RECOVERY OF TAX

1. Tax administration occasionally comes across situations where the tax dues are not paid correctly by the tax payers, most of the times inadvertently and sometimes deliberately. To minimise the inadvertent short payment of taxes, the concept of ‘Matching’ details of ‘Outward supplies’ of supplier with the details of ‘Inward supplies’ of recipient has been introduced in the GST Act. Moreover, the self-assessed tax has to be paid by the due date prescribed under the GST Act and in case of any failure to pay the same by the due date, the Input Tax Credit will not be available to customers and also the tax payer will not be able to file any return for further period. Effectually these provisions work as a self-policing system and take care of any mis-match in the payment of taxes. However, despite these provisions, there may arise some instances where the tax was not paid correctly. To deal with such situations, the provisions for recovery are incorporated in any tax law. Accordingly, the GST Act contains elaborate provisions for the recovery of tax under various situations, which can be broadly classified into the following two categories:

(i)Tax short paid or erroneously refunded or Input Tax Credit wrongly availed; and

(ii)Non-payment of self-assessed tax or amount collected as representing the Tax.   

The incidence of short payment of tax or erroneous refund or wrong availment of Input Tax Credit may be because of an inadvertent bonafide mistake (Normal Cases) or it may be a deliberate attempt (Fraud Cases) to evade the tax. Since the nature of offence is totally different in both the incidences, hence, separate provisions for recovery of the tax and the amount of penalty have been made to deal with such type of cases. Besides these, there are provisions to encourage voluntary compliance such as no penalty or lesser penalty if the tax dues along with interest, are paid within the specified time limit/ incidence. The table below gives a comprehensive chart of provisions for voluntary compliance:

S.	Action by Tax	Amount	Amount	Remarks
No.	Payer	of Penalty	of Penalty
		payable —	payable —
		Normal	Fraud Cases
		Cases
1.	Tax amount,	No Penalty	15% of the	The
	along with the	and no	Tax amount	penalty
	interest, paid	Notice shall	and no	shall also
	before issuance	be issued	Notice shall	be not
	of Notice		be issued	chargeable
				in cases
2.	Tax amount,	No	25% of
				where
	along with the	Penalty. All	the Tax
				the self
	interest, paid	proceedings	amount. All
				assessed
	within 30 days	deemed	proceedings
	of issuance of	to be	deemed	tax or any
				amount
	Notice	concluded	to be
				collected
			concluded
				as tax is
3.	Tax amount,	10% of the	50% of
				paid (with
	along with	Tax amount	the Tax
				interest)
	the interest,	or Rs.	amount. All
				within 30
	paid within	10,000/-,	proceedings	days from
	30 days of	whichever is	deemed	the due
	communication	higher	to be
				date of
	of Order		concluded
				payment
4.	Tax amount,	10% of the	100% of the
	along with the	Tax amount	Tax amount
	interest, paid	or Rs.
	after 30 days of	10,000/-,
	communication	whichever is
	of Order	higher

As can be seen from the foregoing para that for all types of incidences of short payment or erroneous refund or wrong availment of Input Tax Credit, there are incentives for the person who accepts tax liability and readily discharges the same. The law provides an opportunity for the payment of tax, interest and a nil or nominal penalty (depending on the nature of offence) before the issuance of Notice and emphatically stipulates that in all such cases no Notice shall be issued and consequently there shall be no other consequences for any default. However, this is not the end of the road and there is another chance to discharge tax and interest liability with nil or nominal penalty (depending on the nature of offence) within 30 days of issuance of the Notice and the law provides that all proceedings in respect of the said Notice shall be deemed to be concluded. If it becomes inevitable to issue a show cause notice and thereafter pass an Order, the GST Act ensures timely completion of all these procedures by providing a fixed timeline for issuance of notice and order-as follows:

