GOODS AND SERVICES TAX

COURSE CODE: BBA 301

UNIT- 1

Faculty Name: Dr. Shiran Khan

Designation: Assistant Professor
School/Dept: Management
Email address of Faculty Member: [email protected]
Programme Outcomes

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 Program Outcomes (POs)
PO1: Apply knowledge of various functional areas of business
PO2: Develop communication and professional presentation skills
PO3: Demonstrate critical thinking and Analytical skills for
business decision-making
PO4: Illustrate leadership abilities to make effective and productive
teams
PO5: Explore the implications and understanding of the process of
starting a new venture
PO6: Imbibe responsible citizenship towards a sustainable society
and ecological
environment
PO7: Appreciate inclusivity towards diverse cultures and imbibe
universal values
PO8: Foster Creative thinking to find innovative solutions for
various business situations
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 Course Outcomes (COs)

CO1:Understand the concept of GST.

CO2:Undertake Assessment of GST.
CO3:Recognize the steps to file GST returns.
CO4:Understand offences and penalties under GST.
CO5:Comprehends the role of GST Practitioner

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 3.6 Demands and Recovery
Introduction
• Meaning of Demand
• Issue of Notice
• Recovery Provisions

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 Suggested Readings
• Author’s Name: Arpit Haldia
• Title of the Book: GST Made Easy
• Chapter’s name: Demands and Recovery

• Author’s Name: Awdesh Singh

• Title of the Book: GST made Simple
• Chapter’s name: Demand under GST

References :
CBIC Circular on Recovery Tax
https://www.cbic.gov.in/resources//htdocs-cbec/gst/Recovery_of_
Tax.pdf;jsessionid=F4DC61EE8ACFA0AABF5C6F606D1BDCAA
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 3.6 Demands and Recovery
• Occasionally tax administrations comes across situations where the tax dues
are not paid correctly by the tax payers, most of the times inadvertently and
sometimes deliberately.
• The concept of ‘Matching’ details of ‘Outward supplies’ of supplier with the
details of ‘Inward supplies’ of recipient has been introduced in the CGST Act to
minimize the inadvertent short payment of taxes.
• Moreover, the self-assessed tax has to be paid by the due date prescribed
under the CGST Act and in case of any failure to pay the same by the due date,
the Input Tax Credit will not be available to the recipient of goods or services
or both and also the tax payer will not be able to file any return for further
period.
• Effectually these provisions work as a self-policing system and take care of any
mis-match in the payment of taxes. However, despite these provisions, there
may arise some instances where the tax was not paid correctly. To deal with
such situations, the provisions for recovery are incorporated in any tax law.

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• Demand and Recovery under GST Act are basically laid down for
the department, for providing them a framework in order to raise
a demand on non-payment of any tax, interest or penalty and
procedure for recovery in case of non-payment by the assesse.

• Under GST Act, provisions relating to demand and recovery are

quite similar to the provisions under Service Tax and Central
Excise Act with some new provisions.

• Chapter XV of the Central Goods and Services Act 2017 (Sec. 73

to Sec. 84) deals with Demands and Recovery under GST regime
which includes issuance of Show Cause Notices and Adjudication
proceedings.

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LEGAL PROVISIONS

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 Notice when there is No Fraud for tax shortfall(Section 73)
This section applies to non-fraud cases when:
1. Tax is unpaid/short paid or,
2. Refund is wrongly made or,
3. Input tax credit has been wrongly availed/utilised
4. ——for any reason, other than fraud etc. i.e., there is no motive to evade
tax.

The proper officer (i.e., GST authorities) will serve a show cause notice on the taxpayer.
They will be required to pay the amount due, along with interest and penalty.

Time Limit
The proper officer is required to issue the show cause notice 3 months before the time
limit. The maximum time limit for the order of payment is 3 years from the due date for
filing of annual return for the year to which the amount relates.

For Other Tax Periods

Once the above notice has been issued, the proper officer can serve a statement, with
details of any unpaid tax/wrong refund etc. for other periods not covered in the notice.
A separate notice does not have to be issued for each tax period.
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 Voluntary Tax Payment
A person can pay tax along with interest, based on his own calculations (or the
officer’s calculations), before the notice/statement is issued and inform the
officer in writing of the same. The officer will not issue any notice in this case.
However, if the officer finds that there is short payment, they can issue a notice for
the balance amount.

