CGST Section 79 — Recovery of tax

CGST Act · Recovery of tax

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Quick Answer

Section 79 of the CGST Act, 2017 governs Recovery of tax. It provides the core statutory basis, outlining the essential legal principles, rights, and liabilities under Indian indirect tax law. Section 79 GST: Recovery of tax — eligibility, conditions, case laws and compliance impact under Indian tax law.

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Plain-English Explanation

Plain English Summary

Section 79 of the CGST Act, 2017, outlines the various methods the government can use to recover unpaid tax, interest, or penalties from a taxpayer. It empowers the tax authorities to take direct action to recover outstanding dues when a person fails to pay them.

This section applies to any person who owes money to the government under the GST Act or its rules. This includes registered taxpayers who haven't paid their output tax, those who have wrongly claimed input tax credit, or anyone liable to pay penalties or interest. The recovery process is triggered when any amount payable under GST remains unpaid.

Here’s a breakdown of the key aspects of Section 79:

Deduction from Money Owed by the Government: If the government owes money to the defaulter, the tax officer can deduct the outstanding tax amount from that payment.
- Example: Suppose a GST-registered supplier is due a refund from the GST department. If the supplier also has outstanding GST dues, the department can adjust the refund amount to recover the unpaid tax.
Seizure and Sale of Goods: The tax officer can seize and sell goods belonging to the defaulter that are under their control or the control of another specified officer, to recover the outstanding amount.
- Example: If a business fails to pay GST, the tax officer can seize goods lying in the business premises and sell them to recover the dues.
Recovery from Debtors: The tax officer can issue a notice to any person who owes money to the defaulter (or who may owe money in the future) requiring them to pay the outstanding tax amount directly to the government. This is like a garnishee order.
- This notice is binding, even on banks, post offices, and insurers.
- Failure to comply with the notice makes the person liable as a defaulter.
- Payment made under this notice is considered a valid discharge of their liability to the original defaulter.
- Example: A company owes GST. The tax officer issues a notice to one of the company's customers, who owes the company money for goods supplied. The customer is then legally obligated to pay the tax officer the amount they owe to the company, up to the amount of the GST due.
Distraint and Sale of Movable and Immovable Property: The tax officer can seize (distrain) movable or immovable property belonging to the defaulter. If the dues remain unpaid for 30 days after the seizure, the property can be sold to recover the outstanding amount.
- Example: A business owner fails to pay GST. The tax officer can attach their personal property, such as a car or land, and sell it to recover the unpaid tax.
Recovery as Land Revenue Arrear: The tax officer can issue a certificate to the District Collector (or an authorized officer), who will then recover the outstanding amount as if it were an arrear of land revenue.
- Example: The GST department sends a certificate to the District Collector stating the amount of GST owed by a particular business. The Collector then uses the same powers to recover this amount as they would to recover unpaid land revenue, which might include attachment and sale of the defaulter's property.
Application to Magistrate: The tax officer can file an application to the appropriate Magistrate, who will then recover the amount as if it were a fine imposed by them.
Recovery by State/UT Tax Officers: If a person owes tax to the Central Government, a State Tax or Union Territory Tax officer can also recover that amount during the course of recovering State or UT tax arrears, and credit it to the Central Government's account.
Proportionate Distribution: If the amount recovered is less than the total amount due to both the Central and State governments, the recovered amount is distributed proportionally based on the amount due to each.

Important Amendments:

The Central Goods and Services Tax (Amendment) Act, 2018, brought into force on 1st February, 2019, inserted sub-sections (3) and (4) which empowered State/UT tax officers to recover Central tax dues and provided for proportionate distribution of recovered amounts. This amendment aimed to streamline the recovery process and improve efficiency.

In essence, Section 79 provides a comprehensive framework for the recovery of unpaid GST dues, giving tax authorities various tools to ensure compliance and revenue collection. Businesses must understand these provisions to avoid potential recovery actions.

