What is Demand and Recovery under GST PDF

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What is meant of demand recovery and procedure to be followed for recovery...

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What is Demand and Recovery under GST? This article is written by Shreya S.K Pandey, a student of Law College Dehradun Faculty of Uttaranchal University. In this article, she discussed the Demand and Recovery under Goods and Services Tax (GST), how the Government recovers the tax and how the proceeding is initiated in case of no/short payment of tax. Table of Contents  Introduction  What is Demand and Recovery under GST?  Issuance of Demand Notice o Section 73:- Determining the tax which is Short or Not Paid or Refunded Erroneously o Section 74:- Determining the Tax which is Short or Not Paid or Refunded Erroneously and Input Tax Credit has been availed due to Fraud, Wilfulmisstatement or Suppression of Facts o Section 76:- Tax which is collected but not paid to the Government  Rule 142:- Order and Notice of Demand  Section 75: General Provisions regarding Determination of Tax  Section 78: How Recovery Proceedings are Initiated  Section 79: Tax Recovery o Click Here o Rule 143:- When tax is recovered by deducting the amount from owed money o Rule 144. Recovery of tax by auction o Rule 145:- Tax recovery from the third person o Rule 146:- Execution of Decree for the recovery of tax o Rule 147:- Attachment of movable or immovable property for recovery of tax o Rule 155:- Recovery of tax by the Collector, etc. o Rule 156:- Recovery by a criminal court o Rule 157:- Recovery from the surety  Section 77: Tax Which are Wrongfully Collected and which is paid to Central or State Government o Section 54: Tax Refund  Section 80: Tax Payment and Payment of Other Amount in Monthly Instalments o Rule 158:- Tax Payment and Payment of Other Amount in Monthly Instalments  Section 81: When Transfer of Property is considered to be Void  Section 82: Tax to be Charge on Property  Section 83: Provisional Attachment to the Property o Rule 159: Attachment of property provisionally  Section 84:- Enhancement and Reduction of Tax in Appeal, Revision, etc.  Conclusion Introduction Goods and Services Tax (GST) is a system where one person determines the tax and pay the tax by self-assessment. When the tax is paid by doing self-assessment, there is likely to be a chance that the tax may be short paid without any malice intention or there may be also a chance that the assessees may pay the tax short intentionally or knowingly. Under such circumstances, there are some provisions which are followed by the authority to recover those taxes which are short paid by assessees intentionally or without intention. Under Chapter XV from Section 73 to Section 84 of the Central Goods and Services Tax Act, 2017, The provisions relating to Demand and Recovery under Goods and Services Tax (GST) has been discussed. The process of recovery of GST starts with the issuance of the show-cause notice and end up in the Adjudication proceedings. Central Goods and Services Tax (GST) Act, 2017, authorizes the proper offices to demand and determine the amounts: 1. A tax which is not paid (Section 73 and Section 74) 2. A tax which is short paid (Section 73 and Section 74)

3. A tax which is erroneously refunded (Section 73 and Section 74) 4. Wrongly availed Input Tax Credit (Section 73 and Section 74) 5. Wrongly utilized Input Tax Credit (Section 73 and Section 74) 6. A tax which is collected but not paid (Section 76) 7. A tax which is collected beneath the wrong head (Section 77) What is Demand and Recovery under GST? Demand means the wish or desire of a consumer to get or acquire goods or services. When there will be more demands, the market will flourish. It is an action that leads to the growth of the economy. The government imposes a tax on every goods and service. Every person is liable to pay the tax to the Government when they purchase the goods. When a person fails to oblige with his duty, the Government has to recover the tax from the defaulter. Tax is the basic source for the Government to run the economy of the country failing in which causes the economic imbalances. The government adopts strict measures to recover the tax from the defaulters. Issuance of Demand Notice Demand notice is a notice which is sent by the authority under Goods and Service Tax (GST) to communicate its taxpayers. Section 73:- Determining the tax which is Short or Not Paid or Refunded Erroneously Section 73 of Central Goods and Services Tax (CGST) Act, 2017, deals with the determination of those taxes which are short paid or not paid or which is erroneously refunded When any tax has been short paid by the assessee or has not been paid or refunded erroneously and where Input Tax Credit has been wrongly utilized or availed for any of the reason which does not include reason of any wilful-misstatement or fraud or any suppression of tax due to its evasion and it comes to the notice of the proper officer, he will send him a notice to show cause why he should not pay the amount of tax mentioned in the notice along with the interest. He will also state the assessee to pay the penalty which is levy upon him. Time Period: The notice served by the proper officer shall be served three months before the issuance of an order under sub-section (10) of Section 73. Service of Statement: When the notice to be issued by the proper officer under sub-section (1), he will serve a statement to the person who is liable to pay the tax. The statement will include all the details relating to the taxes which are either short paid, or not paid, or erroneously refunded or where the input tax credit is utilized or availed for a period which does not include those as mentioned in sub-section (1). Service of the statement shall be deemed to be the service of notice when the grounds upon which the tax period has relied shall be the same as in the previous notice to the assessee. If the person to whom notice has been served pays the tax including the interest on that tax within a period of thirty days from the date of issue of the notice, the penalty shall not be imposed and all the proceedings against that person relating to the notice shall be considered as complete. After representation by a person who is liable to pay the tax, the proper officer shall take this into account and determines the interest, taxes, and a penalty equal to 10% of the tax or Rs.10,000 (whichever shall be higher) which is due from the person liable to pay the tax. After this, the proper officer shall issue an order. Adjudication and limitation for the recovery of tax 1. If the case is related to the non-fraud, the case shall be adjudicated within a period of three years. The limitation shall be counted from the date of filing of the annual returns for the prevailing financial year. 2. If the case is related to the erroneous refund that is received by the assessee, in such circumstances the case shall be adjudicated within a period of three years. The limitation for the three years shall begin from the date when the erroneous refund was credited in the account of an assessee. 3. The issuance of notice for the recovery of tax shall be made by the proper officer three months before the time limit for the verdict of the issue of order or case. 4. The order of decision shall be issued within three years from the date of furnishing the annual return for the financial year by the proper officer. Section 74:- Determining the Tax which is Short or Not Paid or Refunded Erroneously and Input Tax Credit has been availed due to Fraud, Wilful-misstatement or Suppression of Facts Section 74 of Central Goods and Services Tax (CGST) Act, 2017, deal with the determination of those taxes which are short paid or not paid or which is erroneously refunded and Input Tax Credit

