Demand and recovery process under GST

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Demand and Recovery Process Under GST Law

Demand and recovery process under GST Law (Revised Goods & Service Tax Law) involves Section 66 to Section 78. We have tried to brief each and every section involving Demand & Recovery under GST Law in this article. Go through the below article & Comment if you have any queries regarding the same. (Demand and recovery process under GST)

Determination of tax not paid or short paid or erroneously refunded

Section 66: Applicable in case of non-payment or short payment of tax without fraud or willful-misstatement. Section 67: Applicable in case of non-payment or short payment of tax with fraud or willful-misstatement
Proper officer to issue a Show Cause Notice in both cases
Mere statement containing the non-payment or short payment can be served for subsequent periods instead of detailed show cause notice, only if the grounds raised are identical to the ones raised in the previous year.
Time limit for the proper officer to issue notice – at least 3 months prior to issuance of order Time limit for the proper officer to issue notice – at least 6 months prior to issuance of order
Time limit for the proper officer to issue an order  is within three years from the due date / actual date of filing of annual return. Time limit for the proper officer to issue an order  is within five years from the due date / actual date of filing of annual return
Section 66: Section 67:
No issue of Show Cause Notice where:-
Voluntary payment of Tax + Interest as per section 45 made before issue of notice either

•        As per the ascertainment of the defaulter or;

•       As per the ascertainment of the proper officer;

Voluntary payment of Tax + Interest as per section 45 + 15% of tax as penalty made before issue of notice either

•        As per the ascertainment of the defaulter or;

•       As per the ascertainment of the proper officer;

However, amount paid as per the ascertainment of the defaulter falls short, the Department can issue a notice for the tax still payable.
Section 66: Section 67:
Case where all proceedings are deemed to be concluded after issue of SCN:
Payment of Tax + Interest as per section 45 made within 30 days of issue of notice. No penalty Payment of  Tax + Interest as per section 45 +25% of tax as penalty made within 30 days of  issue of notice
Payment of  Tax + Interest as per section 45 +(10% of tax or Rs.10,000 w.e.f.) as penalty made after 30 days of issue of notice Payment of  Tax + Interest as per section 45  +50% of tax as penalty made within 30 days of  communication of order

General provisions relating to demand of tax: Sec 68

  • Where the service of a notice or an issue of the order has been stayed by an order of a Court or Tribunal, such period of stay shall be excluded from the period of 5 or 3 years accordingly.
  • When a notice has been issued under clause (1) of sub-section (B) but the charges of fraud, suppression and misstatement of facts to evade tax are not sustainable or not established, the tax is to be determined only for the normal period of 3 years.
  • Where any order is required to be issued in pursuance of direction of Tribunal/ Court, such order shall be issued within 2 years from date of communication of such order
  • Opportunity of personal hearing has to be granted when requested in writing by the person chargeable with tax or where any adverse decision is proposed to be taken against the person.
  • Personal hearing can be adjourned when sufficient cause is shown in writing. However, such adjournment can be granted for a maximum of 3 timesDemand and recovery process under GST Law
  • The relevant facts and basis of the decision shall be set out in the order.
  • The amount of tax + interest + penalty shall not be more than what is mentioned in the order and the grounds shall not go beyond what is mentioned in the notice.
  • When the Tribunal/ Court/ Appellate authority modifies the amount of tax, correspondingly interest and penalty shall also be modified.
  • Interest shall be payable in all cases whether specifically mentioned or not.
  • If the order is not issued within the time limits of 3/5 years then the proceedings shall be deemed to be concluded
  • Where any amount of tax in accordance with a return furnished under section 34 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 72. (Demand and recovery process under GST)

Also Read : Audit under GST Law

Tax collected but not deposited with the Central or State Government: Sec 69

  • Any amount collected as tax but not remitted to the Central/State Government is required to make the payment forthwith regardless of whether the related supplies are taxable or not.
  • Proper Officer has to serve a notice
  • The person is permitted to make representation against the notice served on him. The person is given an opportunity of being heard where a request is made by him in writing.
  • The Proper Officer shall determine the amount due from the person and pass an order within one year from the date of issue of notice.
  • There is no time limit to commence proceedings under this section.
  • Under the present tax laws, similar provision exists in Central Excise Law(11D), Customs Law (28B) as well as Service Tax Law (73A).
  • Similar provision also exists in all most all the state VAT Acts. (Demand and recovery process under GST)

 

Tax wrongfully collected and deposited with the Central or a State Government: Sec 70

