Understanding Provisional Property Attachment under GST: Section 83 Explained

Tax disputes under various laws, including GST, often involve lengthy processes. During these ongoing proceedings, there's a risk that government revenue collection could be delayed, or a taxpayer might transfer assets before a final resolution. To safeguard the government's financial interests while legal actions are pending, authorities are authorized to provisionally attach a taxpayer's property.

Recent Legislative Changes

May 1, 2021

Certain deadlines for compliance or completion of actions falling between April 15, 2021, and May 30, 2021, were extended to May 31, 2021. This extension covered acts by GST authorities like completing proceedings, issuing orders, notices, intimations, notifications, sanctions, and approvals. It also applied to taxpayer actions such as filing appeals, replies, documents, or returns (excluding GSTR-3B).

February 1, 2021 (Union Budget 2021)

Key amendments included:

• Provisional attachments now remain valid from the start of proceedings until one year after the order is issued.
• Section 129 and Section 130 were separated, meaning procedures for detaining, seizing, and releasing goods/conveyances in transit are distinct from penalties for confiscation.
• The Jurisdictional Commissioner gained power under Sections 151 and 168 to request information from any individual concerning matters under the Act. Section 152 was also modified to ensure a right to be heard before utilizing information obtained via Sections 150 or 151.

Definition of Property Attachment

When the government attaches an individual's property, that person loses the ability to transfer it to anyone else. Any attempt to transfer attached property is legally invalid. This power extends to bank accounts, preventing fund transfers from such accounts.

Understanding CGST Act Section 83

Under specific ongoing proceedings detailed in the CGST Act 2017, the Commissioner has the authority to issue an order for the provisional attachment of property, including bank accounts. This action aims to protect government revenue. Such an order can remain effective for up to a year if no further steps are taken. A copy of this order may be shared with relevant revenue or transport authorities to impose a legal encumbrance on the property. This encumbrance can only be lifted by the Commissioner's instructions.

When Section 83 Can Be Applied

Section 83 is applicable during the following types of pending proceedings:

• Section 62: Assessment for taxpayers who have not filed returns.
• Section 63: Assessment for individuals who are unregistered.
• Section 64: Summary assessments for particular situations.
• Section 67: Procedures related to inspections, searches, and seizures.
• Section 73: Demand notices issued in cases not involving fraud or intentional misrepresentation.
• Section 74: Demand notices issued in cases that do involve fraud or intentional misrepresentation.

This provision for property attachment does not apply in any other scenarios. For proceedings that are already concluded and the taxpayer is deemed a defaulter, Section 79 of the CGST Act, concerning tax recovery, is invoked for property attachment by GST officers. Therefore, Section 83, which deals with provisional attachment, is restricted to specific pending cases before tax authorities, as outlined above.

Taxpayer Actions and Deadlines for Provisional Attachment

When the Commissioner decides to provisionally attach any property, including a bank account, an order in Form DRC-22 will be issued detailing the attached assets. This DRC-22 notice can be issued at any time after a demand notice has been served under Sections 63, 73, or 74, or after assessment orders under Sections 62 or 64.

Upon receiving this order, the taxpayer has seven days from the date of attachment to file an objection, arguing that the property should not have been attached. The Commissioner must then grant the taxpayer an opportunity to be heard. If the Commissioner finds the taxpayer's response satisfactory, the attached property will be released by an order in Form DRC-23.

If the attached property is perishable or hazardous, the taxpayer must either settle the outstanding tax dues or pay the market value for the property, whichever is lower. Once settled, the Commissioner will release the property using Form DRC-23. If the taxpayer does not agree to either pay the market value of the property or clear the dues, the Commissioner is authorized to sell the property and use the proceeds to cover the taxpayer’s outstanding liabilities.

Responding to a DRC-22 Notice through the GST Portal

Before starting, ensure your reply is prepared and saved as a PDF file, keeping the size under 5 MB. There is no specific format required for the reply. The steps for responding to a DRC-22 notice are similar to those for a DRC-16 notice (attachment and sale of goods/shares under Section 79). Follow these instructions to submit your reply via the GST portal:

Step 1: Log in to the GST portal

Access the GST portal using your credentials.

Step 2: Locate the relevant DRC-22 notice

Navigate to ‘Services’ > ‘User Services’ > ‘View Additional Notices/Orders’. A dashboard displaying issued notices will appear. Find the specific DRC-22 notice and select ‘View’ under the ‘Action’ column.

Step 3: Enter and submit reply details

On the case details page, click the ‘REPLIES’ tab.

1. Click ‘ADD REPLY’.
2. From the dropdown menus, select the mode of recovery, notice type, and notice reference number. These details can be found under the ‘NOTICES’ tab on the left side of the case details page.
3. Upload your PDF reply by clicking ‘Choose File’. Provide a description for the uploaded document under ‘Upload Reply’. You can also attach up to four supporting documents, each with a description.
4. Check the verification box, enter the authorized signatory’s name and the place where the form is filled. Click ‘Submit’. A confirmation message will appear; click ‘Proceed’.

Step 4: Sign the reply using DSC or EVC

Depending on the taxpayer type, sign the form using either ‘SUBMIT WITH DSC’ or ‘SUBMIT WITH EVC’.

A success message will confirm the filing, and an acknowledgment along with an RFN will be sent to the registered email and phone number.

Forms DRC-22 and DRC-23 Explained

Form DRC-22 is used for the provisional attachment of property under Section 83. Form DRC-23 is used to restore provisionally attached property or bank accounts under Section 83.