Demand and Recovery under GST

Levy of taxes is mandatory by law and its recovery is an important function of administration as per law. The verification, scrutiny, audit, review of returns, and records are well-recognized methods in tax administration.

Some Legal provisions under GST for demand and recovery Chapter XV comprise of Sections 73 to 84 lay down the procedure in demand and recovery of GST.

Section 73 and 74 have many similarities in the recovery procedure, although the circumstances under which the proceedings are initiated are totally different. 

Time limit is higher under section 74 considering the serious nature of circumstances  

Section 74- applicable situations 

Proceeding according to Section 74 requires greater responsibility on the part of the department as well as a taxable person. It also extended the period for 5 years, the conclusion of proceedings against a lower period of 3 years under section 73.

  • Reason of fraud.
  • any wilful-misstatement or
  • suppression of facts to evade tax,

General provisions for demand of tax

Section 75- General provisions relating to demand of tax made under section 73 and 74.

  • Computing period of issuance of an order- 3 years’ u/s 73(10) or 5 years’ u/s 74(10)-linked to due date of annual return of the financial year.
  • Order in pursuance of directions of appellate authority or tribunal or court-within 2 years from the date of communication from such authority. 
  • Opportunity of personal hearing or adjournment
  • Contents of Order- Order should contain the relevant facts and basis of the decision. The amount of tax, interest, and penalty demanded shall not exceed the amount specified in the notice. 
  • Conclusion of Proceedings-Order shall be passed within 3 years or 5 years, linked to the due date of annual return of the financial year.
  • The exclusion of time under adjudication proceedings, stay etc., shall be considered as per section 75(11).

Tax collected but not paid to Government 

Section 76 provides that if any person who has collected from any other person an amount as tax or purporting to be tax has not paid the amount to Government, he shall deposit the amount. Various aspects under section 76 are captured hereunder:

  • Amount shall be collected as tax- merely billed is not collected, actual payment by the other person to the bill results in collection.
  • Demand if a person does not deposit or pay it- there is no time limit to issue SCN.
  • Interest payable on delay in deposit.
  • Personal hearing and order.
  • Time limit for passing the order is within one year from the date of issue of notice.
  • Disposal of the amount deposited with the Government Subsection (9) permits the appropriation of such amount against assessed liability. Government Subsection (10) permits refunds the amount to a person who has borne the incidence.

Tax wrongfully collected and paid to the Central Government or State Government 

Section 77 examines a situation where a mix up of payment of SGST/UTGST/CGST and IGST may do mistakenly. Details are as follows:

GST categoryWrongly classified and paidRemedyConsequences
IGSTSGST/UTGST/CGSTRefund of the amountpay IGST- No interest.
SGST/UTGST/CGSTIGSTRefund of the amountpay SGST/UTGST/CGST- No interest

Initiation of recovery proceedings 

Recovery of tax is an important administrative function. If the persons pay tax as per proceedings/ adjudication, the question of recovery does not arise.

 Section 78 provides a period of 3 months from the date of service of such order for payment, failing which recovery proceedings shall be initiated. Officer has the power to demand a tax in a shorter period in the interest of revenue.

Recovery of tax

Section 79 provides a manner for the recovery of tax due to the Government. a. Deduction from any money payable to a person.

  • Recovery through detaining and selling goods.
  • Recovery from any other person who is required to pay any amount to the defaulter- Garnishee order.
  • Detrain property of the person.
  • As arrears land revenue.
  • Recovery through Magistrate.
  • Authorities can use one or more methods.
  • Recovery from bond if provided.
  • Recovery out of inter head refund amount against inter head due amount.

Payment of tax and other amounts in Instalments 

Section 80 facility is a kind of relaxation upon the taxable person. This facility has to be sanctioned by Commissioner on the request from a taxable person. Its facility grants some time to arrange resources and pay in installments. This can be explained as follows:

  • Commissioner is empowered to sanction payment by instalments.
  • Reasons to be recorded in writing for sanction.
  • Monthly instalments not exceeding 24 months.
  • Interest shall be payable.
  • This facility is not available for tax self-assessed by the person.
  • The facility available for demand confirmed u/s 73,74 and 75- tax, interest, penalty, and fine.
  • Commissioner may impose conditions.
  • Default in payment of any installment will result in the entire amount payable forthwith.

Preventive measures for recovery of Tax: 

According to Section 81, 82, and 83 lay down some provisions to secure taxes due to Government by legal mandate under GST.

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

Section 82– Tax to be first charge on property

Section 83– Provisional attachment to protect revenue in certain cases 

Continuation and validation of certain recovery proceedings

According to Section 84 provides that when any demand of tax, interest or penalty has been confirmed against the taxable person and recovery proceedings are being taken the proceedings will be continued even where an amount is enhanced in appeal revision or other proceedings and in case of a reduction of demand such reduced amount to be recovered. Appropriate authority for recovery shall be so instructed by Commissioner.

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