* Section 79. Recovery of tax.-

(1)Where any amount payable by a person to the Government under any of the provisions of this Act or the rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely:-

(a)the proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other specified officer;

(b)the proper officer may recover or may require any other specified officer to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the proper officer or such other specified officer;

(c)(i) the proper officer may, by a notice in writing, require any 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 either forthwith upon the money becoming due or being held, or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount;

(ii)every person to whom the notice is issued under sub-clause (i) shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary;

(iii)in case the person to whom a notice under sub-clause (i) has been issued, fails to make the payment in pursuance thereof to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Act or the rules made thereunder shall follow;

(iv)the officer issuing a notice under sub-clause (i) may, at any time, amend or revoke such notice or extend the time for making any payment in pursuance of the notice;

(v)any person making any payment in compliance with a notice issued under sub-clause (i) shall be deemed to have made the payment under the authority of the person in default and such payment being credited to the Government shall be deemed to constitute a good and sufficient discharge of the liability of such person to the person in default to the extent of the amount specified in the receipt;

(vi)any person discharging any liability to the person in default after service on him of the notice issued under sub-clause (i) shall be personally liable to the Government to the extent of the liability discharged or to the extent of the liability of the person in default for tax, interest and penalty, whichever is less;

(vii)where a person on whom a notice is served under sub-clause (i) proves to the satisfaction of the officer issuing the notice that the money demanded or any part thereof was not due to the person in default or that he did not hold any money for or on account of the person in default, at the time the notice was served on him, nor is the money demanded or any part thereof, likely to become due to the said person or be held for or on account of such person, nothing contained in this section shall be deemed to require the person on whom the notice has been served to pay to the Government any such money or part thereof;

(d)the proper officer may, in accordance with the rules to be made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person;

(e)the proper officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business or to any officer authorised by the Government and the said Collector or the said officer, on receipt of such certificate, shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue;

(f)Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the proper officer may file an application to the appropriate Magistrate and such Magistrate shall proceed to recover from such person the amount specified thereunder as if it were a fine imposed by him.

(2)Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section.

(3)Where any amount of tax, interest or penalty is payable by a person to the Government under any of the provisions of this Act or the rules made thereunder and which remains unpaid, the proper officer of State tax or Union territory tax, during the course of recovery of said tax arrears, may recover the amount from the said person as if it were an arrear of State tax or Union territory tax and credit the amount so recovered to the account of the Government.

(4)Where the amount recovered under sub-section (3) is less than the amount due to the Central Government and State Government, the amount to be credited to the account of the respective Governments shall be in proportion to the amount due to each such Government.

Explanation.-For the purposes of this section, the word person shall include distinct persons as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.¹

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Frequently Asked Questions

What are the different modes of recovery of tax under CGST Section 79?

CGST Section 79 outlines various methods for tax recovery, including: * **Deduction from any money owed to the defaulting taxpayer:** The tax officer can deduct the tax due from any money owed by the government or any other person to the taxpayer. * **Recovery by way of sale of movable or immovable property:** The tax officer can attach and sell the taxpayer's movable or immovable property to recover the dues. * **Recovery from other taxable persons:** The tax officer can recover the tax from any other taxable person who owes money to the defaulting taxpayer. * **Recovery through the Collector:** The tax officer can request the Collector to recover the tax as arrears of land revenue. * **Recovery by any other means:** The tax officer may resort to any other means of recovery as prescribed by the government.

What is the procedure for attaching and selling property under CGST Section 79 for tax recovery?

The procedure generally involves: * **Issuance of a recovery notice:** A notice is first served to the taxpayer, demanding payment within a specified period. * **Attachment of property:** If the taxpayer fails to pay, the tax officer can attach movable or immovable property. * **Issuance of a proclamation:** A proclamation is issued, specifying the property to be sold and the date of the sale. * **Conducting the sale:** The sale is conducted through public auction or any other manner as prescribed. * **Application of proceeds:** The sale proceeds are used to recover the tax dues, interest, and penalties, with any surplus returned to the taxpayer. Specific rules and regulations regarding the procedure can be found within the CGST Rules.

