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Under GST, there are well defined procedures for demand of unpaid tax, which is done via the issue of Show Cause Notice (SCN) and Order. However, if the due tax amount still remains unpaid, then the department is authorised to start recovery of tax, meaning proceedings can be started officially.
As per the provisions of recovery of tax in GST, if the amount payable by a taxable person, remains unpaid, even after 3 months from the date of issuing the order for demand of tax, then the recovery of tax under GST will be initiated. However, if the proper officer considers it urgent in the interest of revenue, he may state reasons recording in writing, and direct the concerned taxpayer to make payment in a reduced period as well. In any case, if the demand is not paid in the time specified, then the department will initiate proceedings for recovery of tax in GST.
As per the GST provisions, the department can seize properties belonging to the defaulter to recover the due tax amount. Sometimes, in order to avoid such seizures, the taxpayer transfers the property via sale, mortgage, exchange etc. after the amount has become due – the intention being to evade paying the tax amount which is due. To handle such a scenario, the provisions have been laid down, which state that transfer of property will become void, whenever there is a tax amount due to be paid.
However, the transfer will not be held as void, provided:
As per the provisions of recovery of tax in GST, any tax amount which is due, including interest and penalty, will be the first charge on the property of the defaulter, and will override all laws, except the Insolvency and Bankruptcy Code.
If at any point in time, the commissioner is of the opinion, that the government revenue is at stake, then he has the authority to provisionally attach any property of the defaulting taxpayer. Such a provisional attachment will have a validity of 1 year.
Properties are generally treated as a temporary security for the purpose of provisional attachment, especially when there is a strong suspicion that the defaulter will abscond. That is the reason why the provision has been made to include bank accounts also into such property and include them as part of provisional attachment of property to protect revenue.
If the taxpayer files for an appeal or revision against the notice of demand received, then either of the following can occur, as far as the decision is concerned:
What is Invoice Reference Number (IRN) in GST? Format and How to Generate IRN?