The CBIC has said the Principal Commissioner or commissioner-level officers can issue directions to recover GST dues before the stipulated three months of serving the demand order.
Under the GST law, if a taxable person does not pay the amount specified in an order passed under the CGST Act within three months from the date of service of such order, the tax officer can initiate recovery proceedings only after the expiry of this period.
However, in exceptional cases where it is necessary in the interest of revenue, the proper officer, after recording the reasons in writing, may ask a taxable person to pay the amount within a period shorter than three months.
The Central Board of Indirect Taxes and Customs (CBIC) said it has been brought to its notice that some of the field formations are initiating recovery before the specified period of three months from the date of service of the order, even in the cases where the taxable person has not been specifically required by the proper officer, for reasons to be recorded in writing, for payment of such amount within a lesser period.
“Therefore, in order to ensure uniformity in the implementation of the provisions of law across the field formations, the board hereby issues the following instructions to be followed in cases where it is necessary, in the interest of revenue, to initiate recovery before the period of three months from the date of service of the order,” the CBIC said.
Generally, recovery proceedings are undertaken by the jurisdictional Deputy or Assistant Commissioner of Central Tax.
In cases where early recovery is deemed necessary, the jurisdictional Deputy or Assistant Commissioner must present the case, along with the reasons for early recovery, to the jurisdictional Principal Commissioner or Commissioner of Central Tax, the CBIC said.
If satisfied with the reasons, the Principal Commissioner or Commissioner must record these reasons in writing.
Upon recording the reasons in writing, the Principal Commissioner or Commissioner may issue directions to the concerned taxable person to pay the specified amount in less than three months from the order’s service date.
Uniformity in Dealing With Cases
Ranjeet Mahtani, partner, Dhruva Advisors, highlighted that in the GST regime, orders are now being passed thick and fast. Upon an order being passed, a taxpayer may appeal against it or admit and pay the demand amount (typically, comprising tax, interest, and penalty).
The statute permits a taxpayer a certain time to prefer an appeal (three months) and so, for disputed demands no amount is payable, at least, till three months from the communication of the order date.
Mahtani added that at the time of filing an appeal, prescribed pre-deposit (i.e. a per cent age of the tax demand) is required to be deposited with the exchequer. In a nutshell, a taxpayer who intends to challenge an order by way of a further appeal need not pay any portion of the disputed amount till the expiry of three months and, simultaneous with preferring an appeal must mandatorily pay the pre-deposit amount.
“Now, some tax officers tend to be over-zealous in attempting recovery of the demand amount before the said three-month timeframe. The CBIC’s latest instructions of 30th May 2024, reiterate that, in the ordinary course, no recovery can be made until the completion of three months of the communication of order. This stance also ensures that the taxpayer’s appellate rights are not rendered infructuous,” Mahtani said.
Exceptional Cases
Mahtani added that the instructions have guidelines to uniformly deal with cases that deserve recovery proceedings of tax dues in a timeframe lesser than three months of communication of an order.
“Such a measure must be undertaken wherever it is expedient “in the interest of revenue”, and not in all cases; in other words, in exceptional cases. The instructions identify the competent officer and what his responsibilities are before requiring a taxpayer to pay up, in a timeframe that is lesser than that statutorily allowed,” Mahtani said.
Moore Singhi executive director Rajat Mohan said this instruction balances safeguarding revenue and maintaining ease of doing business.
Guidelines and mandating proper documentation for early recovery actions, the instructions enhance transparency and predictability in tax administration.
“It is also hoped that state tax administrations will issue similar instructions to address the challenges faced by taxpayers under state jurisdictions. This coordinated approach would further streamline tax compliance and foster a fairer tax environment across the country,” Mohan added.
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