GST Recovery Beyond Section 79: Attachments, Enforcement & Installments Explained
In our previous article, we uncovered the initial stage of GST dues recovery under Section 79 - the official "countdown" when the recovery process kicks off. But the journey doesn’t stop there. When dues remain unpaid, the tax authorities have a range of powerful tools at their disposal, from attachment of properties and provisional attachments to enforcement actions that can seriously impact business operations. Plus, there are provisions allowing for installment payments, offering some relief for taxpayers facing financial constraints.
In this article, we will explore these critical next steps in detail - how the government safeguards its revenue, the procedural safeguards for taxpayers, and how you can strategically manage recovery demands through installment options. Understanding these layers is crucial for any business navigating GST compliance and recovery.
Shielding Government Revenue: Sections 81 & 82
Say No to Fraudulent Transfers – [Section 81]
Once any GST dues become payable, any sale, mortgage, or transfer of property made to defraud the government is considered void against the tax department’s claim.
But not all transfers are suspect - you’re in the clear if:
The deal was for fair value,
Done in good faith,
You weren’t aware of any tax proceedings,
Or you got prior nod from the GST officer.
Government Gets Paid First – [Section 82]
GST dues aren’t just another liability - they become a first charge on all your property. That means:
Government stands first in line before any other creditors.
This overrides all other laws - except the Insolvency and Bankruptcy Code (IBC), 2016.
It’s a strong signal that the tax department takes recovery very seriously.
Attachments in Action: How the Taxman Enforces Recovery
Once recovery proceedings commence, the law enables authorities to attach not just physical assets but even financial interests.
Attachment of Debts, Shares & Other Movables- [Rule 151]
When the defaulter owns debts (unsecured), shares, or other movables not in their possession, attachment is effected through a written order in FORM GST DRC-16, which:
For debts: creditor cannot recover, debtor cannot pay until further order from officer.
For shares: registered owner cannot transfer or receive dividends.
For other movable property: the holder cannot hand it over to the defaulter
Copies of the order are:
Affixed at the tax office,
Sent to relevant parties like corporations or debtors, person holding the movable property
Any debtor prohibited from paying the defaulter may instead pay the department directly - and it is treated as valid payment under the law.
Property in Custody of Courts or Public Officers – [Rule 152]
If the property to be attached is with a court or a public officer,
The proper officer sends them the attachment order,
Requesting that the property - along with any interest or dividend on it - be held,
Until the full recovery of the outstanding dues.
Attachment of Partnership Interest- [Rule 153]
If the defaulter is a partner in a firm, the proper officer may attach their share in the partnership property and profits through an order.
Proper officer may:
Charge the defaulter’s share in the partnership,
Appoint a receiver for their share in profits (declared or accrued),
Collect other dues payable to the partner,
Order sale of the defaulter’s interest, or pass any other suitable order as needed.
Other partners have the right to:
Redeem the defaulter’s interest anytime, or
Buy it themselves if a sale is ordered.
These detailed attachment provisions ensure that tax recovery is not limited to physical assets, but extends to financial and partnership interests as well.
Provisional Attachment: Freezing Assets Before Final Recovery
[Section 83 & Rule 159]
This is one of the strongest tools in the GST department’s recovery kit. Even before final recovery, authorities can provisionally attach your assets to prevent evasion.
Commissioner can attach any property (movable, immovable, or bank accounts) through FORM GST DRC-22, detailing the attached property.
Copies of the order are sent to relevant authorities to place encumbrance on property and to the property owner.
Encumbrance can only be removed on written instructions from the Commissioner or automatically after one year.
For perishable or hazardous property:
Owner can pay market value or dues payable (whichever is less) to get immediate release (order in FORM GST DRC-23).
If payment not made, Commissioner can sell the property and adjust proceeds against outstanding dues.
Owner can file an objection (FORM GST DRC-22A) claiming property should not be attached.
After hearing the objection, Commissioner may release the property (order in FORM GST DRC-23).
Commissioner can release the property anytime if satisfied it is no longer liable for attachment (order in FORM GST DRC-23).
Provisional attachment lasts up to one year and ceases automatically after that period unless further action is taken.
Why Is This Important?
Provisional attachment acts as a protective shield for government revenue - ensuring that taxpayers do not dispose of or transfer assets to evade payment. But it also comes with procedural safeguards to protect taxpayers from arbitrary action. Being aware of your rights and remedies here is essential to avoid unnecessary loss or hardship.
Continuing Recovery Despite Appeals
[Section 84 & Rule 161]
Appeals or revision applications don’t halt recovery altogether. Section 84 ensures that recovery proceedings initiated before such legal challenges can continue - even if the amount is modified later.
When a demand notice is served and the taxpayer files an appeal, revision, or other legal proceedings, the outcome may modify the original demand.
Based on the result:
If demand is enhanced:
Commissioner issues a fresh notice in FORM GST DRC-25 for the increased amount.
Recovery resumes from where it paused - no fresh proceedings needed.
If demand is reduced:
No new notice is issued.
Intimation of reduction is sent in FORM GST DRC-25 to the taxpayer and the recovery authority.
Recovery continues only for the reduced amount, from the same stage.
Need Breathing Room? Opt for Installments – [Section 80]
GST law acknowledges that full payment may not be immediately possible for all. Relief is available:
File FORM GST DRC-20 to request to the Commissioner up to 24 monthly installments.
Interest under Section 50 applies on the outstanding amount during the instalment period.
Commissioner evaluates your financial condition based on report from jurisdictional officer and may allow it through FORM GST DRC-21.
Conditions apply:
Not available for self-assessed liability declared in returns
No ongoing recovery or prior default in installments.
Minimum amount should be Rs. 25,000.
If you default even one installment, the full amount becomes immediately due and liable for recovery without further notice.
Smart Moves: Practical Tips for Taxpayers
1. Stay Alert: Regularly check the GST portal - don’t miss out on crucial notices.
2. Act Fast: Respond to DRC forms or attachment orders promptly.
3. Challenge Wisely: File objections to unfair or premature recovery.
4. Go Legal When Needed: File appeals and seek stay orders where applicable.
5. Plan Payments: Request installments before enforcement escalates.
6. Maintain Records: Keep all tax-related documents ready and organized.
7. Don’t Go Solo: Consult a GST expert to safeguard your business.
Conclusion
GST recovery is a structured process that empowers authorities to secure dues while safeguarding taxpayer rights. From attachments and enforcement to installment options and objection mechanisms, the law strikes a balance between revenue protection and procedural fairness. By staying informed, responding promptly, and using the available remedies wisely, taxpayers can navigate recovery proceedings effectively and minimise business disruption. In matters of GST recovery, timely and strategic action is key.
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.