The Central Board of Indirect Taxes and Customs (CBIC) has recently issued comprehensive guidelines for initiating recovery proceedings under the Central Goods and Services Tax Act, 2017 (CGST Act). These guidelines aim to standardize the recovery process and ensure fair practices by tax authorities.
Key Provisions for Recovery under the CGST Act
Section 78 of the CGST Act
Section 78 mandates that a taxable person must pay the due amount within three months from the date of service of the order. If the payment is not made within this period, recovery proceedings are initiated. However, the proviso to this section allows the proper officer to demand payment within a shorter timeframe to protect the interest of the revenue, provided the reasons are documented in writing.
Section 79(1) of the CGST Act
Section 79(1) empowers the proper officer to recover the amount due to the government using specified modes if a person fails to pay any amount owed.
Issues and the Need for Guidelines
There have been instances where field officers initiated recovery proceedings before the three-month period without proper justification. To address this issue and ensure adherence to due process, CBIC has issued guidelines for the recovery of amounts due under the CGST Act.
Guidelines for Recovery Proceedings
Designation of Proper Officers
As per Circular No. 3/3/2017 – GST dated July 5, 2017:
- The jurisdictional Deputy Commissioner (DC) or Assistant Commissioner (AC) is designated as the proper officer for recovery under Section 79.
- For expedited recovery, the jurisdictional Principal Commissioner (PC) or Commissioner is the proper officer.
Procedure for Early Recovery
- Presentation of Case:
- Before initiating early recovery, the DC/AC must present the case to the PC or Commissioner.
- The presentation must include reasons and justifications for expedited action.
- Recording of Justification:
- The PC or Commissioner must record in writing the justification for early recovery.
- Factors to consider include the financial health, status of business operations, infrastructure, and credibility of the taxable person.
- Criteria for Early Recovery:
- Early payment directives should not be issued mechanically.
- Such directives should be based on credible evidence indicating specific risks to revenue, such as potential business closure, financial decline, or insolvency proceedings.
Balancing Revenue Interests and Business Ease
The guidelines emphasize that early recovery should balance the interest of revenue with the ease of doing business. The reasons for early recovery should be well-founded and evidence-based.
Action on Non-compliance
If the taxpayer fails to comply with the early payment directive, the DC/AC will proceed with recovery as per Section 79 of the CGST Act.
The CBIC’s guidelines for initiating recovery proceedings under the CGST Act aim to ensure a fair and transparent process. These guidelines are designed to protect revenue interests while also considering the financial and operational status of businesses. Proper documentation and justified reasons for early recovery are crucial for maintaining a balance between enforcement and business facilitation.
