DA Newsflash (GST): Guidelines for Initiation of Recovery Proceedings Before Three Months from the Date of Service of Demand Order

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The Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 01/2024-GST dated 30th May 2024, addressing the guidelines for initiating recovery proceedings under the Central Goods and Services Tax (CGST) Act, 2017. This instruction clarifies the circumstances under which recovery can commence before the usual three-month period following the service of a demand order.

Key Points to Note:

1) Standard Recovery Timeline: Under Section 78 of the CGST Act, recovery proceedings should generally start only after three months from the date of service of the demand order if the payable amount remains unpaid.?

2)?Exceptional Circumstances: In exceptional cases, where it is deemed necessary in the interest of revenue, the proper officer can require payment within a shorter period. This decision must be supported by recorded reasons in writing, as per the proviso to Section 78.?

3) Authority and Procedure: The proper officer for initiating recovery under Section 79 is the jurisdictional Deputy or Assistant Commissioner of Central Tax. However, if early recovery is considered necessary, the case must be referred to the jurisdictional Principal Commissioner or Commissioner of Central Tax. The Principal Commissioner/Commissioner must then examine and record the reasons for early recovery and issue specific directions for the same.?

4) Criteria for Early Recovery: Reasons for early recovery could include the high risk of revenue loss due to potential business closure, financial instability, or impending insolvency of the taxpayer. Any such decision must be based on credible evidence and balanced against the ease of doing business.?

5) Implementation and Compliance: All field formations must adhere to these guidelines to ensure uniform implementation of the provisions. Early recovery should not be pursued mechanically but only when justified by specific circumstances

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