MODES OF RECOVERY UNDER GST LAW (PART-2)

[Dr. Sanjiv Agarwal]

Section 79 of CGST Act, 2017 provides for various modes of recovery of amount payable under the GST law. It provides the manner in which recovery proceedings can be carried out under the Act.

Liability of noticee

Under the provisions of section 79 (1) (c) of the CGST Act, 2017, any person from whom the money is due or become due or who holds or may hold any money for a person who has been declared defaulter under the provisions of the GST Act, can be issued a notice by proper officer under the Act requiring such person to pay the amount to the Government instead of paying it to the person who has been declared defaulter.

Following provisions will be applicable on such person:

(a)   Every such person (i.e., debtors or future debtors) to whom such notice has been issued would be bound to comply such notice.

(b)  In case such person fails to pay the amount as mentioned in such notice, he shall be deemed a defaulter in respect of amount so specified in notice.

(c)   Where the person to whom such notice has been issued proves to the satisfaction of proper officer that the money demanded from him or any part thereof is not due to the defaulter or he does not hold any money for such defaulter at the time this notice was issued to him or thereafter, such person will be saved from the liability under such notice.

(d)  Any payment made by such person in compliance of the notice will be considered to have been paid to the defaulter and will be considered discharged of his obligation to defaulter.

(e)   Any person to whom notice has been issued in case pays money to person in default will be considered personally liable to the Government to the extent of money paid by him to such defaulter.

Notice to third party

Notice of recovery can be issued to a third party like bank, post office or insurance company etc. While making this payment, it will not be necessary for bank, post office or insurance to make an entry in passbook or make an endorsement on policy etc.

Recovery through bond

As provided in section 79(2) of the CGST Act, 2017, if an amount is recoverable under the provision of the GST Act, it can be recovered from bond or other instrument executed under this Act, where the terms of such bond or instrument provide that the amount due under such instrument may be recovered in the manner laid down under section 79(1) of the CGST Act, 2017.

Recovery of Central / State Tax

The proper officer of CGST while making recovery of the amount of tax, interest and penalty due to Central Government, may also recover the amount of tax, interest and penalty due to State Government and credit the proceeds to the respective state Government.

Similarly, the proper officer of SGST while making recovery of the amount of tax, interest and penalty due to State Government, may also recover the amount of tax, interest and penalty due to Central Government also and credit the proceeds to the Central Government.

Provisions in this regard has been made in section 79(3) of the CGST Act, 2017. The arrears of tax recovered by the proper officer shall be distributed to the respective Governments in proportion to the amount due to each such Government.

Further, similar provision also exists in SGST/UTGST Act for recovery of any amount due under SGST Act/UTGST Act to be recovered by CGST officers while recovering arrears of CGST as though the amount due was CGST and later pass it on to the concerned State Government/Union Territory.

It is also provided that in case where the SGST officer/UTGST officer also collects CGST in the course of collection of SGST/UTGST or vice versa, where the amount recovered is not fully covering both the liabilities, the amount collected has to be apportioned between Centre and State/Union Territory in the same proportion of the amounts due.

CBIC guidelines for recovery of tax under section 79

CBIC had issued Instruction No. 1/2022-GST dated 07.01.2022 to stipulate guidelines for recovery proceedings under the provisions of Section 79 of the CGST Act, 2017 in cases covered under explanation to sub-section (12) of Section 75 of the CGST Act, 2017.

Accordingly,

1. Where the tax payable in respect of details of outward supplies  furnished by the registered person in GSTR-1, has not been paid through GSTR-3B Return then the tax short paid and the interest thereon, are liable to be recovered.
2. Wherever any tax self-assessed in outward supply statement GSTR-1 is found to be short paid or not paid through GSTR-3B Return, the proper officer may send a communication with DIN to the registered person to pay the amount short paid or not paid, or to explain the reasons for such short payment or non-payment of self-assessed tax.
3. If the concerned person is able to justify the differences between GSTR-1and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, or pays the amount such short paid or not paid, no recovery proceeding is to be initiated.
4. However, if the said registered person either fails to reply or fails to explain the reasons for such difference/ short payment of tax or fails to make the payment of such amount short paid or not paid, then recovery proceedings may be initiated.