If you receive a GST demand order, you have two options: either file an appeal or pay the demanded amount. However, GST officials can request payment before the usual three-month period if they believe it is necessary “in the interest of revenue.” This provision has been misused by some GST field officers. To prevent this, the Central Board of Indirect Taxes & Customs (CBIC) has issued new guidelines requiring prior approval from a higher authority before initiating demand recovery.

How will the guideline on demand recovery proceedings work?

According to a CBIC circular issued on May 30, 2024, some GST field officers have initiated GST demand recovery proceedings prematurely, citing the “interest of revenue,” even when it was not necessary. To prevent the undue harassment of taxpayers, the CBIC has issued new guidelines. These guidelines require GST officers to obtain approval from higher authorities before initiating recovery proceedings within the three-month period after issuing a GST demand notice.

Under these guidelines, a GST proper officer must present a justification to the jurisdictional principal commissioner or commissioner of central tax for initiating early recovery proceedings. The higher authority will review the justification and must be satisfied with the reasons before approving the early recovery action.

An expert explains the reasoning behind the new guidelines: “The primary reason for issuing this instruction is the ambiguous interpretation of ‘interest of revenue’ by the department. The term has been used without proper basis, leading to premature demands for payment. The guidelines aim to ensure that such directions are issued only when justified by credible evidence.”

What reasons constitute ‘interest of revenue’ according to CBIC?

The CBIC circular outlines situations that could constitute an ‘interest of revenue,’ such as: