Under self-assessment system of tax determination and payment of tax in the GST regime, there is every chance of inadvertently short payment of tax and sometimes deliberately taxes are also not paid by the certain category of assessees. GST law makers have incorporated the elaborate provisions for the recovery of tax under various situations such as tax short paid or erroneously refunded or Input tax credit wrongly availed and non-payment of self-assessed tax or amount collected but not deposited taxes to the Government.
Chapter XV and Section 73 to Section 84 of the CGST Act, 2017 contains the provisions of demand and recovery of tax under GST. The recovery processes of tax start with the issuance of show cause notice and end with Adjudication proceedings.
The primary demand for tax can be raised by the authorised officer of GST for short payment or non-payment of tax in the following situations:
(a) when there is reason of fraud or willful misstatement or suppression of facts
(b) when there is no reason of fraud or willful misstatement or suppression of facts
Section 73 of the CGST Act, deals with the cases any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-mis statement or suppression of facts to evade tax.
Limitation for recovery and adjudication:
(i) If the case relating to non-fraud, the adjudication of the case should be done within 3 years from the date of filing of annual return for the relevant financial year.
(ii) If the assessee received an erroneous refund, the case must be adjudicated within 3 years from the date on which such refund was credited to the assessee’s account.
(iii) The proper officer shall issue notice for recovery of Tax at least 3 months prior to the limit of adjudication or issue of order.
(iv) The proper officer shall issue order of adjudication within 3 years from the due date for furnishing of annual return for the financial year for the relevant period of dispute.
Section 74 of the CGST Act, deals with the cases where any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised by reason of fraud or any wilful-mis statement or suppression of facts to evade tax.
Limitation for recovery and adjudication:
(i) If the case relating to fraud or suppression of facts, the adjudication of the case should be done within 5years from the date of filing of annual return for the relevant financial year.
(ii) If the assessee received an erroneous refund, the case must be adjudicated within 5 years from the date on which such refund was credited to the assessee’s account.
(iii) The proper officer shall issue notice for recovery of Tax at least 3 months before the deadline for adjudication of case or issue of order.
(iv) The proper officer shall issue order of adjudication within 5 years from the due date for furnishing of annual return for the financial year for the relevant period of dispute
Interest and Penalty:
The incidence of short payment of tax or erroneous refund or wrong availment of Input Tax Credit may be because of an inadvertent bonafide mistake (Normal Cases) or it may be a deliberate attempt (Fraud Cases) to evade the tax. Since the nature of offence is totally different in both the incidences, hence, separate provisions for recovery of the tax and the amount of penalty have been made to deal with such type of cases. There are provisions to encourage voluntary compliance such as no penalty or lesser penalty if the tax dues along with interest, are paid within the specified time limit / incidence.
The rate of interest and amount of penalty on the various situations has been summarized under the below Table:
|Sl. No||Nature of situations||In Normal Case under Section 73 of the CGST Act.||In case of fraud or suppression/misstatement etc, under Section 74 of the CGST Act.|
|1||Before issuance of show cause notice||The taxpayer needs to pay the tax due along with applicable interest and No penalty, No notice shall be issued.||The taxpayer needs to pay the tax due along with interest and penalty @15% of the tax amount due and no Notice shall be issued..|
|2||After issuance of show cause notice||The taxpayer needs to pay the tax due along with applicable interest within 30 days of issue of SCN and No penalty after the payment.||The taxpayer needs to pay the tax due along with interest and penalty @25% of the tax amount due and must make payment within 30 days of issue of SCN.|
|3||After issuance of order||Even after the order is issued, the taxpayer can avoid prosecution by taking certain actions, i.e. pay tax, interest and penalty on time.||The taxpayer to pay tax along with interest & penalty @50% of the tax amount due. All proceeding deemed to be concluded.|
|4||Any other case||The tax payer has to pay tax amount due with interest and penalty of equivalent to of 10% of Tax amount due or Rs.10,000/-, whichever is higher with 30 days of communication of order.||The taxpayer needs to pay tax amount due along with interest & penalty @100% of the tax amount due.|
(i) The penalty shall also be not chargeable in cases where the self assessed tax or any amount collected as tax is paid (with interest) within 30 days from the due date of payment.
