RECOVERY MECHANISM - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

5. RECOVERY MECHANISM 5.1. The recovery provisions under the CGST Act, 2017 and the rules made thereunder lay down proper procedure for initiation of the recovery proceedings. 5.2. As per Section 78 of the CGST Act, 2017 any amount payable by a taxable person in pursuance of an order passed under the CGST Act, 2017 shall be paid by the taxpayer within a period of three months from the date of service of such order, failing which recovery proceedings shall be initiated. However, as per proviso to Section 78 of CGST Act, 2017 if the proper officer considers it appropriate in the interest of revenue, he may, after recording the reasons in writing, ask the said taxpayer to make the payment within a specified period, before the completion of three months. The Commissioner of Central Tax has been assigned the functions of Proper Officer in this regard. 5.3. As per rule 142(5) of the CGST Rules, 2017, a summary of the order issued under Sections 52, 62, 63, 64, 73, 74, 75, 76, 122, 123, 124, 125, 127, 129 or Section 130 of CGST Act, 2017 shall be uploaded electronically in FORM GST DRC-07 , specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax. DRC-7 to be treated as Notice for Recovery (Refer Rule 142(6) of the CGST Rules, 2017). As per Rule 142(7) of the CGST Rules, 2017 if a rectification of the order has been passed in accordance with the provisions of Section 161 (Rectification of error) or if an order uploaded on the system has been withdrawn, then a summary of the rectification order or of the withdrawal order shall be uploaded electronically by the proper officer in FORM GST DRC-08. 5.4. Section 79 of CGST Act, 2017, deals with the provisions relating to the recovery of the self-assessed tax when the person fails to pay tax to the Government. Before proceeding with the recovery action, it is important to ascertain whether the difference in reporting of outward supplies in the GSTR-1 return and in the GSTR-3B return is due to a genuine mistake or otherwise. 5.5. There is a possibility of typographical error or unintentional wrong reporting of any detail in GSTR-1 or GSTR-3B. Such errors or omissions can be rectified by the taxpayer in a subsequent GSTR-1/ GSTR-3B as per the provisions of Section 37(3) of CGST Act, 2017 or the provisions of Section 39(9) of the Act, as the case may be. Also, there can be cases where Outward Supply was not declared in the past, but the tax was paid under GSTR-3B and to correct this error, such outward supplies are reported in later tax period. In such cases, there could be a mis-match between GSTR-l and GSTR-3B. Therefore, in such cases, an opportunity needs to be provided to the concerned taxpayer by sending a communication to him, asking him to explain the differences between GSTR-1 and GSTR-3B, if any, and for making good short payment or non-payment of the amount of self-assessed tax liability, and interest thereon by paying the same within a reasonable time, before any action under Section 79 of the CGST Act, 2017 is taken for recovery of the said amount. If, the concerned person is able to justify the differences between GSTR-1 and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, to the satisfaction of the proper officer, or pays such short paid or not paid amount, then there is no requirement to initiate proceedings for recovery under Section 79 of the CGST Act, 2017 except in cases where the taxpayer fails to rectify errors of omission by 30th day of November following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier. 5.6. If the taxpayer fails to reply to the Proper Officer or fails to make the payment of the short paid or not paid amount within the time prescribed in the communication or as permitted by the Proper Officer, then the proceedings under Section 79 of the CGST Act, 2017 for recovery of such amount has to be initiated. Further, where the taxpayer fails to explain the reasons for such difference/ short payment of tax to the satisfaction of the Proper Officer then he may proceed for recovery of the said amount as per provisions of Section 79 of the CGST Act, 2017. 5.7. With effect from 26.12.2022 specific provisions by way of Rule 88C of CGST Rules, 2017, have been incorporated in the CGST Rules, 2017, for dealing with difference in liability reported in GSTR-1 and GSTR-3B. (i) The provisions of Rule 88C of CGST Rules, 2017 provide that where the tax payable by a taxpayer as per the statement of outward supplies furnished in FORM GSTR-1 in respect of a tax period exceeds the amount of tax payable as per the return in FORM GSTR-3B for that period then such taxpayer shall be intimated about such difference, in Part A of FORM GST DRC-01B , electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended, highlighting the said difference and directing him to pay the differential tax liability, along with interest through FORM GST DRC-03 or explain the difference in tax payable on the common portal, within the stipulated period. (ii) The taxpayer shall either pay the amount of the differential tax liability, fully or partially, along with interest and furnish the details thereof or furnish a reply, explaining the reasons for the differential tax liability that has remained unpaid, in Part B of FORM GST DRC-01B electronically on the common portal, within the stipulated period. (iii) If any amount specified in the intimation remains unpaid and if no explanation or reason is furnished by the taxpayer in default or if the explanation or reason furnished by such person is not found acceptable by the Proper Officer then the said amount shall be recovered in accordance with the provisions of Section 79 of the CGST Act, 2017. 5.8. With effect from 04.08.2023 specific provisions by way of Rule 88D have been incorporated in the CGST Rules, 2017. (i) Rule 88D of the CGST Rules, 2017provides that if the amount of input tax credit availed by a taxpayer in the FORM GSTR-3B return for a tax period or periods exceeds the input tax credit available to such person in accordance with the auto-generated statement containing the details of input tax credit in FORM GSTR-2B for the corresponding period then the said taxpayer shall be intimated of such difference in Part A of FORM GST DRC-01C, electronically and a copy of such intimation shall also be sent to his e-mail address, highlighting the said difference and directing him to pay the excess input tax credit amount availed in the said FORM GSTR-3B, along with interest, through FORM GST DRC-03 or explain the reasons for the aforesaid difference. (ii) The taxpayer shall either pay the excess input tax credit amount, fully or partially, along with interest through FORM GST DRC-03 and furnish the details thereof or furnish a reply, electronically, giving reasons in respect of the excess input tax credit, in Part B of FORM GST DRC-01C , within the specified period. (iii) If any amount remains to be paid and where no explanation or reason is furnished by the taxpayer in default or where the explanation or reason furnished by such person is not found to be acceptable by the Proper Officer, then the said amount shall be liable to be demanded under the provisions of Section 73 or Section 74 of the CGST Act, 2017, as the case may be. 5.9. Rule 142B has been inserted in the CGST Rules, 2017 vide notification No. 38/2023-CT, dated 04.08.2023, w.e.f. 04.08.2023, which lays down the procedure for intimating the taxpayer online about the amount liable to be recovered under Section 79 of the CGST Act, 2017, as under:- (i) If any amount of tax or interest has become recoverable under Section 79 of the CGST Act, 2017 in accordance with Section 75 of the CGST Act, 2017 ibid read with Rule 88C of CGST Rules, 2017 and is unpaid, the Proper Officer shall intimate the details of the said amount in FORM GST DRC-01D , electronically on the common portal, directing the taxpayer to pay the said amount along with applicable interest, within the specified time and the said amount shall be posted in Part-II of Electronic Liability Register in FORM GST PMT-01. (ii) The intimation shall be treated as the notice for recovery. (iii) If amount of tax or interest specified in the intimation remains unpaid on the expiry of the period specified in the said intimation, the Proper Officer shall proceed to recover such amount in accordance with various modes of recovery prescribed under Rule 143 to Rule 147 or Rule 155 to Rule 157 or Rule 160 of the CGST Rules, 2017.