Recovery under GST

Modes of recovery under GST | Know Entire Proceeding

CA Poonam Gandhi

Updated on February 15th, 2023

Table of Contents
1
Initiation of recovery proceedings under GST
2
Modes of recovery under GST
Different modes of recovery under GST
3
Recovery Provisions in GST
Section 81 – Transfer of property to be void in certain cases
Section 82 – Tax to be first charged on the property
Section 83 – Provisional attachment to protect revenue in certain case
4
Claim upto 100% Input Tax Credit

Every taxation law comes with its own definite recovery proceedings, the same is also covered under Goods and Services Tax (GST). The provision which covers the recovery under GST proceedings summarized hereunder

Particulars

Relevant sections/ rules

Initiation of recovery proceedings under GST (i.e. when can recovery action be taken under GST)

Section 78 of the Central Goods and Services Tax Act, 2017

Modes of recovery proceedings under GST (i.e. manner in which recovery action be taken under GST)

Section 79 of the Central Goods and Services Tax Act, 2017 read with relevant rules of the Central Goods and Services Tax Rules, 2017

The present article briefly covers the entire recovery proceedings as defined under GST law.

Initiation of recovery proceedings under GST

Recovery under GST proceeding

Get Free Bonus Report: Claim 100% ITC for your business

Section 78 of the Central Goods and Services Tax Act, 2017 deals with the provisions relating to the initiation of recovery proceedings under GST. Accordingly, recovery proceedings can be initiated under GST against any taxable person if –

  • Any amount is payable in pursuance of an order passed under the Central Goods and Services Tax Act, 2017; and
  • Such amount remains unpaid for a period of 3 months (or such less time as may be specified) from the date of service of such order.

Thus, in simple terms, recovery proceedings can be initiated against any person if the following two conditions are satisfied

Condition 1 – There is an amount payable by the person as per the order passed under the Central Goods and Services Tax Act, 2017; and

Condition 2 – Such payable amount is not paid by the person within a period of 3 months from the date of service of the order.

Read more related articles:

GST Refund Claim In Case of Inverted Duty Structure under GST

GST on Construction Industry | New GST Rate Applicability

Modes of recovery under GST

Provisions of section 79 of the Central Goods and Services Tax Act, 2017 read with specified rules thereon cover different modes of recovery under GST. A simplified understanding of the same is provided in the table below

Different modes of recovery under GST

Relevant section and rules

Modes of recovery

Details thereon

Section 79(1)(a) read with rule 143

Recovery of the amount from the money under the control of the proper officer/ specified officer.

Eg. – Amount of refund payable to such defaulter can be adjusted against such amount payable.

Section 79(1)(b) read with rule 144

Recovery of the amount by selling goods belonging to such a person but which is under the control of the proper officer.

  • The following procedure is to be followed for such recovery
  1. The proper officer should prepare an inventory of such goods and estimate the market value thereof;
  2. Goods should be sold via auction (including e-auction);
  3. Notice in Form GST DRC-10 is to be issued by the proper officer detailing about the auction of the goods;
  4. Post completion of the auction, the successful bidder will be issued a notice in Form GST DRC-11 requiring the bidder to make payment within a period of 15 days;
  5. On receiving the full payment, the possession of the goods will be transferred to the bidder; and
  6. The proper officer will issue a certificate in Form GST DRC-12 to the bidder.

Section 79(1)(c) read with rule 145

Recovery of the amount from the third person.

  • The proper officer may issue a notice in Form GST DRC-13 to the third person for payment of the amount specified in the notice.
  • Once the specified amount is paid by the third person, the proper officer will issue the certificate in Form GST DRC-14 indicating therein the details of liability discharged by the third person.

Section 79(1)(d) read with rule 147

Recovery of the amount by the sale of movable/ immovable property

The following procedure is to be followed for such recovery –

  1. The proper officer should prepare a list of movable and immovable property belonging to the defaulter;
  2. The proper officer should estimate the market value thereof;
  3. The proper officer should issue an order of attachment/ distraint;
  4. The proper officer should issue a notice in Form GST DRC-16 for the sale of property;
  5. Further, action to be taken based on the type of property –
    Movable property – The proper officer will seize the property and custody of the property will be taken by either the proper officer or the authorized officer.
    Immovable property – The attached/ distraint order shall be affixed on the property and shall remain affixed till the confirmation of the sale.
  6. The attached/ distraint goods should be sold via auction (including e-auction);
  7. Notice in Form GST DRC-17 is to be issued by the proper officer detailing about the auction of the goods;
  8. Post completion of the auction, the successful bidder will be issued a notice in Form GST DRC-11 requiring the bidder to make payment within a period of 15 days;
  9. On receiving the full payment, the proper officer will issue a certificate in Form GST DRC-12 to the bidder mentioning therein details of the property sold; details of the bidder; date of transfer and the amount paid.

Section 79(1)(e) read with rule 155

Recovery of the amount via land revenue authority

  • The proper officer may send a certificate in Form GST DRC-18 to the Collector/ Deputy Commissioner of the district/ any other authorized officer to recovery the amount from the person; and
  • On receipt of the certificate, such amount will be recovered as if it were an arrear of land.

Section 79(1)(f) read with rule 156

Recovery of the amount via court

  • The proper officer may file an application in Form GST DRC-19 to the appropriate Magistrate to recover an amount from such person; and
  • The Magistrate will proceed to recovery the amount as if it were a fine imposed on such a person.

Rule 146

Recovery of the amount via execution of the decree, etc.

  • In case the amount is payable to the defaulter in the execution of the decree of a civil court, the proper officer may send a request in Form GST DRC-15 to the said court.
  • Accordingly, the court may execute the attached decree and credit net proceeds towards the amount payable.

Read more related article:

GST Refund - How To Claim Online on Excess GST?

GST Refund Series- A Detailed Guide on Basics Of the GST Refund Process

Get Free Bonus Report: Claim 100% ITC for your business

Recovery under GST provision

Recovery Provisions in GST

Some of the important provisions relating to recovery, other than the one stated above, are highlighted hereunder

Section 81 – Transfer of property to be void in certain cases

The provision states as under

Situation

Particulars

Conditions when transfer shall be void

  • When a person creates a charge on or parts with the property belonging to him after any amount has become due; and
  • Such transfer is carried out with the intention of defrauding the department.

Conditions when transfer shall not be void

  • When a person creates a charge on or parts with the property belonging to him without notice of pendency of the amount payable or with prior permission of the proper officer; and
  • Such transfer is carried out in good faith and for adequate consideration.

Section 82 – Tax to be first charged on the property

As per the provisions, any liability/ amount to be paid to the Government will be given priority in the matter of effecting recovery by placing the first charge on the property of the defaulter.

Section 83 – Provisional attachment to protect revenue in certain case

The said provision empowers the Commissioner to provisionally attach the property by passing an order in Form GST DRC-22. Such provisional attachment is possible only if the Commissioner is of the opinion that it is necessary to protect the interest of the revenue.

reconciliation

Claim upto 100% Input Tax Credit

Easiest GSTR 2B Reconciliation With Reverse ERP Integration

  • Identify defaulting suppliers 
  • 100+ validation checks for each invoice
  • Accurate GSTR 2A reconciled with purchase
  • Get every month’s GSTR-2A within seconds
Get A Callback
CA Poonam Gandhi

About the author

Poonam Gandhi is a Chartered Accountant and a Lawyer, with practical experience of 9+ years in the field of Indirect Taxation.

Follow us:

Share0
Tweet0
Share0