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Various Provisions for Recovery of Tax in India

According to Section 72, if the taxable person fails to pay the tax on any order within 90 days, then an assigned tax officer shall proceed to recover the amount. For the payment of interest on revenues, the authorities might shorten the period from 3 months, in such case the reason is recorded in writing.

The tax officer can recover the amount by either of the following methods:

Deduction from any amount due to be paid to the defaulter

If any amount of money is owed to the person by the GST authorities, then the amount which is due or not payable by that person is deducted. So, if any concerned person is entitled to receive the refund for any period then the amount due to him/her will be first deducted from the refund to make up for the unpaid amount. The amount which will remain will only be payable to the person as a refund.

Confiscate and Sell Goods

GST authorities or tax officer have the rights to detain and sell goods owned by the defaulter which are under the control of the tax officer. Tax authorities can seize and sell these goods to recover the due amount.

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Recovery of amount from the Debtor to the Defaulter

  • The tax officer can issue the notice to the debtor asking him/her to pay the amount which is due to the government. In such case, the defaulter is liable to pay the amount to the extent of the defaulting amount.
  • The defaulter is required to pay the due tax to the credit of central or state government, within the time specified in the notice period. The amount should not be paid before the money becomes due or is held.
  • Every person who receives such notice is bound to comply. If he doesn’t do so, then he will become a defaulter under GST.
  • Once the notice is issued, the debtor is bound to pay the amount due directly to the government. The debtor will be held personally responsible if they pay to the defaulter.
  • If the notice is issued to post office, insurer or banking company, they are not bound to produce any passbook, deposit receipt, policy or any other document for any entry.
  • The amount which will be payable by the debtor to the government will be considered as the settlement of his debt to the extent paid. The debtor cannot be sued by the defaulter for this amount. For example, Aman owes the defaulter Anmol Rs. 70,000. Out of which Aman pays Rs. 40,000 to the government. Anmol (defaulter) cannot sue Aman to pay Rs. 40,000.
  • If the person can prove that he did not owe any amount to the defaulter, then the provisions of recovery will not be applicable to him.

Confiscating Moveable and Immoveable Property

The tax officer can confiscate both moveable and immoveable property belonging to the defaulter till the full amount is paid by him or her. The officer can also sell the property after 30 days if the due amount is not paid by the defaulter.

The due amount can also be collected by the tax officer as a land revenue. The officer mails the certificate to the District Collector so that tax can be collected from the defaulter. This certificate is sent to the district where the defaulter resides or owns any property or conduct business.

Application to Magistrate

The tax officer can file an application to the appropriate magistrate. The magistrate will recover the amount from the defaulter.

  • There are various kinds of bonds and security investments involved in recovery. If the bond specifically states that the amount will be recovered as per Section 79, then recovery will be done only according to the provisions of Section 79, not with any other mode.
  • State Goods and Service Tax (SGST) officer has the power to recover any due Central Goods and Service Tax (CGST). Similarly, a CGST officer can recover any amount due to SGST and can submit it to the relevant state to which it belongs.
  • If the amount which is recovered is less than the amount due to the State or Central Government, then it will be divided proportionately between the two in the ratio of their original due amounts.