No Penalty
If the taxpayer pays all their dues within 30 days from date of notice, then the
penalty will not be applicable. All proceedings (excluding proceedings u/s
132,i.e., prosecution) regarding the notice will be closed.

Penalty in Other Cases

The tax officer will consider the taxpayer’s representation and then calculate
interest and penalty. Penalty will be 10% of tax subject to a minimum of Rs.
10,000. The tax officer will issue an order within three years from the due date
for filing of relevant annual return.

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*** Case study ( as discussed below)

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Notice when there is Fraud for tax shortfall ( section 74)
This section applies to cases of tax evasion involving:
fraud
wilful misstatement
suppression of facts
This results in:
unpaid/short paid tax or,
wrong refunds or,
wrongly availed/utilized input tax credit
In such cases, the proper officer will serve a show cause notice to the taxpayer. They will be
required to pay the amount due along with interest and penalty.

Time Limit
For cases of fraud, the proper officer is required to issue the notice 6 months before the time limit.
The maximum time limit is 5 years from the due date for filing of annual return for the year to
which the amount relates.

For Other Tax Periods

Once the above notice has been issued, the proper officer can serve a statement, with details of any
unpaid tax/wrong refund etc. for other periods not covered in the notice. A separate notice does
not have to be issued for each tax period.
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 Voluntary Tax Payment
If the person pays tax along with interest and a 15% penalty based
on their own calculations (or the officer’s calculations) before the
notice/statement is issued and informs the officer in writing, then
the officer will not issue any notice.

However, if the officer finds that there is short payment, they

can issue a notice for the balance amount.

If the taxpayer pays all their dues and a penalty of 25% within 30
days from the date of the notice, then all
proceedings (excluding proceedings u/s 132,i.e.,
prosecution)regarding the notice will be closed.

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13 of 35
Case study ( as discussed below)

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 General Provisions for Determination of Tax(Section 75)

• If the service of notice or issue of the order has been stayed by a

Tribunal/Court order then the stay period will be excluded from the time limits
of 3 and 5 years.
• If the Appellate Authority/Tribunal/Court decides that charges of fraud are not
sustainable (i.e., it is not a fraud case), then the notice issued earlier will be
assumed to be a notice u/s 73 (i.e. non-fraud case). The tax officer will
calculate the tax accordingly.
• If the Tribunal/Court directs that an order has to be passed, then it will be
issued within two years from the date of the direction.
• An opportunity of a personal hearing will be given to the taxpayer when they
request it in writing OR a penalty or any adverse decision is proposed against
such person.
–The proper officer can adjourn the personal hearing if the person provides
sufficient cause in writing. But adjournment will be allowed for a maximum
of 3 times.

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 General provisions contd..

• The amount of tax, interest and penalty demanded in the order will not
exceed the amount specified in the notice. All demands will be only on
grounds specified in the notice.
• The Appellate Authority/Tribunal/Court can modify the amount of tax
determined by the officer.
• Interest unpaid/short paid tax will have to be paid whether or not specified in
the order.
• If the order is not issued within 3 or 5 years then it is assumed that the
adjudication proceedings are completed. No order will be issued afterwards.
• Pending cases where the decision was against the interest of revenue might be
appealed to a higher authority. For these, the period between the date of the
decision (aggrieved order) and the date of appeal decision of higher authority)
will be excluded from the period of 3/5 years.
• Recovery provisions for unpaid/short paid tax and interest is
applicable irrespective of demand provisions.

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 Section 76:- Tax which is collected but not paid to the
Government
Section 76 of the Central Goods and Services Tax (CGST) Act, 2017, deals with the taxes
which are collected by a person but not paid to the Government.
If a person collects from any other person the amount of tax and has not paid it to the
Government have to pay the amount of tax to the Government irrespective of the fact
that the goods or services upon which the tax was collected are taxable or not.

• If any person, who is liable to pay the tax to the Government fails to do so, then the
proper officer may serve a notice to that person asking him to show cause why he
should not pay the amount as mentioned in the notice and why he should not pay a
penalty equal to the amount mentioned in the notice.( SCN in FORM DRC-01)

• The person will pay the amount after the due amount shall be determined by the
proper officer after his representation. Following the principle of Natural Justice, the
opportunity of being heard shall be provided to the person by the proper officer on his
requests in writing.

