Section 79 of CGST Act - Recovery of Tax
Section 79 of the Central Goods and Services Tax Act, 2017 empowers the proper officer to recover an amount payable to the Government when it remains unpaid. The provision gives the tax administration several statutory recovery methods, including deduction from money owed, detention and sale of goods, recovery from third parties such as banks, distraint and sale of property, recovery as arrears of land revenue, and recovery through a Magistrate.
Meaning and scope of Section 79
Recovery of tax means the statutory process used by the Government to collect an amount that has become payable under the CGST Act or the rules but has not been paid. Section 79 is not limited to basic tax alone: its opening words apply to any amount payable under the Act or rules, subject to the legal basis on which that amount has become recoverable.
For an amount payable in pursuance of an order, Section 78 - Initiation of Recovery Proceedings generally provides three months from service of the order for payment. The proper officer may require payment within a shorter period when expedient in the interest of revenue, but reasons must be recorded in writing.
Section 79 explained clause by clause
Section 79(1): Recovery when an amount remains unpaid
Where an amount payable to the Government under the CGST Act or the rules is not paid, the proper officer may proceed by one or more of these methods:
- Deduction from money owed: deduct the amount from money owing to the defaulter that is under the control of the proper officer or another specified officer.
- Detention and sale of goods: recover the amount by detaining and selling goods belonging to the defaulter that are under the control of the proper officer or another specified officer.
- Recovery from a third person: issue a written notice to a person who owes, may owe, holds, or may subsequently hold money for the defaulter, requiring payment to the Government to the extent specified by law.
- Distraint and sale of property: distrain movable or immovable property belonging to or under the control of the defaulter and, if the dues and prescribed costs remain unpaid for thirty days after distress, cause the property to be sold and return any surplus.
- Recovery as arrears of land revenue: send a signed certificate specifying the amount due to the District Collector where the person owns property, resides, or carries on business, or to another officer authorised by the Government.
- Recovery through a Magistrate: apply to the appropriate Magistrate for recovery of the specified amount as if it were a fine imposed by the Magistrate.
Section 79(2): Bonds and other instruments
If a bond or other instrument executed under the CGST Act, rules or regulations provides that an amount due under it may be recovered in the manner laid down in Section 79(1), the amount may be recovered by those modes without prejudice to any other available recovery method.
Section 79(3): Cross-empowerment for recovery
Where tax, interest or penalty payable under the CGST Act remains unpaid, a proper officer of State tax or Union territory tax may, during recovery of that person's tax arrears, recover the Central tax amount as if it were an arrear of State tax or Union territory tax and credit the recovered amount to the Central Government.
Section 79(4): Proportionate credit
If the amount recovered under Section 79(3) is less than the total amount due to the Central and State Governments, the recovery is credited to the respective Governments in proportion to the amount due to each.
Modes of recovery under Section 79
| Mode | What the proper officer may do | Practical example |
|---|---|---|
| Deduction | Deduct dues from money payable to the defaulter and controlled by a specified tax officer. | A refundable or otherwise payable Government-controlled amount may be appropriated, subject to law. |
| Goods under control | Detain and sell goods belonging to the defaulter that are already under the control of the officer. | Goods lawfully under departmental control may be used for recovery through the prescribed sale procedure. |
| Third-party notice | Require a debtor, bank, insurer, post office or another holder of money to pay the Government. | A bank may be directed to remit money held for the person in default, to the extent legally recoverable. |
| Property | Distrain movable or immovable property, detain it and, after the statutory period and procedure, sell it. | Attached property may be sold under the applicable CGST Rules if dues remain unpaid. |
| Land revenue | Issue a recovery certificate to the Collector or authorised officer. | The certified amount may be recovered as an arrear of land revenue. |
| Magistrate | Apply to the appropriate Magistrate. | The amount may be recovered in the manner applicable to a fine, subject to law. |
Recovery from banks and other third parties
Section 79(1)(c) is an important garnishee-type recovery provision. A written notice may be served on a person from whom money is due or may become due to the defaulter, or who holds or may subsequently hold money for the defaulter. The notice can require payment to the Government up to the amount due.
A person served with such notice is bound to comply. If the recipient of the notice fails to pay as required, that recipient may be treated as a defaulter for the amount specified in the notice. The issuing officer may amend or revoke the notice or extend the time for payment.
A third party that pays the Government in compliance with the notice receives statutory protection: the payment is treated as authorised by the person in default and operates as a sufficient discharge to that extent. Conversely, a person who discharges a liability to the defaulter after service of the notice may become personally liable to the Government within the limits stated in Section 79(1)(c)(vi).
The provision also protects a notice recipient who proves to the satisfaction of the issuing officer that the demanded money was not due, was not held for the defaulter when the notice was served, and is not likely to become due or be held for that person.
Relevant CGST Rules and recovery forms
The recovery machinery in Section 79 is supplemented by the CGST Rules, 2017. The principal recovery rules include Rules 143 to 147, dealing with recovery by deduction, sale of goods under the officer's control, recovery from a third person, execution of a decree, and recovery by sale of movable or immovable property. The prescribed DRC series of forms supports different stages of demand and recovery.
| Rule / Form | Purpose |
|---|---|
| Rule 143 | Recovery by deduction from money owed. |
| Rule 144 | Recovery by sale of goods under the control of the proper officer. |
| Rule 145 / FORM GST DRC-13 and DRC-14 | Recovery from a third person and certificate of payment to the third person. |
| Rule 146 | Recovery through execution of a decree, where applicable. |
| Rule 147 / FORM GST DRC-16 onward | Recovery by attachment and sale of movable or immovable property and the related sale process. |
Because rules and forms may be amended by notification, the current text should be checked on the official GST/CBIC or India Code sources before acting on a recovery notice.
Related CGST Act provisions
Section 79 should be read with the surrounding provisions in Chapter XV. Section 78 deals with initiation of recovery proceedings; Section 80 concerns payment of tax and other amounts in instalments; Section 81 addresses certain transfers of property; Section 82 deals with the statutory first charge, subject to its terms; Section 83 concerns provisional attachment; and Section 84 deals with continuation and validation of certain recovery proceedings.
Frequently asked questions
Can GST authorities recover money directly from a bank?
Section 79(1)(c) permits a written notice to a banking company or another person holding money for the defaulter. The recipient is bound by the statutory notice subject to the conditions and protections contained in the provision and the applicable rules.
Can more than one recovery method be used?
Yes. Section 79(1) expressly allows recovery by one or more of the listed modes.
What happens to surplus sale proceeds?
For distraint and sale under Section 79(1)(d), after satisfying the payable amount and permitted costs, including the cost of sale, the surplus, if any, is to be rendered to the person concerned.
Is Section 79 the same as provisional attachment under Section 83?
No. Section 79 is a recovery provision for unpaid amounts, while Section 83 is a separate power of provisional attachment intended to protect revenue in circumstances specified by that section.
Reference: This page is an explanatory article. For statutory interpretation or action in a particular recovery proceeding, read the current Act, rules, notifications, orders and the specific demand/recovery documents together.