No Recovery Proceedings Within Three Months Of Tax Notice: CBIC

New Delhi, Jun 3 (KNN) The Central Board of Indirect Taxes and Customs (CBIC) has issued instructions to its field formations regarding the recovery of tax demands from businesses.

In a letter dated May 31st, the apex body has mandated that tax officers must refrain from initiating recovery proceedings within three months of serving a tax notice, reported ET.

This three-month period is prescribed under Section 78 of the CGST Act, allowing businesses time to address the tax demand or seek legal recourse.

However, the CBIC has permitted field formations to initiate earlier recovery in exceptional circumstances where there is a credible risk to revenue interests.

Such circumstances include the impending closure of business operations, declining financial health of the taxable entity, or the likelihood of insolvency proceedings.

The CBIC has emphasised that any decision to expedite recovery must be based on substantive evidence and not taken in a routine manner.

Field officers have been directed to thoroughly evaluate the business status, financial standing, and credibility of the taxable person before issuing directions for early payment of confirmed demands.

This move comes in the wake of concerns over the indiscriminate invocation of the ‘exceptional circumstances’ clause by tax officers, prompting businesses to approach courts seeking stays on recovery processes.

The CBIC has acknowledged the need to strike a balance between safeguarding revenue interests and promoting ease of doing business for taxpayers.

Tax experts have welcomed this directive as a positive step towards fair application of tax laws and ensuring a conducive business environment under the Goods and Services Tax (GST) regime.

(KNN Bureau)