Updated on: October 20th, 2021 9:38 PM

Provisional Attachment of Property under GST

Provisional attachment of any property can be made to enforce or protect the recovery of tax demands under the GST law. Central Board of Indirect Taxes and Customs (“CBIC”) has recently issued the guidelines for provisional attachment of property under Section 83 of the Central Goods and Services Tax Act, 2017.  With this notification, Section 83 of the CGST act was amended to widen and raise the Commissioners’ power to provisionally attach the property to safeguard the interest of the revenue. The current article briefs the Guidelines on Provisional Attachment of Property under GST.

Attachment of Property under GST

The demand and recovery proceedings take a considerable amount of time. In this period, the taxpayer might default or even escape to avoid tax collection. To safeguard the interest of the revenue, power is given to the GST authorities under the Central Goods & Services Tax (‘CGST’) Act, 2017 to provisionally attach the property of the taxable person, including bank account, during the pendency of proceedings. If the government attaches the property of a person, the person cannot transfer the said property to anyone else.

Legal Provision - Section 83 of CGST Act

Section 83 provides for provisional attachment of property to protect the interest of revenue during the pendency of any proceeding under Section 62, Section 63, Section 64, Section 67, Section 73, and Section 7.  Concerning the same, Rule 159 of the CGST Rules provides the procedure to be followed by the proper officer.

Circumstances under which Section 83 can be invoked

As mentioned above, Section 83 of CGST can be invoked during the pendency of the following proceedings:

• Section 62: Assessment of non-filers of returns
• Section 63: Assessment of unregistered persons
• Section 64: Summary assessment in certain special cases
• Section 67: Proceedings related to inspection, search, and seizure
• Section 73: Demand raised in cases other than those involving fraud or willful misrepresentation of facts
• Section 74: Demand raised in cases involving fraud or willful misrepresentation of facts

Cases fit for provisional attachment of property

Provisional attachment should not be invoked in cases of technical nature and should be reported mainly in cases where there is an evasion of tax or where the wrongful input tax credit (“ITC”) is availed or utilized or wrongfully passed on. Provisional attachment can be resorted to in the following cases:

• If the taxable person has supplied goods or services without the issue of invoice intending to evade tax
• In case the taxable person has issued any invoice without supply
• If the taxable person has availed ITC using the invoice or bill issued without any corresponding supply or fraudulently availed ITC without any invoice
• In case taxable person has collected any amount as tax but has failed to pay the same to the Government beyond a period of 3 months
• If a taxable person has fraudulently obtained a refund
• If a taxable person has passed on ITC fraudulently to the recipients but has not paid the commensurate tax

Types of property that can be attached under GST

• The value of the property attached should not be excessive and should be reasonable to the estimated amount of pending revenue. More than one property can be attached.
• Provisional attachment can be made only of the property belonging to the taxable person, against whom the proceedings under Section 83 of the Act are pending.
• Movable property should normally be attached only if the immovable property, available for attachment, is not sufficient to protect the interests of revenue.

As far as possible, it should also be ensured that such attachment does not hamper the normal business activities of the taxable person. This would mean that raw materials and inputs required for the production of finished goods should not normally be attached by the Department. In cases where the movable property, including a bank account, belonging to a taxable person has been attached, such movable property may be released if a taxable person offers any other immovable property which is sufficient to protect the interest of revenue.

Procedure for Provisional Attachment of Property

During the pendency of certain specified proceedings under the CGST Act 2017, the Commissioner can pass an order in Form GST DRC -22 with proper Document Identification Number (DIN) for attachment of property of the taxpayer to protect the interests of the revenue. Such an order may remain in effect for up to one year if no action is taken.The form GST DRC-22 is attached here for reference:

• A copy of this order in Form GST DRC – 22 may be sent to the concerned Revenue Authority, Transport Authority, or any such authority to place an encumbrance on the said property.
• This encumbrance cannot be removed unless instructions have been received from the Commissioner to do so.
• Copy of attachment order will be provided to the taxable person, In case of any objections, the taxable person needs to file the same within 7 days.
• If such objection is filed by the taxable person, Commissioner will provide an opportunity of being heard. After considering the facts presented by the person in his written objection as well as during the personal hearing, if any, the Commissioner should form a reasoned view whether the property is still required to be continued to be attached or not, and pass an order in writing.
• In case, the Commissioner is satisfied that the property was or is no longer liable for attachment, he may release such property by issuing an order in FORM GST DRC- 23.
• Even in cases where the objection is not filed within the time prescribed under Rule 159(5) of CGST Rules i.e. 7 days, the Commissioner should pass a reasoned order.
• Each such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order of attachment.

Procedure for Provisional Attachment of Hazardous Property

In case the attached property is of a perishable/hazardous nature, then such property shall be released to the taxable person by issuing an order in FORM GST DRC-23 after the taxable person pays an amount equivalent to the market price of such property or the amount that is or may become payable by the taxable person, whichever is lower, and submits proof of payment. In case the taxable person fails to pay the said amount, then the perishable/hazardous property may be disposed of and the amount recovered from such disposal of property shall be adjustable against the tax, interest, penalty, fee, or any other amount payable by the taxable person. Further, the sale proceeds thus obtained must be deposited in the nearest Government Treasury or branch of any nationalized bank in fixed deposit and the receipt thereof must be retained for the record, so that the same can be adjusted against the amount determined to be recoverable from the said taxable person.