(ii) The amount of tax, interest and penalty demanded in the order shall not be more than the amount specified in the notice and no demand shall be confirmed on the ground other than the ground specified in the notice.
Section 75 of the CGST Act, deals with the general provisions relating to determination of tax and which provides that,
(i) where the service of notice or issuance of order is stayed by an order of Court or Appellate Tribunal , the period of stay shall be excluded in computing the period specified in sub-section(2) and (10) of Section 73 or sub-section(2) and of section 74 as the case may be.
(ii) where any Appellate Authority or Appellate Tribunal or Court concludes that the notice issued under section 74(1) is not sustainable for the reason that the charges of Fraud or wilful-misstatement or suppression of facts to evade tax has not been established, the proper officer shall determine the tax payable deeming as if the notice were issued under section 73(1).
(iii) Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within 2 years from the date of communication of the said direction.
(iv) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.
(v) The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing. ( provided that no such adjournment shall be granted for more than three times to a person during the proceedings)
(vi) The proper officer, in his order, shall set out the relevant facts and the basis of his decision.
(vii) The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.
(viii) The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.
(ix) where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.
(x) The adjudication proceedings shall be deemed to be concluded, if the order is not issued within 3 years as provided for in sub-section (10) of section 73 or within 5 years as provided for in sub-section (10) of section 74.
Section 76 of the CGST Act, specified the provision of tax collected but not paid to Government. Every registered person who has collected from any other person any amount as tax and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government , irrespective of whether the supplies in respect of which such amount was collected are taxable or not. In that case the proper officer may serve a show cause notice for recovery of such amount and penalty equivalent to the amount specified in the notice.
There is no time limit in the case of where taxes collected but not paid to Government but the proper officer has to pass order within one year from the date of issue of the notice, provided an opportunity of hearing shall be granted to the person whom the notice was issued to show cause.
Where the issuance of order is stayed by an order of the court or Appellate Tribunal, the period of such stay shall be excluded in computing the period of one year.
Section 77 of the CGST Act, provides mechanism for refund of tax wrongly collected and paid.
If a registered person on a transaction wrongly paid as CGST / SGST or CGST / UTGST as the case may be, considering as intra-State supply which was actually inter-State supply, then a refund of such tax can be claimed as per this section.
Also if a registered person paid integrated tax on a transaction which is actually an intra-State supply but considered an inter-State supply, then he does not required to pay any interest on the amount of CGST/SGST or CGST/UTGST as the case may be.
Section 78 of the CGST Act, provides that any amount payable by a taxable person in pursuance of an order passed shall be paid within 3 months from the date of service of such order failing which recovery proceedings shall be initiated by the department. The proper officer considers it expedient in the interest of revenue, may with reasons to be recorded in writing, require the said person to make such payment within such reduced period as may be specify by him.
Section 79 provides the various modes of recovery of tax by the proper officer in the following manner:
(a) The proper officer may recover by deduct the amount from the other amount payable to such person which may be under the control of such officer.
(b) The proper officer may recover by detaining or selling any goods belonging to such person which are under his control.
(c) The proper officer may by notice in writing, recover from other person, from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the Government.
(d) The proper officer may detain any movable or immovable property belonging to or under control of such person and detain the same until the amount payable is paid. If the dues not paid within 30 days, the said property is to be sold and with the proceeds of such sale the amount payable and cost of sale shall be recovered.
(e) The proper officer may prepare a certificate specifying amount due from such person and send it to collector of the relevant district and collector shall proceed to recover from such person the amount as if it were an arrear of land revenue.
(f) The proper officer by way of an application to the appropriate Magistrate who in turn shall proceed to recover the amount as if it were a fine imposed by him
(g) where any bond or other instrument was executed under this Act or Rules or regulations made thereunder provides that any amount due under such instrument may be recovered.
(h) The proper officer of State tax or Union tax, during the course of recovery of said tax arrears from any person may recover unpaid amount of tax, interest, penalty payable to Central Government by such person. Such amount will be recovered as if it were arrear of SGST/UTGST and credit the amount so recovered to the account of Central Government.
(i) In case the amount recovered is less than the amount due, then such amount will be apportioned among Central Government, State Government & Union Territory in proportion of the amount due to each authority.
