GST Dues Recovery Under Section 79 - The Countdown Starts Now

Introduction: The Clock Starts Ticking After a Demand Order

Receiving a GST demand order isn’t the end of the road-it’s the beginning of a countdown. Under the CGST Act, taxpayers are given three months from the date of service of such an order to clear their dues. But if you think the department waits passively during this time, think again.

Sections 78 and 79 of the CGST Act, along with a suite of procedural rules, arm tax officers with a range of recovery mechanisms-ranging from deduction from government payments to full-blown auctions of your property. This article walks you through these provisions and explains how each recovery method works in practice.

It All Starts Here: Section 78 – When Recovery Gets Triggered

You may think you have some breathing room after a tax order is issued-but Section 78 of the CGST Act sets the clock ticking.

According to this provision:

“Any amount payable by a taxable person in pursuance of an order under GST law must be paid within 3 months from the date of service of that order.”

And here’s the kicker:

If you don’t pay within 3 months, the department is empowered to initiate recovery proceedings-no further reminders required.

But wait-there’s a proviso too. If the proper officer believes it’s in the interest of revenue, they can ask you to pay even before the 3 months are over, provided they record their reasons in writing.

☠ So, if you receive a demand order, the recovery engine is already revving in the background.

What Happens Next? Section 79 Kicks In

Once the recovery process is triggered under Section 78, Section 79 of the CGST Act takes over, laying down the actual methods of recovery. And they aren’t subtle. Here’s how the department can collect the dues:

But before diving into the specific tools, it’s important to understand a new procedural layer that connects the dots between default and recovery-Rule 142B.

Rule 142B: The Department’s First Strike-DRC-01D Intimation Before Recovery

Inserted via Notification No. 38/2023–Central Tax, dated 04.08.2023, Rule 142B adds a fresh weapon to the department’s recovery arsenal. It creates a formal intimation mechanism before any recovery action is taken under Section 79.

Here's how it works:

Why it matters:
Rule 142B ensures quick and procedural escalation of unpaid tax/interest-especially in automated or data mismatch cases-without waiting for lengthy adjudication or reminders. It shortens the window between detection and action.

💣6 Strong Recovery Tools Under GST

Once Section 79 kicks in, these are the go-to recovery weapons in the department’s arsenal:

1. Deduction from Government Payments

[Section 79(1)(a) + Rule 143]

If you are owed money by the government (e.g., contractor bills), the department can adjust your dues against those payments.

This method ensures that if you are due to receive funds from any government entity (say, as a contractor or vendor), your GST dues can be adjusted at source even without your consent.

2. Detainment and Sale of Goods

[Section 79(1)(b) + Rule 144 & Rule 144A]

If your goods are in government custody, they can be detained and sold to recover dues.

Rule 144A kicks in when goods or the vehicle are detained/seized during transit under Section 129, and the penalty is not paid within 15 days of the order passed under Section 129(3), then the officer proceeds to sell/dispose the goods or conveyance so detained or seized.

This rule deals specifically with the recovery of penalty under Section 129 (for goods or conveyance detained or seized in transit), follows the same procedure as laid down in Rule 144. The only additional provision is:

“If the detained or seized goods are perishable, hazardous, or likely to depreciate in value over time, the proper officer may reduce the 15-day period for payment or auction, to safeguard revenue.”

3. Third Party Recovery

[Section 79(1)(c) + Rule 145]

Department can recover dues from someone who owes you money or holds funds on your behalf.

4. Attachment and Auction of Property

[Section 79(1)(d) + Rule 147]

Your movable or immovable property can be attached and auctioned if dues remain unpaid.

Note: Other Relevant Rules

5. Recovery via District Collector

[Section 79(1)(e) + Rule 155]

The officer can issue a certificate to the District Collector, who will recover your dues like land revenue arrears.

6. Recovery through Court

[Section 79(1)(f) + Rule 156]

GST dues can even be collected like a court-imposed fine, with a Magistrate’s help.

Where Do the Sale Proceeds Go?

[Applicable to Rule 144, Rule 144A & Rule 147 | As per Rule 154]

Whether the recovery is done by selling detained goods in transit (under Rule 144A), goods in custody (under Rule 144), or attached property (under Rule 147), the disposal of sale proceeds is governed by Rule 154.

Here’s how the amount recovered is appropriated:

1. Administrative Costs First

The first cut goes towards the administrative expenses of conducting the recovery and sale.

2. Then Toward Tax or Penalty

Next, the amount is adjusted against:

3. Then Any Other Dues

Any remaining balance is used to offset other liabilities under CGST, IGST, SGST/UTGST laws and rules.

4. Surplus? It’s Returned

But if the amount cannot be returned within 6 months (or within any extended time allowed), the balance must be transferred to the Consumer Welfare Fund.

This rule ensures sale proceeds are properly appropriated and any surplus is rightfully returned-reinforcing a fair and transparent recovery mechanism.

Miscellaneous Recovery Rules

In addition to the standard recovery procedures, there are specific provisions under the GST framework that address unique recovery situations.

Rule 146: Recovery through Execution of a Decree, etc.

Rule 157: Recovery from Surety

Rule 160: Recovery from Company in Liquidation

Conclusion: When the Department Knocks, Be Prepared

The recovery machinery under GST is anything but passive. Once a demand order is served, the law sets a precise timeline-and empowers tax authorities to act swiftly and decisively. From slicing your dues out of government payments to attaching your property or involving the Magistrate, the recovery mechanisms under Sections 78 and 79 are varied, far-reaching, and rigorously codified.

For taxpayers, the key takeaway is this: don't wait for reminders. The moment a demand is raised, the countdown begins. Whether it's responding to a DRC-10 or challenging an attachment in DRC-16, timely action can protect your assets and reduce the damage. Understanding how each tool works isn’t just academic-it’s your first line of defense.

In the world of GST, compliance delays come at a steep cost. Stay alert, stay proactive.

Note- The provisions covered under Section 79 set the stage for the recovery process, but GST recovery is a multi-step journey with many layers. In our next article, we will delve deeper into the subsequent recovery mechanisms - including installment payments, attachment of property, provisional attachments, and enforcement procedures that follow if dues remain unpaid. Stay tuned to understand the full scope of how GST dues are recovered and how you can best navigate these processes.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.