  • Taxable person has paid CGST/SGST considering a transaction to be intra-state supply
  • Subsequently held to be inter-state supply
  • Allowed refund of CGST/SGST paid, subject to conditions
  • A taxable person who has paid IGST on a transaction considered by him to be an inter-state supply
  • Subsequently held to be an intra-state supply
  • Not be required to pay any interest on the amount of CGST/SGST payable.
  • As set off of CGST/SGST is not allowed against IGST, in case the supplier files refund application then, he may not get the refund due to the application of the principle of unjust enrichment. Furthermore, the subsequent payment of integrated GST may become a cost to the supplier who may not be able to recover the same from its receiver. (Demand and recovery process under GST)

Also Read : E-Commerce under GST Law

Initiation of recovery proceedings: Sec 71

  • Amount payable in pursuance of an order passed shall be paid within a period of ninety days from the date of service of order
  • In the interest of revenue, PO may require the taxable person to make such payment within a shorter period
  • Reasons to be recorded in writing. (Demand and recovery process under GST)

Recovery of Tax: Sec 72

Recovery modes to collect/recover any amount payable under GST laws but not paid:

  • Adjust demand from any money under the control of the PO/ any specified officer to the taxpayer.
  • Detain and sell any goods belonging to the taxpayer and under the control of the Proper Officer.
  • Recovery from any other person who owns money to the tax payer by way of issue of notice
  • Detain any movable or immovable property belonging to or under the control of the taxpayer to recover the amount due and sell it after 30 days in case of non-recovery;
  • Prepare a Recovery Certificate specifying the amount due and send it to the concerned district Collector in respect of the tax payer. The Collector shall then proceed to recover the amount specified there under from the tax payer as if it were an arrear of land revenue.
  • File an application to the appropriate Magistrate, who shall then proceed to recover the amount specified thereunder from the taxpayer as if it were a fine imposed by him.  (Demand and recovery process under GST)

Also Read : Payment Process under GST Law

Bar on recovery proceedings: Sec 73 & Payment of tax and other amount in instalments: Sec 74

Sec 73: No recovery proceedings are to be initiated against the order of demand against which appeal is filed

Sec 74: If a tax payer makes an application to either extend the time for payment or allow payment of any amount due (other than the amount due as per the liability self-assessed in any return) in monthly installments (not exceeding 24), the jurisdictional Commissioner/Chief Commissioner may, for reasons to be recorded in writing, allow to do so subject to payment of interest with such restrictions and conditions as may be prescribed.

Default in payment of any one installment on its due date would result in the whole outstanding balance payable on such date becoming due and becoming payable forthwith and liable for recovery. (Demand and recovery process under GST)

Also Read : Refund Under GST Law

Transfer of property to be void in certain cases: Sec 75

  • Where a person, after any amount has become due from him,

          (i) creates a charge on or

          (ii) parts with his property by way of sale, mortgage, exchange or any other mode of transfer in   favour of any other person with the intention of defrauding the government revenue,

Charge or transfer shall be void as against any claim in respect of any tax or other sum payable by such tax payer.

  • However, this provision shall not affect any such charge or transfer if it is made

(i) for adequate consideration and without notice of the pendency of proceedings against/amount(s) payable by the taxpayer, or

          (ii) with the previous permission of the tax officer. (Demand and recovery process under GST)

Tax to be first charge on property: Sec 76

  • Amount payable by a taxable person on account of tax, interest or penalty shall be the first charge on the property of such person
  • This provision also covers any other person since there are many provisions in the CGST Act, which provide for creating a liability or recovery from a person other than the taxable person like a legal representative, member of partitioned HUF etc. (Demand and recovery process under GST)

Provisional attachment to protect revenue in certain cases: Sec 77

  • During the pendency of any proceedings, the jurisdictional Commissioner may order provisional attachment of any property, including bank account, belonging to the taxpayer
  • Manner prescribed
  • Order to be in writing

If he is of the opinion that such provisional attachment is necessary for the purpose of protecting the interest of the Government revenue.

  • Such provisional attachment shall cease to have effect after the expiry of 1 year from the date of the provisional attachment order. (Demand and recovery process under GST)

Continuation and validation of certain recovery proceedings: Sec 78

Notice is served for recovery of government dues from a taxable person and upon any appeal, revision application there is: –

  • Enhancement of Govt. dues
  • Commission shall serve another notice on the taxable person, in respect of the enhanced amount.
  • If notice of demand is already served on taxable person before such appeal, revision or any other proceedings, then recovery of enhanced amount would be continued from the stage at which the initial proceedings stood. There is no need to issue a fresh notice of demand to the extent already covered by earlier notice. (Demand and recovery process under GST)

Continuation of certain recovery proceedings: Sec 78

Reduction of Govt. dues

  • Commissioner not required to serve fresh notice of demand upon the taxable person. He shall intimate such reduction to taxable person and also to appropriate authority with whom recovery proceedings are pending
  • Any recovery proceedings are initiated prior to the disposal of such appeal, revision application or other proceeding may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal (Demand and recovery process under GST)

That’s all for Demand and recovery process under GST Law. Keep Sharing.

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