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.
Wherever such directions are issued and the taxpayer fails to comply with the early payment directive, DC/AC shall proceed with recovery of amount as per Section 79.
[1] Instruction No. 01/2024-GST dated 30 May 2024
