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NEW DELHI: In a bid to check unnecessary pressure on GST payers against early recovery of dues, the Central Board of Indirect Taxes and Customs (CBIC) has put in place guidelines mandating senior officers to initiate recovery action quickly only in rare cases and that too after clearly stating the reasons.
The law allows central GST authorities to initiate recovery after three months in case the dues remain unpaid after an order is passed.Only in exceptional circumstances can recovery be initiated earlier. But with “early action” becoming a norm or sorts, leading to pressure on taxpayers, CBIC has now said that if recovery has to be initiated before three months, a principal commissioner- or commissioner-rank officer will have to order action and state specific reasons.
“Such reasons could include high risk to revenue involved in waiting till the completion of the three-month period due to apprehension that the concerned taxable person may close the business operations in near future, or due to possibility of default by the taxable person due to his declining financial conditions or impending insolvency, or likely initiation of proceedings under Insolvency and Bankruptcy Act,” the instructions issued on Thursday said, while stating mechanical issuing of demand should be avoided.
The order must be based on credible evidence and should be issued after considering the financial health, status of business, credibility of the taxpayer, infrastructure and should strike a balance between the interests of tax authorities and ease of doing business, it said.
“Such explicit instructions from govt are quite welcome and will help minimise any unnecessary hassles that businesses have been facing regarding tax recovery. I hope these guidelines are implemented and followed in letter and spirit by jurisdiction officials,” said Abhishek Jain, indirect tax head and partner at KPMG.
The law allows central GST authorities to initiate recovery after three months in case the dues remain unpaid after an order is passed.Only in exceptional circumstances can recovery be initiated earlier. But with “early action” becoming a norm or sorts, leading to pressure on taxpayers, CBIC has now said that if recovery has to be initiated before three months, a principal commissioner- or commissioner-rank officer will have to order action and state specific reasons.
“Such reasons could include high risk to revenue involved in waiting till the completion of the three-month period due to apprehension that the concerned taxable person may close the business operations in near future, or due to possibility of default by the taxable person due to his declining financial conditions or impending insolvency, or likely initiation of proceedings under Insolvency and Bankruptcy Act,” the instructions issued on Thursday said, while stating mechanical issuing of demand should be avoided.
The order must be based on credible evidence and should be issued after considering the financial health, status of business, credibility of the taxpayer, infrastructure and should strike a balance between the interests of tax authorities and ease of doing business, it said.
“Such explicit instructions from govt are quite welcome and will help minimise any unnecessary hassles that businesses have been facing regarding tax recovery. I hope these guidelines are implemented and followed in letter and spirit by jurisdiction officials,” said Abhishek Jain, indirect tax head and partner at KPMG.
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