Provision to Pay GST in Instalments and Other Recovery Provisions

Ever knew about paying GST liability in instalments? A special rule under the GST law allows GST payment in instalment on approval. In this article, we will understand about paying GST in instalments and other recovery provisions in detail.

Provision to Pay GST in Instalments (CGST Section 80)

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 taxpayer can apply in Form DRC-20 with details of amount due, reasons for seeking instalments, and documentary evidence supporting financial hardship.

The Commissioner can extend the due date for payment or allow the taxpayer to pay in instalments in Form DRC-21. The reasons for accepting/rejection of such application have to be provided in writing. 

GST in instalments is not available in the below cases-

• Where the GST dues are already subject to recovery provisions
• GST in instalments was not allowed in the preceding financial year
• The GST amount due is less than Rs.25,000

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 April with due dates being 30th of each month. He defaults in paying the instalment due on 30th June, 2025. Immediately the entire outstanding balance of 10,000 will become due on 1st July 2025.

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:

• Request Commissioner
• Monthly instalments
• Maximum of 24 installments allowed
• Interest at 18% p.a.
• Pay instalments on time without defaulting

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  (CGST Section 81)

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 2025. In January 2025, she had wished to sell her flat and had put up ads. She sells the flat in May 2025 for Rs. 50 lakhs. The transfer is not void because she received enough consideration.

Example: Case 2 Ms. X received a notice in April 2025 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  (CGST Section 82)

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, amended from time to time.

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 (CGST Section 83)

If the Commissioner is of the opinion that the government revenue is at stake, then he can provisionally attach any property of the defaulter or person mentioned under CGST Section 122(1A) (failure to register certain machines used in manufacture of goods). This provisional attachment of property becomes applicable in pending cases of:

• Assessment of taxpayers not filing returns (Chapter XII)
• Assessment of unregistered persons who were found liable to be registered (Chapter XII)
• Summary Assessment (Chapter XII)
• Inspection, search, seizure (Chapter XIV)
• Demand and recovery proceedings for fraud and non-fraud cases (Chapter XV)

**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.