Provision to Pay GST in Instalments and Other Recovery Provisions

In this article, we will understand about paying GST in instalments and other recovery provisions in detail.

Latest Updates

1st May 2021
The time limit for completion or compliance has been extended to 31st May 2021, where the time limit falls between the period from 15th April 2021 to 30th May 2021. This includes completion of proceedings, passing of orders, issuing notices, intimations, notifications, sanctions, approvals by the GST authorities. Also, filing an appeal, reply, submitting appeal, document, return (except for the GSTR-3B) by the taxpayers.

1st February 2021
Union Budget 2021 outcome: 
1. The provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding till the expiry of a period of one year from the date of order made thereunder.
2. Section 129 is delinked from Section 130. Accordingly, proceedings relating to detention, seizure and release of goods and conveyances in transit will be separate from the levy of penalty for the confiscation of goods and conveyance.
3. The Jurisdictional Commissioner can now call for information from any person relating to any matter dealt with in connection with the Act under Section 151, together with section 168. Further, section 152 is amended to provide an opportunity of being heard before using information obtained under Sections 150 or 151 of the Act.

Provision to Pay GST in Instalments

If the taxpayer cannot pay all the GST dues (tax/interest/penalty) in a lump sum or within the stipulated date, then he can file an application to the Commissioner requesting to pay in instalments.

The Commissioner can extend the due date for payment or allow the taxpayer to pay in instalments. The reasons for accepting/rejection of such application have to be provided in writing. When paying in instalments, the taxpayer has to remember that:

• Instalments are payable every month
• Only a maximum 24 instalments are allowed – i.e., the time of payment can be extended for maximum 2 years
• Interest @18% must be paid along with the instalment
• All instalments must be paid on time. A single default will cause the instalments to cease and the entire outstanding balance will become due on that date. Notice will NOT be issued for this

For example- Mr. X requested to pay Rs. 12,000 tax through 12 monthly instalments starting from June with due dates being 30th of each month. He defaults in paying the instalment due on 30th August, 2018. Immediately the entire outstanding balance of 10,000 will become due on 31st August 2018.

Note: This option of paying in instalments is NOT available for dues under self-assessment. Any tax under self-assessment must be paid in one go. Option to pay in instalments is available for any liability calculated by the tax authorities during provisional/final assessments, scrutiny, audit etc.

It is similar to the current excise system. The salient points of this provision are listed below:

It is similar to the current excise system. The salient points of this provision are listed below:

Transfer of Property to be Void if there are GST Dues

As we have discussed in our previous article,  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-

• It is made for adequate consideration
• It is made in good faith (no intention to defraud)
• The taxpayer had not received any notice regarding pending tax dues or proceedings
• Previous permission of the proper officer has been obtained

Example: Case 1 Ms. X has GST dues of Rs. 10 lakhs pending from February 2018. In January 2018, she had wished to sell her flat and had put up ads. She sells the flat in May 2018 for Rs. 50 lakhs. The transfer is not void because she received enough consideration.

Example: Case 2 Ms. X received a notice in April 2018 demanding the due amounts. She immediately transferred her flat to her daughter showing the transfer as a gift. This is a case of intention to defraud and the transfer will be void.

Tax to be the First Charge on Property

The GST recovery provision states that any tax amount due (including interest & penalty) will be the first charge on the property of such taxable person or such person, and will override all laws except Insolvency and Bankruptcy Code, 2016.

For example, the defaulter owes Rs. 10,000 GST tax and Rs. 2,50,000 as the loan to the bank. He has a car worth Rs. 50,000. GST tax, which has the first charge will be adjusted first for Rs.10,000 and the balance of Rs. 40,000 will be taken by the bank. This applies to most of the tax laws in India.

The Supreme Court had held that the statutory dues will have priority over the dues of a secured creditor only if there is a specific provision in that particular statute. To overcome the impact of this SC judgment, most of the major tax laws including GST Act, now provide the first charge for recovery of tax dues.

Provisionally Attaching Property to Protect Revenue in Certain Cases

If the Commissioner is of the opinion that the government revenue is at stake, then he can provisionally attach any property of the defaulter. This provisional attachment of property becomes applicable in pending cases of:

• 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

**Property includes bank account.

***The provisional attachment will have a validity of 1 year.

Provisional attachment is a temporary security while pursuing a final judgment. Usually, it is done in cases where there is a strong suspicion that the defaulter will abscond. It brings the property into the custody of the GST authorities and takes away the defendant’s right to remove it or dispose of it.

Recovery Provisions in Cases of Appeal and Revisions

If the taxpayer files for an appeal or revision against the notice of demand received then either of the following can occur in the appeal decision:

a) The due amount is increased in the appeal

The Commissioner will serve another notice of demand for the difference. The old amount will be covered by the notice earlier issued. For example: Let’s assume that the original amount demanded was Rs.10,000. The taxpayer appealed against this amount and subsequently, it was increased to Rs. 12,000. Then the Commissioner will issue a fresh notice only for Rs. 2,000.

b) The due amount is decreased in the appeal

No new notice will be issued in this case. The Commissioner will inform the taxpayer about the reduction, and also apprise the authority with whom the recovery proceedings are pending of the change. The proceedings will continue with the reduced amount.

For example: Let’s assume that the original amount demanded was Rs.10,000. The taxpayer appealed against this amount and subsequently, it was reduced to Rs.8,000. The Commissioner will NOT issue a fresh notice. The old proceedings will continue with Rs. 8,000.

Summary of Other GST Recovery Provisions