The recovery provisions under section 78 and 79 of the CGST Act, 2017 lay down a well defined procedure which is as follows:
- Any amount payable, in pursuance to any order passed in this matter, is required to be paid within 3 months from the date of receipt of order and the tax payer should pay the same within this time limit. However, it may be mentioned that in certain cases, considering the interest of revenue, this period of 3 months may be reduced.
- If the payable amount is not paid within the specified time limit of 3 months then recovery proceedings shall be initiated and various actions may be taken by the recovery officer, for realisation of Government dues. The options for recovery of Government dues include deduction of money from any amount payable to such tax payer, by detaining and selling any goods, by directing any other person from whom the money is due to such person, attaching any property belonging to the defaulter etc.
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.
Notice of Recovery of Tax
- To initiate recovery of tax payable or any amount due from a person to the Government which has not been paid, notice is required to be issued.
- Proper officer shall issue a notice to:
- any person from whom money is due or becomes due
- any person who holds or may hold any money for a person declared defaulter under GST law.
- The notice may require such to pay amount to the Government inserted of paying it to the person decarled as defaulter.
- Notice can be issued by proper officer to third parties e.g., bank, insurance, company, post office.
- All noticees, persons to whom notice is issued is under obligation to comply with such notice.
Recovery of Tax: Action on Notice
Once a person receives a notice from proper officer under section 79(1)(c) of the CGST Act for recovery, following consequences follow:
- It should be checked whether notice of recovery is issued by the proper officer of the person declared as defaulter.
- It may be ascertained:
- whether money is due from him, or
- he holds or may hold any money for such person under the Act
i.e., he is debtor or a future debtor
- Noticee is bound to comply with such notice issued by the proper officer.
- If noticee does not pay as required in notice, he is deemed to be a defaulter for such amount.
- If the noticee is able to prove to the contrary to the satisfaction of proper officer, such noticee is saved from the liability under the notice.
- On payment made in terms of notice, it will be considered as if he has paid to the defaulter and will stand discharged towards his obligation to the said defaulter.
- However, if the noticee does not pay as required in notice but pays to the person in default, he shall be personally liable to the Government to the extent of money so paid in contravention of notice.
Recovery of Tax (CGST, SGST, UTGST) u/s 79(3) and 79(4) of CGST Act, 2017
- 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 / UT Government also and credit the proceeds to the respective State / UT Government.
- The proper officer of SGST /UTGST while making recovery of the amount of tax, interest and penalty due to State / UT Government, may also recover the amount of tax, interest and penalty due to Central Government also and credit the proceeds to the Central Government.
- In both cases, amount under recovery shall be tax, interest and penalty which remains unpaid, i.e., confirmed demands in arrears remaining unpaid.
- Amount of recovery shall be credited to the credit of Central Government or respective State / UT Government, as applicable.
- 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.
- Where the amount recovered is not fully covering both the liabilities, the amount collected has to be apportioned between Centre and State/UT in the same proportion of the amounts due.
Recovery from property of defaulter of u/s 79 of CGST Act, 2017
- Section 79(1)(d) read with Rule 144 provide for detention and selling of property belonging to defaulter.
- Goods which belong to defaulter or in his control should exist.
- Goods should belong to the person who is liable to pay any amount
- Goods may be detained and sold by the proper officer or such other specified officer as authorized by the proper officer.
- The amount payable by defaulter shall be recovered out of the realization.
- In terms of Rule 144 of CGST Rules, 2017, the goods should be sold through a process of auction including e-auction, for which a notice should be issued in Form GST DRC-10 indicating the goods to be sold and the purpose of sale.
- If the goods are perishable or hazardous in nature or the expenses of storing them is likely to exceed the value of such goods, then proper officer may sell them before 15 days.
- Proper officer has to issue a notice to the successful bidder in Form GST DRC-11 requiring him to make the payment within a period of fifteen days from the date of auction.
- On payment of the full bid amount, the possession of the said goods shall be transferred to the successful bidder and a certificate in Form GST DRC-12 shall be issued.
- In case the defaulter pays the amount under recovery, including any expenses incurred on process of recovery, before the issue of notice issued in Form GST DRC-10 (Notice of Auction) then the proper officer shall cancel the process of auction and release the goods.
- Following Forms are to be used:
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GST DRC-10
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Notice of sale of property through auction or e-auction
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GST DRC-11
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Notice issued by proper officer to successful bidder for making payment within 15 days from the date of auction
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GST DRC -12
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Transfer letter for possession of goods issued by proper officer to successful bidders
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Recovery of tax through District Collector
- Proper officer may prepare a certificate signed by him specifying the amount due from the defaulter.
- Such certificate will be sent to the District Collector of the District in FORM GST DRC-18 where the defaulter:
- owns any property; or
- resides; or
- carries on his business.
- The District Collector on receipt of such certificate shall proceed to recover from such defaulter the amount specified in the certificate.
- Such amount shall be recovered as if such amount is arrears of land revenue.
- Proper officer to issue certificate of payment by third person towards discharge of liability in GST DRC-14.
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