Indirect Tax Laws · Demands and Recovery

Provisional Attachment and Special Recovery Provisions under GST

Updated 5 October 2026 · Fact-checked

These provisions protect GST dues. Dues are a first charge on the defaulter's property, subject to the Insolvency and Bankruptcy Code. The Commissioner can provisionally attach property during pending proceedings for up to one year. A transferee of a business is jointly liable with the transferor. Dues can also be recovered in another state.

Understand Provisional Attachment and Special Recovery Provisions

GST is a government dues. If a person can sell assets, move money or hand over the business before the department recovers, the revenue is lost. The Act therefore adds special protections beyond the normal recovery steps.

First, tax, interest and penalty payable to the Government are a first charge on the property of the taxable person or other person liable (section 82). This operates notwithstanding other laws, except as the Insolvency and Bankruptcy Code, 2016 provides. A private lender's charge does not automatically rank ahead of the tax dues.

Second, provisional attachment (section 83). While proceedings under section 62, 63, 64, 67, 73, 74 or 122 are pending, the Commissioner may attach the taxpayer's property, including a bank account, by a written order, if he forms the opinion that it is necessary to protect the interest of revenue. The attachment lapses after one year from the date of the order. The taxpayer can file an objection under Rule 159 of the CGST Rules, and the Commissioner must consider it after giving the taxpayer an opportunity of being heard.

Third, liability in special cases. If a taxable person transfers the business in whole or in part, by sale, gift, lease, leave and licence, hire or any other manner, the transferor and the transferee are jointly and severally liable for dues up to the date of transfer (section 85). This applies whether the dues were determined before the transfer or later. For a part transfer, the liability is to the extent of the part transferred. The Act has similar provisions for agents and principals, amalgamation, liquidation, directors, partners, guardians and trustees, and for death of a proprietor or dissolution of a firm.

Fourth, recovery rules (section 79). Under section 79(4)(c), if the defaulter has property in another state or Union territory, the proper officer sends a certificate of the dues to the proper officer of that state or Union territory, who recovers it. Recovery proceedings that have started do not need to be restarted. Under section 79(2) and (3), where the demand is modified in appeal, revision or other proceedings, recovery continues for the modified amount. Recovery ends only if the demand is set aside in full.

Key rules to remember

First charge on property: Tax + interest + penalty due to Government = first charge on defaulter's property (save as the Insolvency and Bankruptcy Code, 2016 provides); Section 82. It overrides other laws, so state the exception for the IBC.
Provisional attachment conditions: Proceedings pending under section 62, 63, 64, 67, 73, 74 or 122 + Commissioner's opinion that revenue needs protection + written order → property (including bank account) attached; Section 83. Cite the proceedings, the opinion and the written order in your answer. The objection and hearing are under Rule 159 of the CGST Rules.
Validity of provisional attachment: Lapses on expiry of 1 year from the date of the order; The department can attach again only through a fresh order. Do not say it continues until the demand is final.
Transfer of business: Transferor and transferee are jointly and severally liable for dues up to the date of transfer; part transfer → to the extent of the part transferred; Section 85. It covers sale, gift, lease, leave and licence, hire or any other manner. It applies to dues determined before or after the transfer.
Recovery outside the state: Property in another state or Union territory → certificate of dues to the proper officer of that state (section 79(4)(c)); demand modified in appeal or revision → recovery continues for the modified amount (section 79(2) and (3)); Use section 79(4)(c) where the defaulter's property is outside the state of the demand. If the demand is modified, recovery continues for the modified amount and ends only if the demand is set aside in full.

How to solve Provisional Attachment and Special Recovery Provisions questions

Use this order for any case question on special liability, attachment or recovery.

1Identify the person with the dues and the stage: is a demand pending, finalised or unpaid, or has the business been transferred?
2Identify the provision involved: first charge, provisional attachment, transfer of business, other special liability, or recovery in another state.
3List the conditions and check them against the facts: pending proceedings, the Commissioner's opinion and a written order for attachment; or a transfer by sale, gift, lease or other disposal for section 85.
4Fix the extent and the period: dues up to the date of transfer, whole or part of the business, and the one-year validity of attachment.
5Check for exceptions and priorities, such as the Insolvency and Bankruptcy Code, 2016 over the first charge.
6Compute the amount each person is liable for, if numbers are given, and state whether liability is joint and several.
7Conclude in provision-facts-conclusion form, naming the person liable and the action open to the department.