has been wrongly utilized or availed for any of the reasons which include wilful-misstatement or fraud, etc. When any tax has been short paid by the assessee or has not been paid or refunded erroneously and where Input Tax Credit has been wrongly utilized or availed for any of the reasons which include wilful-misstatement or fraud or any suppression of tax due to its evasion and it comes to the notice of the proper officer, he will send a notice to the person has wrongly utilised or availed the Input Tax Credit to show cause why he should not pay the amount of tax mentioned in the notice along with the interest. He will also state the assessee to pay a penalty equal to the tax which is levy upon him in the notice. Time Period: The notice served by the proper officer shall be served six months before the issuance of an order under sub-section (10) of Section 73. Service of the Statement: When the notice to be issued by the proper officer under sub-section (1), he will serve a statement to the person who is liable to pay the tax. The statement will include all the details relating to the taxes which are either short paid, or not paid, or erroneously refunded or where the Input Tax Credit is utilized or availed for a period which does not include those as mentioned in sub-section (1). Service of the statement shall be deemed to be the service of notice when the grounds upon which the tax period has relied shall be the same as in the previous notice to the assessee. Person to whom tax is chargeable may pay the sum of the tax including the interest which is equal to 15% of the tax, after determining the tax on his own or by the proper officer. After this, he has to inform the proper officer in writing about that payment. Adjudication and limitation for recovery of tax 1. When the case deals with the suppression of facts or fraud, the case shall be adjudicated within a period of five years. The limitation shall be counted from the date of filing of the annual returns for the prevailing financial year. 2. If the case is related to the erroneous refund that is received by the assessee, in such circumstances the case shall be adjudicated within the period of five years. The limitation for the three years shall begin from the date when the erroneous refund was credited in the account of an assessee. 3. The issuance of notice for the recovery of tax shall be made by the proper officer three months before the time limit for the verdict of the issue of order or case. 4. The order of decision shall be issued within five years from the date of furnishing the annual return for the financial year by the proper officer. Penalty and Interest under Goods and Services Tax Section 74 of the Central Goods and Services Act, 2017. Sr. Section 73 of the Central Goods and Situations No. (Case of suppression or fraud or Services Tax, 2017. misstatement) There shall be no-issuance of Before show There shall be no-issuance of penalty or notice and the taxpayer pays the 1. cause notice notice and the taxpayer pays the due tax due tax including the penalty and is issued including the interest which is applicable. interest @15% of the amount due on a tax A taxpayer is required to pay the due tax A taxpayer is required to pay the within the period of 30 days from the issue due tax along with the interest and Aftershow of show cause notice along with the penalty @25 2. cause notice interest which is applicable and there shall % and payment must be within the is issued be no penalty after the payment of due period of 30 days of issue of show tax. cause notice. A taxpayer pays tax including the A taxpayer may avoid the prosecution penalty and interest @50% of the After an order even after the issuance of the order if he due amount of tax. After the 3. is issued will pay the interest, tax or penalty on time. payment of due tax, the proceeding shall be deemed to be completed. 4. Other Cases A taxpayer is required to pay the due A taxpayer is required to pay the amount of tax along with penalty and due tax along with the penalty and

interest equal to of @10% of the due amount tax or Rs. 10,000 (whichever is higher) within 30 days from the communication of the decision.

interest @100% of the due amount of tax.

