  • or, Summary Assessment in some special cases with sufficient grounds
  • or, Inspection, Search & Seizure
  • or, Determination or Demand of Tax, Interest, a penalty in case of fraud etc.

Such provisional attachment shall be ceased to have effect after the expiry of one year from the date of the order mentioned above.

Continuation and Validation of Certain Recovery Proceedings

Where any notice of demand in relation to Government dues viz Tax, Penalty, Interest or any other amount payable under the act, is served upon the taxable person and any appeal, revision application is filed or any other proceeding is initiated in respect of such Government dues then if:-

If the Tax Dues are Enhanced

If the appeal, revision or other proceedings result in enhancement of tax dues, then the commissioner shall serve notice of demand in respect of enhanced amount. Recovery proceeding shall be continued from the stage at which such proceedings stood immediately before such disposal.

If the Tax Dues are Reduced

If the appeal, revision or other proceedings result in a reduction of tax dues, then fresh notice of demand is not required. Here, only reduced demand is liable for recovery and the reduction in dues is conveyed to the taxable person. Further recovery proceeding should continue with the reduced amount from the stage at which such proceedings stood immediately before such disposal.

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CA Chetan Shinde
CA Chetan Shinde
Chetan is the Lead Tax Advisor at H&R Block (India) with an experience of almost half a decade in audit and taxation. His professional areas of interest are GST advisory and statutory audit. Apart from taxation, he is passionate about social causes and works extensively towards rural school development and literacy.