S.	Nature of	Time for issuance of	Time for issuance of
No.	Case	Notice	Order
1.	Normal	Within 2 years and	Within 3 years from the
	Cases	9 months from the	due date of filing of
		due date of filing	Annual Return for the
		Annual Return for the	Financial Year to which
		Financial Year to which	the demand pertains
		the demand pertains	or from the date of
		or from the date of	erroneous refund
		erroneous refund
2.	Fraud	Within 4 years and	Within 5 years from the
	Cases	6 months from the	due date of filing of
		due date of filing of	Annual Return for the
		Annual Return for the	Financial Year to which
		Financial Year to which	the demand pertains
		the demand pertains	or from the date of
		or from the date of	erroneous refund
		erroneous refund
3.	Any	No time limit	Within one year from
	amount		the date of issue of
	collected		notice
	as tax but
	not paid
4.	Non-	No need to issue a	Recovery proceedings
	payment	show cause notice	can be started directly
	of self-
	assessed
	tax

The GST Act also ensures timely disposal of cases by further providing that if the Order is not issued within the stipulated time limit of three years or five years, as the case may be, the adjudication proceedings shall be deemed to be concluded. From all these provisions it is clear that the non-payment of self-assessed tax or the amount collected as representing the tax has been treated differently than the other short payments and in case of these two, the only opportunity for paying the same without incurring any penalty is, if it is paid, with interest, within 30 days from the due date of payment.

All these provisions makes it clear that there are sufficient opportunities to amend and discharge the tax liability with nil or nominal penalties. However, there are disincentives also for the person who fails to utilise these beneficial provisions. Besides that, the law also provides that the

Board may fix certain monetary limits for not filing an

Appeal against any order. It means, if any order is passed in favour of the assesse, the department will not pursue the case further by filing appeals if the amount involved is less than the specified limit. At present, under the existing laws, the monetary limits for not filing an appeal to various judicial forums are follows:

Tribunal- Rs. 10 Lakhs

High Courts- Rs. 15 Lakhs and

Supreme Court- Rs. 25 Lakhs

5. The recovery proceedings are final steps towards the realisation of any tax or amount, which has been confirmed as payable after following the due process of adjudication by the proper officer. Therefore, if the tax dues and other amounts remain unpaid, despite these beneficial provisions, and the tax payer fails to pay the dues after the orders are passed and the statutory limit of 3 months is over, then the proper officer may initiate recovery proceedings. These recovery provisions under the CGST

Act, 2017 lay down a well defined procedure which is as follows:

Any amount payable, in pursuance to any order passed in this matter, is required to be paid within 3 months from the date of receipt of order and the tax payer should pay the same within this time limit. However, it may be mentioned that in certain cases, considering the interest of revenue, this period of 3 months may be reduced.

If the payable amount is not paid within the specified time limit of 3 months then recovery proceedings shall be initiated and various actions may be taken by the recovery officer, for realisation of Government dues.

The options for recovery of Government dues include deduction of money from any amount payable to such tax payer, by detaining and selling any goods, by directing any other person from whom the money is due to such person, attaching any property belonging to the defaulter etc.

Iii. However, considering various business aspects, the provisions for payment of all such amounts, other than self-assessed tax, in instalments have also been made in the Act. A person can avail this benefit of payment in instalments, by making an application to the Commissioner by specifying reasons for such request. On receipt of application, the Commissioner may allow the payment of amount in instalments subject to maximum 24 monthly instalments and on payment of applicable interest. Here it may be noted that if there is default in payment of any one instalment then the whole outstanding balance shall become due and payable immediately.

Provisional Assessment in GST

Introduction

A supplier will come to know the extent of his tax liability which has to be discharged on a continuous and regular basis only after assessment. Assessment means determination of tax liability and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment. The major determinants of the tax liability are generally the applicable tax rate and the value. There might be situations when these determinants might not be readily ascertainable and may be subject to the outcome of a process that requires deliberation and time. Hence like under the previous laws, when due to various circumstances it might not be always possible, at that point of time, to carry out an assessment and determine the exact duty liability, the GST law also provides for provisional assessment.

The Asst. Commissioner/Dy. Commissioner of Central Tax provisionally determines the amount of tax payable by the supplier and is subject to final determination. On provisional assessment, the supplier can pay tax on provisional basis but only after he executes a bond with security, binding them for payment of the difference between the amount of tax as may be finally assessed and the amount of tax provisionally assessed. On finalization of the provisional assessment, any amount that has been paid on the basis of such assessment is to be adjusted against the amount that has been finally determined as payable. In case of short payment, the same has to be paid with interest and incase of excess payment, the same will be refunded with interest.

