Under GST law, tax to be first charge on property except under IBC

Yes, under the Goods and Services Tax (GST) law, the tax due is treated as the first charge on the property. This means that in case of default in payment of GST, the tax authorities have the power to attach and sell the assets of the defaulting taxpayer to recover the outstanding tax amount.

However, this rule does not apply to companies undergoing insolvency resolution under the Insolvency and Bankruptcy Code (IBC). In case of such companies, the proceeds from the sale of assets are first used to pay the resolution process costs, followed by the dues of secured creditors. The GST dues are treated as operational debts and are ranked lower in priority compared to secured creditors.

It is important for taxpayers to ensure timely and correct payment of GST to avoid any penal consequences and to maintain compliance with the GST law.

Under GST law, tax to be first charge on property except under IBC FAQs

Here are some frequently asked questions (FAQs) regarding the rule that tax is treated as the first charge on property under GST law, except under IBC:

1. What is meant by the "first charge" on property under GST law?

The "first charge" means that the tax authorities have the first right to recover any unpaid tax from the assets of the defaulting taxpayer. This means that in case of default, the assets can be attached and sold to recover the tax dues.

2. Does this rule apply to all taxes under GST?

Yes, this rule applies to all taxes, including Integrated Goods and Services Tax (IGST), Central Goods and Services Tax (CGST), and State Goods and Services Tax (SGST).

3. Are there any exceptions to this rule?

Yes, the rule does not apply to companies undergoing insolvency resolution under the Insolvency and Bankruptcy Code (IBC). In such cases, the priority of dues is determined by the IBC and the GST dues are ranked lower in priority compared to secured creditors.

4. What happens if the assets are not sufficient to cover the tax dues?

In case the assets are not sufficient to cover the tax dues, the tax authorities can initiate recovery proceedings against the directors or other authorized signatories of the defaulting taxpayer.

5. Can the defaulting taxpayer challenge the attachment of assets?

Yes, the defaulting taxpayer can challenge the attachment of assets by filing an appeal with the appropriate forum. However, the appeal does not stay the recovery proceedings and the tax authorities can continue with the recovery process.

It is important for taxpayers to ensure timely and correct payment of GST to avoid any penal consequences and to maintain compliance with the GST law.