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Guidelines for Initiation of Recovery Proceedings Before Three
Months from the Date of Service of Demand Order : Instruction No. 01/2024-GST
Introduction: The
Central Board of Indirect Taxes and Customs (CBIC) issued Instruction No.
01/2024-GST on May 30, 2024, providing guidelines for the initiation of
recovery proceedings before the standard three-month period from the date of
service of a demand order under the Central Goods and Services Tax (CGST) Act,
2017. This instruction clarifies the conditions under which the standard
recovery timeline may be shortened and offers a framework for ensuring that
such measures are implemented only when absolutely necessary in the interest of
revenue.
Legal Framework: The
guidelines draw upon two key sections of the CGST Act:
1. Section 78:
Specifies that any amount payable by a taxable person in pursuance of an order
under the Act must be paid within three months from the date of service of the
order. If the payment is not made within this period, recovery proceedings are
to be initiated.
2. Section 79:
Details the modes of recovery that the proper officer may employ if the amount
remains unpaid. These may include deduction of the amount from any money owed
by the Government to the person, attachment and sale of movable or immovable
property, or appointment of a receiver for the management of the person’s
property.
Exceptional Circumstances
for Early Recovery:
While the CGST Act
provides a three-month window for payment before recovery proceedings are
initiated, the instruction emphasizes that this period can be shortened in
exceptional circumstances where it is necessary to protect the revenue. This
can only be done under the following conditions:
Written Justification:
The proper officer must record the reasons for shortening the payment period in
writing, demonstrating that it is in the interest of revenue.
Notification to Taxpayer:
The taxable person must be informed of the new, shorter payment period through
a formal direction, and a copy of this direction must be sent to the
jurisdictional Deputy or Assistant Commissioner of Central Tax.
Implementation Protocol:
The instruction lays out
specific steps to ensure that early recovery proceedings are conducted with due
diligence:
1. Risk Assessment:
The proper officer must base the decision to initiate early recovery on
credible evidence that suggests a significant risk to revenue. This may include
factors such as the financial health of the taxable person, the status of
business operations, and the potential for the taxpayer to dispose of assets or
otherwise evade payment.
2. Consideration of
Taxpayer’s Circumstances: Before issuing any directions, the
proper officer must consider the taxpayer’s financial situation, business
infrastructure, and ongoing operations to avoid causing undue hardship.
3. Role of Higher
Authorities: The jurisdictional Principal Commissioner
or Commissioner of Central Tax is responsible for authorizing early recovery
proceedings. If the taxpayer fails to make payment within the specified
shortened period, the jurisdictional Deputy or Assistant Commissioner must
proceed with recovery as per the procedure laid out in Section 79.
Conclusion: Instruction
No. 01/2024-GST serves as a critical guideline for safeguarding government
revenue while ensuring that the rights of taxpayers are not unduly compromised.
It establishes a clear framework for when and how early recovery proceedings
can be initiated, emphasizing the need for written justification and careful
consideration of the taxpayer’s circumstances. Tax authorities and taxpayers
alike must understand these provisions to navigate the complexities of GST
compliance effectively.
References:
- Instruction No. 01/2024-GST,
CBIC, May 30, 2024.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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