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 Adjudication and limitation for recovery of tax

• The order shall be issued by the public officer within

one year from the date of issuance of the notice.
• When the appellate court had put a stay on the issuance
of an order by the public office, then the limitation
period shall exclude the period of stay for the purpose
of computing the time period of one year.

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Section 77: Tax Which are Wrongfully Collected and which is paid
to Central or State Government
• Section 77 of Central Goods and Services Tax, 2017, deals with
the taxes which are collected wrongfully and credited in the
account of the Central Government or State Government.
• If a registered person pays a Central tax and State tax or if he pays
Central Tax and Union Territory tax considering it to be an intra-
state transaction, but it is an inter-state transaction than the
amount of tax paid by him shall be refunded to him in a manner
prescribed.
• Now, if a registered person pays the integrated tax considering it
to be an inter-state transaction, but which is an Intra-state
transaction than that person is not liable to pay the interest on
the State tax and the amount of Central tax or Union Territory tax
and Central tax.

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 Rule 142:- Order and Notice of Demand
• Rule 142 of Central Goods and Services Tax (CGST) Rules, 2017 deals with the
issuance of order and notice of demand which is required to be paid by the
person upon whom the liability has been imposed to pay the tax.
• A proper officer is required to serve a summary in an electronic manner along
with the notice under Section 73(1) or Section 74(1) or Section 76(2) in FORM
GST DRC-01, stating the details a payable sum.

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A proper officer is also required to serve a summary in an
electronic manner along with the statement under Section
73(3) or Section 74(3) in FORM GST DRC-02, stating the details of
the payable sum.

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If a person who is liable to pay the tax makes the
payment of interest and tax in compliance with Section
73(5) or tax, interest or penalty in compliance
with Section 74(5) before the statement or notice may be
served to him, he is required to inform about such
clearance of dues to the proper officer in FORM GST
DRC-03.

When a proper officer receives such information, he will

accept the payment made by the defaulter taxpayer and
he may issue an acknowledgment stating that he had
accepted the payment given by the taxpayer in FORM
GST DRC-04.

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 Recovery of Tax

Initiation of Recovery proceedings Section-78 CGST Act 2017

• Any amount payable by a taxable person in pursuance of an

order passed under this Act shall be paid by such person
within 3 months from the date of service of such order.
• If he fails to pay the same, recovery proceedings shall be
initiated against him.
• If it is in the interest of revenue, proper officer may require
the said taxable person to make such payment within such
period less than a period of 3 months as may be specified by
him.

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 Modes of Recovery of Tax( Sec79)
• Deduction of due amount from the tax amount payable to such
person by the department
• Recovery of tax by way of detaining and selling any goods
belonging to such person
• Recovery of tax from another person, from whom money is either
due or may become due to such person
• Recovery of tax from another person, who holds or may
subsequently hold money for or on account of such person, to
pay to the credit of the Central or a State Government
• Detention of any movable or immovable property belonging to
such person, until the amount payable is paid. If the dues are not
paid within 30 days, the said property is to be sold and with the
proceeds of such sale the amount payable and cost of sale is to
be recovered

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 Modes of Recovery of Tax( Sec79)
• 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

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 Special provisions for recovery of tax under GST
1) Void transfer of property
• As per the GST provisions, the department can seize properties belonging to
the defaulter to recover the due tax amount. Sometimes, in order to avoid
such seizures, the taxpayer transfers the property via sale, mortgage, exchange
etc. after the amount has become due – the intention being to evade paying
the tax amount which is due. To handle such a scenario, the provisions have
been laid down, which state that transfer of property will become void,
whenever there is a tax amount due to be paid.
However, the transfer will not be held as void, provided:
• Transfer has been made for an adequate consideration
• Transfer has been made in good faith, i.e. without any intention to cause fraud
• The taxpayer has not received any notice regarding pending tax dues or
proceedings at the time of transfer
• Prior permission of the proper officer has been obtained

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 Special provisions for recovery of tax under GST

2)Tax to be the first charge on property

As per the provisions of recovery of tax in GST, any tax amount which is due,
including interest and penalty, will be the first charge on the property of the
defaulter, and will override all laws, except the Insolvency and Bankruptcy
Code.
3)Provisionally attaching property to protect revenue
• If at any point in time, the commissioner is of the opinion, that the
government revenue is at stake, then he has the authority to provisionally
attach any property of the defaulting taxpayer. Such a provisional attachment
will have a validity of 1 year.
• Properties are generally treated as a temporary security for the purpose of
provisional attachment, especially when there is a strong suspicion that the
defaulter will abscond. That is the reason why the provision has been made to
include bank accounts also into such property and include them as part of
provisional attachment of property to protect revenue.