Section 80 of the CGST Act, provides for payment of tax and other amount in instalments. On an application filed by a taxable person, the Commissioner / Chief Commissioner may for reasons to be recorded in writing, extend the time for payment or allow payment of any amount due under this Act, other than the amount due as per liability self-assessed in any return, by such person in monthly instalments not exceeding twenty four, subject to payment of interest. Provided, where there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and shall without any further notice being served on the person.
Section 81 of the CGST Act, provides that when a person, after any amount has become due from him, creates a charge on or parts with property belonging to him or in his possession by way of sale , mortgage , exchange , or any other mode of transfer whatsoever of any of his properties in favour of any other person with the intention of defrauding the Government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said person. Provided that, such charge or transfer shall not be void if it is made for adequate consideration , in good faith and without notice of the pendency of such proceedings under this Act without notice of such tax.
Section 82 of the CGST Act, specified that any amount payable to Government as tax, interest , penalty by a taxable person or any other person shall be first charge on the property of such taxable person or any other person , notwithstanding anything contrary contained in any other law for the time being in force, except insolvency and Bankruptcy code 2016.
Section 83 of the CGST Act, specified that during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 , Commissioner may, if necessary in the interest of Government revenue , by order in writing attach provisionally any property belonging the taxable person, by order writing attach any property including bank account. Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order.
Section 84 of the CGST Act, specified that where any notice of demand in respect of any tax, penalty, interest or any other amount payable under this Act, is served upon any taxable person or any other person and any appeal or revision application is filed or any other proceedings is initiated in respect of such Government dues, then-
Government dues are enhanced in appeal, revision or other proceedings then Commissioner shall serve notice of demand in respect of enhance amount. The recovery proceeding shall be continued from the stage at which such proceedings stood immediately before such disposal.
Where such Government dues are reduced in such appeal, revision or in other proceedings –
(a) it shall not be necessary for the Commissioner to serve upon the taxable person a fresh notice of demand.
(b) the Commissioner shall give intimation of such reduction to him and to the appropriate authority with whom recovery proceedings is pending.
(c) any recovery proceedings initiated on the basis of the demand served upon him prior to the disposal of such appeal, revision or other proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.
Rule 142 to 161 of the CGST Rules, 2017 provides the procedure of Demands and Recovery under GST. The various procedures and different forms have been incorporated under GST Rules, are summarized in the below Table:
|Sl.No||CGST Rules||Description of procedures||Forms||Purpose / CGST Act.|
|1||142||Notice and Order for demand of amounts payable.||FORM GST DRC-01,
FORM GST DRC-02,
FORM GST DRC-03,
FORM GST DRC-04,
FORM GST DRC-05,
FORM GST DRC-06,
FORM GST DRC-07,
FORM GST DRC-08.
|(i) The proper officer shall serve notice and a summary thereof electronically in FORM GST DRC-01 as per section 73 (1), 74(1) & 76(2) of the CGST Act.
(ii) The proper officer may serve a statement electronically, containing the details of tax not paid or erroneously refunded in FORM GST DRC-02 as per section 73 (3), 74(3) & 76(2) of the CGST Act.
(iii) The registered person shall inform own ascertainment of tax & payment details to the proper officer in FORM GST DRC–03 as per section 73(6) & 74 (6) of the CGST Act.
(iv) The proper officer shall issue acknowledgement of the information of the said person in FORM GST DRC-04
(V) The proper officer shall issue Order accepting the payment of such person in respect of said notice in FORM GST DRC-05
(Vi) The proper officer shall, after considering representation, if any, made by the person, issue an Order in FORM GST DRC-06 as per section 73(9) , 74(9) & 76(3) of the CGST Act.
|2||143||Recovery by deduction from any money owed.||FORM GST DRC-09||The proper officer shall deduct the amount from any money owing to such defaulter in FORM GST DRC-09 as per section 79(1) of the CGST Act.|
|3||144||Recovery by sale of goods under the control of proper officer.||FORM GST DRC-10,
FORM GST DRC-11,
FORM GST DRC-12.
|The proper officer shall issue auction notice in FORM GST DRC-10 clearly indicating goods as per section 79(2) of the CGST Act.
The proper officer shall issue notice to the successful bidder in FORM GST DRC -11 as per section 79(5) of the CGST Act.
