This Tax Alert summarizes recent guidelines1 issued by the Central Board of Indirect Taxes and Customs (CBIC) on initiation of recovery proceedings under the Central Goods and Services Tax Act, 2017 (CGST Act).
As per Section 78 of
CGST Act, a taxable person is required to pay the dues within three months from
the date of service of order failing which recovery proceedings shall be
initiated. However, as per the proviso, for protecting the interest of revenue,
the proper officer may require payment within a shorter timeframe, provided the
reasons are recorded in writing.
In terms of Section
79(1), if a person fails to pay any amount due to the Government, the proper
officer can recover the amount using specified modes.
However, some field
officers are initiating recovery before the three month period without any
proper reason/justification in writing. Accordingly, CBIC has issued guidelines
for recovery of amount.
As per Circular No.
3/3/2017 - GST dated 5 July 2017, the proper officer for recovery u/s 79 is the
jurisdictional Deputy Commissioner (DC) or Assistant Commissioner (AC).
Further, the proper officer for the purpose of expedited recovery is the
jurisdictional Principal Commissioner (PC) or Commissioner.
Therefore, before
initiating early recovery, DC/ AC must present the case to PC or Commissioner,
outlining the reasons/justifications for expedited action. The PC or
Commissioner must record in writing the justification for early recovery
considering the financial health, status of business operations, infrastructure
and credibility of the taxable person.
The guidelines also
emphasizes that such directions for early payment should not be issued
mechanically but only in cases where there is a specific risk to Revenue such
as potential business closure, financial decline, or insolvency proceedings.
The reasons for early recovery should be based on credible evidence and balance
the interest of revenue with ease of doing business.
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