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 Rule 143:- When tax is recovered by deducting the
amount from owed money
• Rule 143 of the Central Goods and Services Tax Act,
2017, deals with the recovery process when tax is
recovered by the Government from the defaulter
taxpayer by making a deduction from the money owed.
• When a defaulter taxpayer, who is liable to pay the tax
to the Government, does not pay the tax then, the
proper officer will ask the specified officer, in FORM GST
DRC-09, to deduct the sum from the money which is
unpaid or due against such defaulter person in
compliance to Section 79(1)(a).

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Rule 143:- When tax is recovered by deducting the
amount from owed money

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 Rule 144. Recovery of tax by auction
• Rule 144 of the Central Goods and Services Tax Act, 2017, deals with the
situation where the proper officer may sell the goods by auction to recover the
tax from the defaulter person.
• When a person liable to pay the tax fails to do so, then the amount of tax will
be recovered from the goods owned by that person. The goods shall be sold in
compliance with Section 79(1)(b). It is the duty of the proper officer to
estimate the market value and make an inventory of the goods required to be
sold and begin with the procedure of to sell that much of goods through which
the tax amount may be recovered along with the expenditure incurred by
them in selling the goods.
• The goods belonging to the defaulter taxpayer shall be sold by auction or by e-
auction. When the method of e-auction is adopted, a notice in FORM GST
DRC-10 is issued which will show the property and the purpose behind making
a sale. In no case, the last date of auction or submission of a bid shall be prior
to fifteen days from the date when the notice was issued for the auction.
• If goods from which the amount of tax is required to be recovered is of
perishable and hazardous nature and the expense to maintain that goods
exceed its actual value then the proper officer may sell it without any delay.

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 Rule 145:- Tax recovery from the third person

• Rule 145 of the Central Goods and Services Tax Rule,

2017 deals with the situation where proper officers
recover the tax from the third person. The third person
will pay the tax on behalf of the defaulter.
• A notice in FORM GST DRC-13 will be served by the
proper officer to the third person under Section 79(1)
(c) directing him to pay the sum which is mentioned in
the notice
• RULE 146, RULE 147,155,156 ….
https://blog.ipleaders.in/demand-recovery-gst/
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 Section 80: Tax Payment and Payment of Other Amount
in Monthly Instalments

• Section 80 of the Central Goods and Services Tax Act,

2017, deals with the payment of tax by using the mode
of monthly installments.
• If a person, who is liable to pay the tax, files an
application to the commissioner to extend the time for
paying off the tax or to allow him to pay the tax or any
due amount under this Act in monthly installments, the
Commissioner may allow him to pay the tax in
installments not exceeding twenty-four after recording
his reasons in writing.
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 Section 81: When Transfer of Property is considered to be Void

• If a person with an intention to defraud the Government revenue

transfers his property by means of sale, exchange, mortgage or by
any other way or creates charge upon the property, such transfer
of property by any mode or creation of charge shall be
considered as a void against the claim in relation to the tax
payable by that person.
• Exception: when the transfer of property and creation of charge
is done due to the reason as follows, it shall not be considered as
void –
• Good Faith
• Without knowledge of the pendency of proceedings.
• When previous permission has been taken from the proper
officer.
• Without any knowledge that a liability has been imposed upon
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 Section 82: Tax to be Charge on Property
• Section 82 of Central Goods and Services Tax Act, 2017, says that-
• When a person is required to pay the tax, penalty or interest to the
Government, it shall be the first charge on the property of the person liable to
pay the tax. Nothing in this Section shall affect the provisions given
in Insolvency and Bankruptcy Code, 2016.

Section 83: Provisional Attachment to the Property

• Section 83 of the Central Goods and Services Tax Act, 2017, deals with the
attachment of property provisionally.
• If the commissioner is of the opinion that the property of the taxpayer must
be attached provisionally including bank accounts to protect the interests of
the Government revenue, he may order in writing to attach the property
provisionally.
• This order shall be given by the Commissioner when the proceeding under
Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section
74 is pending

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