The proper officer shall issue certificate to the successful bidder in FORM GST DRC-12 as per section 79(5) of the CGST Act.
|4||145||Recovery from a third person||FORM GST DRC-13,
FORM GST DRC-14.
|The proper officer shall serve notice to the third person in FORM GST DRC-13 as per section 79(1) (c) of the CGST Act.
The proper officer shall issue certificate in FORM GST DRC-14 on payment received from the third person.
|5||146||Recovery through execution of a decree, etc.||FORM GST DRC-15||Where any amount payable to the defaulter on account of a decree of a civil court, the proper officer shall send a request in FORM GST DRC-15 to the said court and the court shall credit the net proceeds for settlement of the amount recoverable. As per section 78 of the CGST Act, 2017.|
|6||147||Recovery by sale of movable or immovable property.||FORM GST DRC-16,
FORM GST DRC-17,
|The proper officer shall issue an order of attachment and a notice for sale in FORM GST DRC-16 for the recovery of the amount. As per section 79 of the CGST Act, 2017.
The property attached shall be sold through auction / e.auction for which notice shall be issued in FORM GST DRC-17
|7||148||Prohibition against bidding or purchase by officer.||No officer attempt to acquire any interest in the property sold.|
|8||149||Prohibition against sale on holidays.||No sale on Sunday and other general holidays.|
|9||150||Assistance by police.||The officer-in-charge of police station shall depute sufficient number of police officers for providing such assistance is required for acquiring property of defaulter.|
|10||151||Attachment of debts and shares, etc.||FORM GST DRC-16||The proper officer shall issue written order in FORM GST DRC-16, for attachment of debt, share and other movable property of the defaulter. A copy of such order shall be affixed on some conspicuous part of the officer of the proper officer and another copy shall be sent to the person in possession of the such properties.|
|11||152||Attachment of property in custody of courts or public officer.||The proper officer shall send the order of attachment to such court or officer to withhold the payment of dividend till the recovery of the amount payable to the Government.|
|12||153||Attachment of interest in partnership.||Where the property to be attached consists of an interest of the defaulter, being a partner, in the partnership property, the proper officer makes an order for the sale of such interest.|
|13||154||Disposal of proceeds of sale of goods and movable or immovable property.||The amounts so realized from the sale of goods, movable or immovable property, for the recovery of dues from a defaulter shall, first be appropriated cost of the recover process , next be appropriated against the amount to be recovered and any balance , be paid to the defaulter.|
|14||155||Recovery through land revenue authority.||FORM GST DRC-18,
|The proper shall send a certificate to the collector of the district or any other officer authorised in this behalf in FORM GST DRC-18 to recover from the defaulter like land revenue. As per section 79(1) (e) of the CGST Act, 2017.|
|15||156||Recovery through court.||FORM GST DRC-19,
|The proper officer shall make an application before the Magistrate in FORM GST DRC-19 to recover from the defaulter like a fine imposed. Section 79(1) (f) of the CGST Act, 2017.|
|16||157||Recovery from surety.||The proper officer recovers the amount due by the defaulter from the surety.|
|17||158||Payment of tax and other amounts in instalments.||FORM GST DRC-20,
FORM GST DRC-21,
|On an application filed electronically by a taxable person, in FORM GST DRC-20, seeking extension of time for the payment of taxes.
Upon consideration, the commissioner may issue an order in FORM GST DRC-21 allowing the taxable person further time to make payment / monthly installment. ( should not exceed 24 instalments)
|18||159||Provisional attachment of property.||FORM GST DRC-22,
FORM GST DRC-23,
|The commissioner shall pass an order in FORM GST DRC-22 to that effect mentioning the details of property which is attached.
Where the property attached is of perishable or hazardous nature, taxable person pays an amount is payable, then such property shall be released forthwith, by an order in FORM GST DRC-23. The Commissioner may issue the same order and released the property, if satisfied that the property is no longer liable for attachment.
|19||160||Recovery from Company in liquidation.||FORM GST DRC-24||The Commissioner shall notify the liquidator for the recovery of any amount representing tax, interest, penalty or any other amount due in FORM GST DRC-24|
|20||161||Continuation of certain recovery proceedings||FORM GST DRC-25||The order for the reduction or enhancement of any demand shall be issued in FORM GST DRC-25|