Recovery, and Paying in Instalments

An order confirming a demand is not, on the day it is served, a licence to empty the person’s bank account. The Act gives a period to pay or to appeal, a list of the ways the department may recover once that period has run, and a route to pay over time. The difficulty for most people is knowing which of these stages they are at: whether the three months are still running, whether an appeal has stayed recovery, and what a letter to their bank actually requires the bank to do.

This guide covers section 78 (when recovery may begin), section 79 and rules 143 to 161 (how it is done, and in which form), and section 80 with rule 158 (instalments). The order itself, and its rectification, are covered in the previous guide. Provisional attachment before an order, under section 83, is a different power and is not covered here.

What makes an amount recoverable

Two kinds of amount can be recovered under section 79.

An amount due under an order. Rule 142(6) provides that the summary of an order uploaded in FORM GST DRC-07 “shall be treated as the Notice for recovery”. No separate demand notice follows.

Self-assessed tax. Section 75(12) provides that self-assessed tax in a return that “remains unpaid”, and interest on it, “shall be recovered under the provisions of section 79”, without a show cause notice. Its Explanation includes tax on supplies declared in GSTR-1 but left out of GSTR-3B. CBIC’s Instruction No. 01/2022-GST (7 January 2022) asks central officers first to send a communication, with a DIN, asking the person to pay or explain the difference “within a reasonable time”, and to proceed under section 79 only if there is no reply, no payment, or no satisfactory explanation.

CBIC’s Instruction No. 01/2022-23 (GST-Investigation), of 25 May 2022, states the converse. Recovery under section 79 “can be made … only after following due legal process of issuance of notice and subsequent confirmation of demand”. Nothing found during a search or an investigation is recoverable until an order makes it payable. That is covered in the guide on inspection and search.

Three months, and when they can be shortened

Section 78 reads:

Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated

The three months run from service of the order. They match the time to appeal under section 107(1).

The proviso allows a shorter period “where the proper officer considers it expedient in the interest of revenue”, but only “for reasons to be recorded in writing”, and only by requiring the person to pay “within such period less than a period of three months as may be specified by him”.

CBIC’s Instruction No. 01/2024-GST (30 May 2024) records that some field formations had been recovering inside the three months without any such direction. It sets out how central officers are to use the proviso:

• The proper officer for the proviso is the jurisdictional Principal Commissioner or Commissioner. The proper officer for recovery under section 79 is the jurisdictional Deputy or Assistant Commissioner (both under Circular No. 3/3/2017-GST).
• The Deputy or Assistant Commissioner places the case, with reasons, before the Commissioner. If satisfied, the Commissioner records the reasons and issues directions to the person to pay within the shorter period.
• The reasons must be specific. The instruction gives as examples an apprehension that the business may close soon, declining finances, impending insolvency or proceedings under the Insolvency and Bankruptcy Code. It also says the reasons “should be based on credible evidence”.
• The Commissioner “must duly consider the financial health, status of business operations, infrastructure, and credibility of the taxable person”. The directions “should not be issued in a mechanical manner”.
• Only if the person does not pay within the period directed does recovery under section 79 begin.

The Patna High Court has held that the reasons must reach the person. In Ascend Telecom Infrastructure Pvt. Ltd. v State of Bihar (25 January 2024), an appeal had been decided against the company on 16 June 2023. Ten days later, the State tax officer sent recovery notices to the company’s banks for the whole demand. The Appellate Tribunal had not then been constituted, and the company had paid the pre-deposit required to appeal to it. The court applied its earlier decision in Sita Pandey v State of Bihar: the reasons under the proviso “are not to be recorded surreptitiously and kept in the files”. They must be “informed to the assessee and a time specified within three months for the payment to be made”. It held the recovery “high handed and arbitrary”, ordered the money returned, and imposed costs on the officer personally. The case is on gst.bharattax.net.

An appeal stays recovery of the balance

Section 107(7) provides that where the appellant has paid the pre-deposit under section 107(6), “the recovery proceedings for the balance amount shall be deemed to be stayed”. Section 112(9) does the same for an appeal to the Appellate Tribunal, “till the disposal of the appeal”. The stay follows from the payment. No application for it is needed. The amounts, time limits and Tribunal dates are in the guide on appeals and pre-deposit.

Two points about the stay are worth knowing.

