Can GST dues be paid in instalments?

Ashish M. Shaji

16 Mar, 2023

Due to the Covid-19 pandemic, many businesses were hit hard by its impact. Many were forced to shut down, and others struggled to clear their dues. This goes the same in case of GST dues as well. Businesses failed to clear their GST dues on account of the impact of the pandemic therefore, it gives rise to the question of whether GST dues can be paid in instalments. This article answers this query with a relevant case law.

Provision of paying GST dues in Instalments

In case where a taxpayer is unable to pay all GST dues in a lump sum amount or within the prescribed time period, then he can file an application to the commissioner requesting to pay the same in instalments.

The commissioner can extend the due date for payment or he can permit the taxpayer to pay the dues in instalments. The reasons for acceptance or rejection of such an application should be provided in writing.

Essential points to know while paying dues in instalments

The following points should be noted by a taxpayer when paying in instalments:

• Instalments are payable every month;
• Maximum of 24 instalments are permitted, which means the time for payment can be extended for a maximum of two years;
• Interest at the rate of 18% should be paid along with the instalment;
• The instalment should be paid on time, and it is worth mentioning that in case of a single default, instalments shall cease, and the outstanding balance shall be due on that date. No notice will be issued for the sane.

Paying GST dues in Instalments: Case Law

PAZHAYIDOM Food Ventures Pvt. Ltd vs. Superintendent Commercial taxes (CGST)

Facts of the case-

The petitioner in this case (PAZHAYIDOM Food Ventures Pvt. Ltd) is a private limited company which is registered under the GST Act, 2017^[1] as a service provider and has admitted tax arrears for November 2018 to March 2019 of 4 lakh rupees which it sought to pay in monthly instalments along with the applicable interest and late fees. This was due to the fact that the business of the petitioner was severely affected due to the Covid-19 pandemic therefore, the petitioner was not in a stable financial position to pay the tax arrears.

Respondents Contention-

However, respondents argued that there is no such provision under GST where monthly instalments of tax payments is allowed with interest and late fees. Further, they stated that this would be against the GST provisions, and therefore the relief sought by the petitioner can’t be granted in view of the express provisions of the statute.

The Ruling of Kerala High Court-

The Kerala High Court stated that the petitioner has agreed to the arrears of taxes, and it is not disputing liability of tax or quantum thereof. The petitioner has only sought for monthly instalment of the payment with payment of applicable interest and late fees. Due to the Covid-19 pandemic, the petitioner’s business has taken aback, and there is no demand pending against the petitioner as on date.

Therefore the Kerala HC permitted the monthly instalment of payment of tax from 25^th August 2020 to 25^th March 2021 along with applicable interest and late fees. The Kerala HC also ruled that in case the petitioner defaults in any instalment payment, then the respondent can start with the recovery proceedings as provided under GST.

Recovery of GST dues

As per Section 78 of the Central Goods and Services Tax Act, any amount payable by a taxable person in pursuance of the order passed should be paid within 3 months from the date of serving such order. In case it’s not paid, then recovery proceedings can be initiated by the department.

Section 79 of the Act provides for various ways of recovering tax by the proper officer. They are as follows:

• The proper officer may deduct the amount from other amount payable to such person which is under the control of the officer;
• The proper officer may detain or sell any goods of such person that are under his control;
• The proper officer may recover from other person from whom money is due or may become due to such person or who has or may hold money for or on account of such person to pay to the government;
• The officer may detain any property of such person and detain it until the amount payable is paid. In case the dues are not cleared in 30 days, such property shall be sold to recover the amount payable;
• The officer may through an application to the magistrate who in turn will proceed to recover the amount as if it were a fine imposed by such officer;
• The proper officer can prepare a certificate certifying the amount due from such person and send it to the collector of the relevant district and the collector shall proceed to recover the amount from such person as if it were an arrear of land revenue; and
•  The proper officer of the state tax or union tax during the course of recovery of the said tax arrears may recover unpaid amount of tax payable to the government by such person. The amount shall be recovered as if it was arrear of SGST/UTGST and credit the amount recovered to the Central Government’s account.

Conclusion

It is worth mentioning here that the option of paying in instalments is not allowed for dues under self-assessment. Therefore any tax under self-assessment should be paid all in one go.  The option to pay GST dues in instalments is available for any liability calculated by tax authorities during provisional/final assessments etc. 

Read our article: All you need to know about Accounts and Records Under GST