Note:1. When any tax which is self-assessed is paid or any amount which is collected as a tax is paid along with the interest within 30 days from the due date, the penalty shall not be charged. 2. The amount of interest, penalty, and tax which is demanded in the decision shall not exceed the amount mentioned in the notice. And, the demand shall have the same ground as mentioned in the notice. 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. 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. Adjudication and limitation for recovery of tax 1. The order shall be issued by the public officer within one year from the date of issuance of the notice. 2. 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. 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.

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.

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.

When a person upon whom the liability to pay the tax has been imposed pays the tax under Section 73(8) of interest, penalty or tax under Section 74(8) within the period of 30 days from the date when notice was served, the person is required to inform about this to the proper officer in FORM GST DRC-03 and after the issuance of the order in FORM GST DRC-05, the proper officer shall conclude the proceedings.

When a person who is liable to pay the tax represents himself under Section 73(9) or Section 74(6) or Section 76(3), that representation made by such person may be in FORM GST DRC-06.

When the issuance of order is done in summary under Section 73(9) or Section 74(9) or Section 76(3), it is required that it shall in FORM GST DRC-07. It shall state the sum of interest, penalty or tax that a person is liable to pay. Issuance of the order shall be a recovery notice.

When a proper officer may correct the order in compliance with Section 161 of the Central Goods and Services Tax Act, 2017, it shall be done by the proper officer in FORM GST DRC-08.

Section 75: General Provisions regarding Determination of Tax Section 75 of the Central Goods and Services Tax Act, 2017, deals with the provisions regarding the determination of tax. When Appellate Court stays the issuance of the notice or order by the public officer, for computing the limitation period under Section 73(2) and Section 73(10) or Section 74(2) and Section 74(10), the period till the issuance of notice or order are under stay shall be excluded. When the charges under Section 74(1) relating to the willful misstatement or fraud or suppression of facts to escape the tax did not establish against the person to whom notice has been issued by the public officer in the Appellate Court or Tribunal and the court will remove those charges, the notice shall be treated as a notice under Section 73(1). When Appellant Court or Tribunal passes any direction and an order is required to pass in relation to that direction then such order shall be passed within two years from the date when the direction was one communicated. When any adverse decision is pronounced against the person liable for tax or penalty or where he gives in writing, an authority may provide him with an opportunity of being heard. And if he shows

sufficient cause to satisfy the proper officer, his hearing may be adjourned or time may granted to him. When the amount of the tax, penalty, and interest is outlined in the order it shall not exceed the amount that was mentioned in the prior notice. Moreover, the grounds in the decision or order and the grounds in the notice must be the same. If the order does not talk about any interest in the short/not paid tax, the taxpayer is still liable to pay the interest on taxes. If the court does not come up with a judicial decision in the three years under Section 73(10) or five years under Section 74(10) then the proceeding shall be deemed to be concluded. If a court has imposed a penalty upon a person under Section 73 or Section 74, then no subsequent penalty shall be imposed upon that person under any provision of Central Goods and Services Act,2017, for the same act or omission. Section 78: How Recovery Proceedings are Initiated Section 78 of Central Goods and Services Tax, 2017, talks about the consequences of not paying the tax after the order has been made by the court. If a notice has been issued to a person to pay tax and subsequently an order has been issued by the court against that person to pay the tax then that person is required to pay the tax within three months from the date when the first service of an order has been made. If that person fails to pay the tax within three months, recovery proceedings will be started against that person. The proviso of Section 78 deals with a situation where it is desirable to the proper officer in the sale of revenue that the person should pay tax before the three months prescribed to him, then he may direct the person to pay the tax before the time period after recording his reasons in writing. Section 79: Tax Recovery Section 79 of Goods and Services Tax Act, 2017, deals with the provisions relating to the recovery of tax when the person fails to pay tax to the Government. 1. If a person does not pay the tax to the Government which he is required to pay under the Central Goods and Services Tax Act, 2017, then it shall be recovered by the proper officer by any of the modes as prescribed:i. If the proper officer or any other specified officers are holding the money which is unpaid to the defaulter or overdue against such person, then the proper officer or any other specified officer by the proper officer will deduct the amount of tax from that money. ii. If the proper officer or any other specified officer is in control of any goods which belong to the person who is required to pay the tax, then that goods may be sold or detained by the proper officer or any other specified officer. iii. If some person holds due money of the person who is liable to pay the tax under this Act, than the proper officer may require that person holding due to the taxpayer to pay the tax to the Government equivalent to the money due irrespective of the fact that whether it is equal to the due tax or equal to it. A person to whom the notice has been issued in the previous clause is...