It covers the balance, not the admitted amount. The pre-deposit includes “in full” whatever the appellant admits. Recovery of the balance is stayed. Nothing in the provision stays anything else.

A payment made through the wrong form can still count. Rule 142(2B) and FORM GST DRC-03A, inserted by Notification No. 12/2024-Central Tax, let a person who paid towards a demand through DRC-03 apply to have that payment adjusted against the demand, as if made on the date of the DRC-03. Circular No. 224/18/2024-GST (11 July 2024) says such an amount may count towards the pre-deposit under section 107 or section 112. The same circular set out an interim procedure for stays of recovery while the Tribunal had not yet begun work. That procedure was a pre-deposit paid against the demand plus an undertaking to appeal. Now that the Tribunal is accepting appeals, the ordinary route under section 112 applies.

If the demand is later enhanced or reduced on appeal or revision, section 84 lets recovery continue “from the stage at which such proceedings stood”. A reduction requires only an intimation, not a fresh demand. Under rule 161, that intimation or notice is issued in FORM GST DRC-25.

The modes of recovery and their forms

Section 79(1) lists six modes, “one or more” of which the proper officer may use. Each has a rule and a form.

Mode	Section 79(1)	Rule	Form
Deduction from money owed to the defaulter by a government, local authority, or government-owned body or company	(a)	143	DRC-09
Sale of the defaulter’s goods already under the officer’s control	(b)	144	DRC-10 (auction notice), DRC-11 (to the successful bidder), DRC-12 (certificate of sale)
Notice to a third person who owes or holds money for the defaulter (garnishee)	©	145	DRC-13 (notice), DRC-14 (certificate of discharge)
Execution of a civil court decree in the defaulter’s favour		146	DRC-15
Distraint, attachment and sale of movable or immovable property, debts and shares	(d)	147, 151 to 153	DRC-16 (attachment and notice for sale), DRC-17 (auction notice), DRC-11, DRC-12
Certificate to the Collector, recovered as arrears of land revenue	(e)	155	DRC-18
Application to a Magistrate, recovered as if a fine	(f)	156	DRC-19

Rule 157 allows a surety to be proceeded against “as if he were the defaulter”. Rule 160 requires the Commissioner to notify a liquidator in FORM GST DRC-24 where a company is in liquidation. The Explanation to section 79 provides that “person” includes distinct persons under section 25(4) and (5). A demand against one registration of a business can therefore be recovered from another registration of the same business.

The garnishee notice, DRC-13

This is the mode most businesses meet, usually as a notice to their bank. Under section 79(1)© and the text of DRC-13, the person receiving the notice:

• must pay the amount specified, “forthwith upon the money becoming due or being held”, or within the time stated, but not before the money is due
• is treated as paying “under the authority of the person in default”, and the certificate in DRC-14 is “a good and sufficient discharge” of what it owed the defaulter, to that extent
• if it pays the defaulter after receiving the notice, is “personally liable to the Government” up to the lesser of what it paid and the defaulter’s liability
• if it fails to pay, “shall be deemed to be a defaulter” for the amount in the notice
• may show the officer that the money “was not due to the person in default”, or not held for him, and is then not required to pay

The officer may “amend or revoke such notice or extend the time” at any time, under section 79(1)©(iv). Where the notice goes to a bank, post office or insurer, it is not necessary to produce any pass book, deposit receipt or policy before the payment is made.

Attachment and sale

Under rule 147, the officer lists the property, estimates its market value and issues an order of attachment in DRC-16. The order prohibits transfer of the property or any charge on it, and DRC-16 states that any transfer or charge “shall be invalid”. A copy goes to the revenue, transport or other authority to record an encumbrance. For immovable property the order is affixed on it; movable property is seized and held in custody.

The rules then set out the steps and the protections:

• Notice before sale. The auction is notified in DRC-17. The last date for bids, or the auction itself, cannot be “earlier than fifteen days” from that notice, except for perishable or hazardous goods or goods whose custody costs would exceed their value.
• Payment stops the sale. Under rules 144(6) and 147(14), if the defaulter pays the amount and the costs of recovery before the auction notice is issued, the officer “shall cancel the process of auction and release the goods”.
• Claims by others. Under rule 147(8) to (11), a person who claims the property was not the defaulter’s may object. That person must show an interest in, or possession of, the property on the date of attachment. The officer investigates, may postpone the sale, and releases the property, wholly or partly, if the claim is made out.
• Only so much as is needed. Rule 144(1) allows sale of “only so much of the goods as may be required” for the amount due and the cost of recovery.
• No Sunday or holiday sales, and no bidding by officers. These are rules 149 and 148.
• Order of payment from the proceeds. Under rule 154, proceeds go first to the cost of recovery, then to the amount due, then to any other GST dues of the defaulter. Any balance is credited to his electronic cash ledger, or to his bank account if he is not registered.

