Section 81 of CGST Act: Transfer of Property to be Void in Certain Cases
Section 81 of the Central Goods and Services Tax Act, 2017 is a revenue-protection provision in Chapter XV, "Demands and Recovery". It targets a transfer or charge over property made after an amount has become due where the transfer is intended to defraud Government revenue. The provision also protects specified bona fide transactions.
Text of Section 81
81. Transfer of property to be void in certain cases.
Where a person, after any amount has become due from him, creates a charge on or parts with the property belonging to him or in his possession by way of sale, mortgage, exchange, or any other mode of transfer whatsoever of any of his properties in favour of any other person with the intention of defrauding the Government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said person:
Provided that, such charge or transfer shall not be void if it is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under this Act or without notice of such tax or other sum payable by the said person, or with the previous permission of the proper officer.
Meaning and scope of Section 81
Section 81 does not declare every transfer made by a person who owes GST dues to be void. Its operative conditions focus on the timing of the transfer, the property involved, and the intention behind the transaction. In particular, the section applies where an amount has already become due and the person then creates a charge over, or parts with, property with the intention of defrauding Government revenue.
| Element | What Section 81 requires |
|---|---|
| Amount due | An amount must have become due from the person before the relevant charge or transfer. |
| Property | The provision covers property belonging to the person or in that person's possession. |
| Transaction | It extends to sale, mortgage, exchange, creation of a charge, or any other mode of transfer. |
| Intention | The transaction must be made with the intention of defrauding Government revenue. |
| Effect | The charge or transfer is void against a claim for tax or any other sum payable by that person, subject to the proviso. |
When a transfer is protected
The proviso preserves a transfer where the statutory protection is satisfied. A transaction is not rendered void under Section 81 if it is made for adequate consideration, in good faith and without notice of the pendency of proceedings under the CGST Act or without notice of the tax or other sum payable. The section also expressly protects a transaction made with the previous permission of the proper officer.
Important expressions used in Section 81
"Charge" and "transfer"
The section is deliberately broad. It refers not only to a sale but also to a mortgage, exchange, creation of a charge, and "any other mode of transfer whatsoever". This prevents the revenue-protection rule from being confined to one form of disposition.
"Void as against any claim"
The statutory consequence is specifically that the offending charge or transfer is void as against a claim for tax or another sum payable by the person. The provision is therefore directed to protection and recovery of Government dues.
"Proper officer"
Under Section 2(91) of the CGST Act, "proper officer", in relation to any function to be performed under the Act, means the Commissioner or the officer of central tax who is assigned that function by the Commissioner in the Board.
Relationship with nearby recovery provisions
Section 81 should be read in the context of Chapter XV. Section 78 deals with initiation of recovery proceedings; Section 79 provides modes of recovery; Section 80 concerns payment in instalments; Section 82 deals with the first charge of tax dues on property; and Section 83 provides for provisional attachment in specified circumstances.
Illustrative application
If a person, after GST dues have become due, transfers property to another person merely to place the asset beyond the reach of Government recovery, Section 81 may make that transfer ineffective against the Government's claim. By contrast, the proviso is relevant where the transaction is for adequate consideration, is bona fide, and the transferee lacks the notice described in the section, or where previous permission of the proper officer has been obtained.
Key takeaways
- Section 81 is part of the CGST Act's demands and recovery framework.
- It applies after an amount has become due from the person.
- It covers a wide range of dealings with property, including sale, mortgage, exchange and creation of a charge.
- An intention to defraud Government revenue is an express statutory condition.
- The proviso protects qualifying bona fide transactions and transactions made with previous permission of the proper officer.
This page is an explanatory guide to the statutory provision. For a particular transaction or recovery dispute, the facts, applicable notifications, orders and current judicial decisions should also be examined.