Procedure

In case a supplier is unable to determine the value of goods or services or both or to determine the rate of tax applicable thereto, he can request the Asst. Commissioner/ Dy. Commissioner of Central Tax in writing, giving reasons for payment of tax on a provisional basis. The supplier requesting for payment of tax on a provisional basis has to furnish an application along with the documents in support of his request, electronically in FORM GST ASMT-01 on the common portal, either directly or through a Facilitation

Centre notified by the Commissioner.  The Asst. Commissioner/Dy. Commissioner of Central Tax will scrutinize the application in FORM GST ASMT-01. In case, additional information or documents in support is required by the Asst. Commissioner/Dy. Commissioner of Central Tax to decide the case, notice in FORM GST ASMT-02 will be issued to the supplier requesting for submission of the same.  The supplier has to file a reply to the notice in FORM GST ASMT – 03, and if he desires can also appear in person before the Asst. Commissioner/Dy. Commissioner of Central Tax to explain his case.

The Asst. Commissioner/Dy. Commissioner of Central Tax will then issue an order in FORM GST ASMT-04 within a period not later than ninety days from the date of receipt of the request, allowing the payment of tax on a provisional basis. The order will indicate the value or the rate or both on the basis of which the assessment is to be allowed on a provisional basis and the amount (this amount shall include the amount of integrated tax, central tax, State tax or Union territory tax and cess payable in respect of the transaction) for which the bond is to be executed along with the security to be furnished. The security will not exceed twenty-five percent of the amount covered under the bond.

The supplier has to execute the bond in FORM GST ASMT-05 along with a security in the form of a bank guarantee for an amount as mentioned in FORM GST ASMT-04.A bond furnished to the proper officer under the State Goods and Services Tax Act or Integrated Goods and Services Tax Act shall be deemed to be a bond furnished under Central Goods and Services Tax Act. 

On executing the bond the process of the provisional assessment is complete and the supplier can supply the goods or services or both and pay the tax at the rate or on the value that has been indicated in the order in FORM GST ASMT-04.

Finalization of provisional assessment

The provisional assessment will be finalized, within a period not exceeding six months from the date of issuance of FORM GST ASMT-04. The Asst. Commissioner/Dy. Commissioner of Central Tax will issue a notice in FORM GST ASMT-06, calling for information and records required for finalization of assessment and shall issue a final assessment order, specifying the amount payable by the registered person or the amount refundable, if any, in FORM GST ASMT-07.

On sufficient cause being shown and for reasons to be recorded in writing, the time limit for finalization of provisional assessment can be, extended by the Joint Commissioner or Additional Commissioner for a further period not exceeding six months and by the Commissioner for such further period not exceeding four years.

n writing, the time limit for finalization of provisional assessment can be, extended by the Joint Commissioner or Additional Commissioner for a further period not exceeding six months and by the Commissioner for such further period not exceeding four years.

Interest liability

In case any tax amount becomes payable subsequent to finalization of the provisional assessment, then interest at the specified rate will also be payable by the supplier from the first day after the due date of payment of the tax till the date of actual payment, whether such amount is paid before or after the issuance of order for final assessment.

In case any tax amount becomes refundable subsequent to finalization of the provisional assessment, then interest (subject to the eligibility of refund and absence of unjust enrichment) at the specified rate will be payable to the supplier.

Release of Security consequent to Finalization

Once the order in FORM GST ASMT-07 is issued, the supplier has to file an application in FORM GST ASMT- 08 for the release of the security furnished. On receipt of this application the Asst. Commissioner/Dy. Commissioner of Central Tax will issue an order in FORM GST ASMT–09 within a period of seven working days from the date of the receipt of the application, releasing the security after the amount payable if any as specified in FORM GST ASMT-07 has been paid.

Conclusion

Provisional assessment provides a method for determining the tax liability in case the correct tax liability cannot be determined at the time of supply. The payment of provisional tax is allowed only against a bond and security. The provisional assessment has to be finalized within six months unless extended. On finalization, the tax liability can either be more or less as compared to the provisionally paid tax. In case of increase in the tax liability, the difference is payable along with interest and in case of decrease in the tax liability the amount will be refunded with interest.