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Provisions for Recovery of Tax Unpaid under GST


Provisions for Recovery of Tax Unpaid under GST

If a registered taxpayer does not file his/her GST returns on the given due date, he is liable to be penalised as per the notice sent by the government in form GSTR 3A. However, if the taxpayer or the defaulter fails to file the same, even after 3 months from the issuance of an order for the demand of tax, the government officials can begin with the proceeding to recover tax under GST.

Modes of Recovery under GST
The GST officers can recover the tax amount due by such defaulters in the below-given modes:

  • Deduction of the due amount from any money owed by the GST department to such person.
  • Selling goods belonging to such person under control of (detained by) GST officer
  • Recovery of tax from a third person, who holds or may subsequently hold money for or on account of the defaulter
  • Recovery through the execution of a decree of a civil court for the payment of money or for sale in the enforcement of a mortgage or charge.
  • Detention and selling of any movable or immovable property belonging to such person.
  • Recovery of tax through the collector of the district, in which such person owns any property or resides or carries on his business as if it were an arrear of land revenue. The proper officer will need to prepare a certificate specifying the amount due from such person and hand it over to the concerned collector, for this purpose
  • Recovery of tax by way of application to the appropriate magistrate, who in turn shall proceed to recover the amount as if it were a fine imposed by him
  • Recovery of tax via enforcing the bond or instrument executed under the Act or any rules or regulations made under the Act
  • Recovery of tax done by the proper officer of the State Government or Union Territory Government, wherein, any CGST arrears will be recovered as if it were an SGST / UTGST arrear. Such an amount will be recovered, and then later credited to the account of the Central Government. In case the amount recovered by this means is less than the amount due, then the amount will be apportioned among the Central Government and State / UT Government in proportion to the amount due to each authority
Special provisions for recovery of tax under GST
Transfer of Property to be Void if there are GST Dues
The GST authorities can seize properties belonging to the defaulter to recover any due amount. To avoid such seizure, the defaulter often creates a charge on his property or immediately transfers it through sale, mortgage, exchange AFTER the amount has become due. The intention is to defraud the government by not paying taxes. In such cases, the transfer of property will become void.

However, the transfer will NOT be void when-
  • Adequate considerations are made
  • It is made with no intention to defraud and in good faith.
  • The taxpayer did not receive any notice in regards to pending tax dues or proceedings
  • Previous permission of a proper officer has been obtained
Tax - First Charge on Property
As per the GST recovery provision, any tax amount due, along with the applicable penalties, will be the first charge on the property of such defaulter. The provision overrides all laws with an exception to the Insolvency and Bankruptcy Code, 2016.

Provisionally Attaching Property to Protect Revenue in Certain Cases
In cases, wherein the Commissioner finds if the government revenue is at stake, under such circumstances he can provisionally attach any property of the defaulter.

This provisional attachment of property is applicable in the below-given cases:
  • Assessment of taxpayers not filing returns
  • Assessment of unregistered persons who were found liable to be registered
  • Summary Assessment
  • Inspection, search, seizure
  • Demand and recovery proceedings for fraud and non-fraud cases
  • The property includes bank account.
  • The provisional attachment is valid for 1 year.
Provisional attachment is only a temporary security until a final judgment has been made. Usually, it is done to restrain the defaulter from absconding.

With the provisional attachment, the property is brought under the custody of the GST authorities, which takes away the defendant’s right to remove it or dispose of it.

Recovery Provisions in Cases of Appeal and Revisions
The taxpayer can choose to file for an appeal or revision of the demand notice. Which may lead to either of the following decisions:

a) Increase of the due amount
The Commissioner, for the difference in the due amount, will serve another notice of demand. The old amount will be covered by the notice issued earlier.

b) Reduction of the Due Amount
The commissioner shall inform the taxpayer about the reduction, but no new notice will be served and the proceedings will continue with the reduced amount. In addition, the Commissi1oner will apprise the authority with whom the recovery proceedings are pending of the change.

IRIS GST is one of the leading GST Suvidha Providers (GSP) in India. Our GST compliance solution, IRIS Sapphire, is designed to help you file your GST returns on time without any hassle.

For any queries or to book a demo, please write to

About Ashwini Gorhe


Ashwini Gorhe, a Chartered Accountant, is associated with IRIS as a Financial Analyst. She has around 6 years of experience in compliance space which includes XBRL reporting, GST and Data analysis. She is actively involved in the IRIS Sapphire (GST filing solution) and IRIS Topaz (E-way bill solution) product development. Before GST, she was handling US compliance analyzing US financial statements and reviewing XBRL filings for US and India market.

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