MEANING OF ‘ARREARS’ AND TYPES OF ARREARS - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

2. MEANING OF ARREARS AND TYPES OF ARREARS 2.1. The demand of tax may be confirmed fully or partially or dropped in the process of adjudication. On issuance of the Order after adjudication proceedings the amount of tax, interest, penalty, late fees, etc., determined as payable by the taxpayer, become arrears and recoverable from the taxpayer. If the arrears are paid by taxpayer, then the dispute concludes. However, in case, it is not paid then the mechanism prescribed in GST law has to be used to recover the same from the taxpayer or other person concerned. 2.2. Thus, arrears are the overdue payment of the amount of tax, cess, interest, fine, late fee or penalty that is payable by the taxpayer to the exchequer. The arrears may arise as a result of Order-in-Original, Order of Appellate Authority, Appellate Tribunal and the Courts (High Court/Supreme Court). 2.3. The amount involved in the case under investigation, unconfirmed demands (i.e. the amount demanded in the Show Cause Notice but not adjudicated, and Order-in-Original set aside or remanded for de-novo adjudication by Appellate authority are not the arrears. 2.4. The following are the categories of arrears: (i) Arrear in Litigation/Appeal: where the confirmed demand is under appeal or litigation before any appellate authorities, namely, Supreme Court/High Court/Appellate Tribunal /Commissioner (Appeals); (ii) Restrained Arrears: Taxpayer against whom financial/operational creditors have initiated insolvency or bankruptcy proceeding before NCLT/DRT under Insolvency and Bankruptcy Code, 2016; (iii) Arrear where appeal period is not yet over; (iv) Recoverable arrear other than the above. 2.5. The time period allowed under Section 107 of the CGST Act, 2017 for filing appeal before the Appellate Authority or Appellate Tribunal is three months from the date of receipt of the Order-In-Original or the Order-In-Appeal, as the case may be. The taxpayer may, consequent to any order passed, pay the dues within 3 months from the date of receipt of order. 2.6. For filing an appeal before the Appellate Authority or Appellate Tribunal, the taxpayer has to make a mandatory pre-deposit of the prescribed amount, as prescribed under Section 107(6) and 112(8) of the CGST Act, 2017 respectively. If a taxpayer files the appeal before the Appellate Authority or Appellate Tribunal and deposits the mandatory pre-deposit, then the balance amount of dues shall be deemed as stayed. If any demand proceedings have attained finality either on account of no appeal filed against the Order-In-Original or on account of litigation process being finally over or attained finality on account of taxpayer having exhausted all appellate remedies available under the law, then such confirmed demand becomes recoverable arrears. 2.7. As per Section 119 of the CGST Act, 2017, if an appeal has been preferred to the High Court or the Supreme Court, sums due to the Government as per the order passed by the Appellate Tribunal or an order passed by the High Court, as the case may be, shall be payable in accordance with the order so passed. 2.8. In respect of cases where proceedings have been initiated by financial or operational creditors before National Company Law Tribunal or before Debt recovery Tribunal (DRT), as applicable, under Insolvency and Bankruptcy Code, 2016, (IBC Code, 2016), against the taxpayer or defaulter person from whom GST arrears are also due for recovery, the provision of Insolvency and Bankruptcy Code has overriding effect over the provision of GST Laws. Therefore, any action for recovery of arrears, where the proceedings have already been initiated by financial /operational creditors against the defaulter before NCLT, has to be considered in the light of provision of IBC, 2016. Such arrears are restrained arrears . Circular No. 134/04/2020-GST dated 23.03.2020 and Circular No. 187/19/2022-GST dated 27.12.2022 issued by CBIC contain the instructions and clarifications on dealing with the restrained arrears in such cases before NCLT/DRT.