Can recovery proceedings under CGST Section 79 be initiated against a company under liquidation?

Yes, recovery proceedings can be initiated against a company under liquidation. However, the procedure is governed by the Insolvency and Bankruptcy Code (IBC) and the Companies Act. The tax authorities usually need to file a claim with the liquidator and the recovery will be subject to the waterfall mechanism under the IBC. It's crucial to follow the prescribed procedures and timelines outlined under the IBC.

What is the time limit for recovering tax under CGST Section 79?

While CGST Section 79 doesn't explicitly state a time limit for recovery itself, it's intertwined with the time limit for issuing a demand notice under Section 73 (for cases other than fraud, willful misstatement or suppression of facts) and Section 74 (for cases involving fraud, willful misstatement or suppression of facts). These sections prescribe limitation periods for issuing a show cause notice, which precedes the demand and subsequent recovery. Consequently, the recovery has to occur within a reasonable time after the demand is crystallized following the adjudication of the SCN.

What are the rights of a taxpayer against whom recovery proceedings have been initiated under CGST Section 79?

A taxpayer has several rights, including: * **Right to receive a proper notice:** They are entitled to receive a clear and detailed notice specifying the tax amount, reasons for the demand, and the time limit for payment. * **Right to appeal:** They have the right to appeal against the demand order, provided they meet the pre-deposit requirements. * **Right to be heard:** They are entitled to present their case and provide evidence to contest the demand. * **Right to procedural fairness:** The recovery proceedings must be conducted in accordance with the law and principles of natural justice. * **Right to release of attached property (if applicable):** Upon payment of the outstanding dues or providing sufficient security, the attached property can be released.

Is interest charged on delayed payments if tax is recovered under CGST Section 79?

Yes, interest is charged on delayed payments of tax. Under Section 50 of the CGST Act, interest is levied on the outstanding tax amount from the date it was due until the date of payment. The applicable interest rate is prescribed by the government and may vary from time to time.

If the tax officer recovers an amount under CGST Section 79 exceeding the actual tax liability, what happens to the excess amount?

If the tax officer recovers an amount exceeding the actual tax liability, the excess amount must be refunded to the taxpayer. The taxpayer can claim a refund of the excess amount by filing a refund application in the prescribed format, as per the provisions of Section 54 of the CGST Act. The refund process involves verification by the tax authorities to ensure the validity of the claim.

Key Conditions & Requirements

Condition	Details
Amount Payable	Any amount payable by a person to the Government under the provisions of the CGST Act or rules is not paid.
Proper Officer Action	The proper officer must proceed to recover the unpaid amount using one or more specified modes.
Deduction from Money Owed	The proper officer may deduct (or require another specified officer to deduct) the amount from any money owing to the defaulter that is under the control of the proper officer or the specified officer.
Detaining and Selling Goods	The proper officer may recover (or require another specified officer to recover) the amount by detaining and selling any goods belonging to the defaulter which are under the control of the proper officer or the specified officer.
Notice to Third Party	The proper officer may issue a notice to any person from whom money is due (or may become due) to the defaulter, or who holds (or may subsequently hold) money for the defaulter, requiring them to pay the amount due to the government.
Third Party Compliance	The person receiving the notice is bound to comply with it. Special provisions exist for notices issued to post offices, banks, or insurers, exempting the need for documentation for payment.
Failure to Comply with Notice	If the person receiving the notice fails to make the payment to the Government, they are deemed a defaulter for the amount specified in the notice.
Amendment or Revocation of Notice	The officer issuing the notice can amend, revoke, or extend the time for payment in the notice.

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Amendment History

Enforced w.e.f. 1st July, 2017.

1Superscript numbers in the text mark amended passages — click them to jump here. Click "↑ view in text" to jump back.

2018↑ view in text

Inserted by s. 24 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) -Brought into force w.e.f. 01st February, 2019.