Debts not secured by a negotiable instrument, shares, and property held by others are attached by a written order in DRC-16 under rule 151. A debtor who has been prohibited from paying the defaulter may pay the officer instead, and that payment “shall be deemed as paid to the defaulter”. A partner’s interest in a firm is charged under rule 153. The other partners may redeem it or buy it.

Paying in instalments: section 80 and rule 158

Section 80 allows the Commissioner, on an application, to “extend the time for payment or allow payment of any amount due under this Act … in monthly instalments not exceeding twenty four”. He must record reasons in writing. Payment is “subject to payment of interest under section 50”.

What can be spread. Any amount due under the Act “other than the amount due as per the liability self-assessed in any return”. Tax a person has declared in GSTR-3B but not paid cannot be put into instalments under this section.

The application. Rule 158(1) requires it to be “filed electronically” in FORM GST DRC-20. The form asks for:

• the demand ID
• the amounts of tax, interest, penalty, fee and others, under each Act
• whether the request is for more time or for instalments, and how many
• the reasons, with documents uploaded
• a verification by the authorised signatory

The decision. The Commissioner “shall call for a report from the jurisdictional officer about the financial ability of the taxable person to pay”. Considering that report and the request, he may issue an order in FORM GST DRC-21 under rule 158(2). The order allows further time, or monthly instalments not exceeding twenty-four, “as he may deem fit”. DRC-21 is also the form in which the application is refused, with reasons.

When the facility is not allowed. Rule 158(3) bars it where:

(a) the taxable person has already defaulted on the payment of any amount under the Act or the Integrated Goods and Services Tax Act, 2017 or the Union Territory Goods and Services Tax Act, 2017 or any of the State Goods and Services Tax Act, 2017, for which the recovery process is on; (b) the taxable person has not been allowed to make payment in instalments in the preceding financial year under the Act or [the other GST Acts]; © the amount for which instalment facility is sought is less than twenty-five thousand rupees.

Clause (b) is quoted as CBIC publishes it. The twenty-five thousand rupee floor is in rule 158(3)© itself; CBIC’s text of the rule records no amendment to it.

Default. The proviso to section 80 is strict:

where there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and shall, without any further notice being served on the person, be liable for recovery.

Interest under section 50 continues to run on the unpaid balance throughout.

What was recommended in October 2026

At its 57th meeting on 8 October 2026, the GST Council recommended two changes that bear on this guide:

• an upper limit of Rs 40 crore (Rs 20 crore each under the CGST and SGST or UTGST Acts) on the pre-deposit for an appeal against a penalty-only order, by amending the provisos to sections 107(6) and 112(8)
• a circular on “various issues relating to payment of pre-deposits”

These are recommended, not yet notified. Until the Act is amended, the provisions described above apply.

Recovery, step by step

1. The date of service of the order (DRC-07) fixes the start of the three months. Unless the Commissioner has directed earlier payment, with recorded reasons, recovery under section 79 is not to begin for three months.
2. A direction for earlier payment specifies the period within which payment is required. Instruction No. 01/2024-GST requires the reasons behind it to be specific and based on evidence.
3. An appellant pays the admitted amount and the pre-deposit. Recovery of the balance is then deemed stayed under section 107(7), and later under section 112(9).
4. Where an amount was paid through DRC-03 towards the demand, an application in DRC-03A has it adjusted against the demand.
5. A third party that receives a DRC-13 is bound to comply, unless it shows the officer that it owes or holds nothing for the defaulter. A payment it makes is acknowledged in DRC-14.
6. On attachment in DRC-16, payment of the amount and costs before the auction notice in DRC-17 stops the sale. A third party claiming the property may object under rule 147(8).
7. Payment over time is applied for in DRC-20 on the portal. The Commissioner decides in DRC-21, after a report on financial ability, for up to twenty-four monthly instalments with interest. Missing one instalment makes the whole balance recoverable at once.

The next guide covers the department’s power of inspection and search under section 67, and the safeguards that govern its use.