Quickest way: Trigger, person, extent

When to use it: Use this in the exam for MCQs and short case scenarios when time is tight.

Trigger: find the word in the facts that sets off the provision, such as pending proceedings, transfer of business or defaulter in another state.
Person: name who is liable or affected, such as the transferor and transferee together, or the taxpayer whose bank account is attached.
Extent: whole or part of the business, dues up to transfer date, and the one-year attachment limit.
Exception: check for the Insolvency and Bankruptcy Code, 2016 and for the taxpayer's right to object and be heard under Rule 159.

Common mistakes in Provisional Attachment and Special Recovery Provisions

Saying only the transferee is liable after a business transfer.
Students think liability moves to the new owner along with the business.
Fix: State that the transferor and transferee are jointly and severally liable, so the department can recover from either one.
Making the transferee liable for dues arising after the transfer date.
Students read section 85 as covering all dues of the business.
Fix: The section covers dues up to the time of transfer. The transferee pays tax on its own supplies after the transfer in its own right.
Ignoring part transfer and charging the transferee the full dues.
Students stop reading at 'transfers business' and miss 'in whole or in part'.
Fix: In a part transfer, limit the transferee's liability to the extent of the part transferred.
Saying the first charge always beats every other claim.
Students remember 'notwithstanding any other law' and miss the exception.
Fix: Add 'save as otherwise provided in the Insolvency and Bankruptcy Code, 2016'.
Allowing provisional attachment without pending proceedings or without a written order.
Students treat attachment as a general recovery tool.
Fix: Attachment protects revenue during pending proceedings. It needs the Commissioner's opinion and a written order, and it ends after one year.
Saying the department must restart recovery if the demand is reduced in appeal.
Students confuse a modified demand with a cancelled one.
Fix: Recovery does not restart. Under section 79(2) and (3) it continues for the modified amount. It ends only if the demand is set aside in full.

Worked examples

Example 1

Ravi Traders, a registered dealer, sold its entire business to Meena Enterprises on 1 October 2026. In January 2027 a show cause notice for 2025-26 was finalised and tax and interest of ₹6,00,000 was demanded for the period before 1 October 2026. Ravi Traders says it has no business left and refuses to pay. Who is liable?

Show the solution

Provision: if a taxable person transfers the business in whole or in part, by sale, gift, lease or any other manner, the transferor and the transferee are jointly and severally liable.
Facts: the whole business was sold on 1 October 2026, and the dues relate to the period before that date.
The dues were determined after the transfer. This does not matter, as the rule covers dues whether determined before the transfer or subsequently.
Ravi Traders cannot escape liability by saying it has no business left, because its own liability continues.
The department can recover the ₹6,00,000 from Ravi Traders, from Meena Enterprises, or from both, until it is fully paid.

Answer: Ravi Traders and Meena Enterprises are jointly and severally liable for the ₹6,00,000. The department can recover the full amount from either one. Meena Enterprises is not liable for tax on supplies made after 1 October 2026 under this rule.

Example 2

A section 74 proceeding is pending against Kiran Metals. On 10 June 2026 the Commissioner, believing that the revenue might be lost, passes a written order attaching its current bank account. Kiran Metals objects on 14 June 2026. Examine the validity of the attachment and its duration.

Show the solution

Provision: section 83 allows the Commissioner to attach property, including a bank account, while proceedings under section 62, 63, 64, 67, 73, 74 or 122 are pending, to protect revenue.
Conditions: a section 74 proceeding is pending, the Commissioner has formed an opinion on revenue protection, and a written order has been passed. All three are present.
Bank account: it is within the meaning of property that may be attached.
Objection: under Rule 159 of the CGST Rules the taxpayer may object, and the Commissioner must consider the objection after giving an opportunity of being heard. Kiran Metals' objection must therefore be considered.
Duration: the attachment ceases to have effect after one year from the date of the order, that is, on expiry of one year from 10 June 2026, unless it is released earlier.
If the demand is not recovered during that time, the department must use the normal recovery modes. Tax dues remain a first charge on the property of Kiran Metals, subject to the IBC exception.

Answer: The attachment is valid on the facts. It lapses on expiry of one year from 10 June 2026 or on earlier release. Kiran Metals' objection must be heard under Rule 159, and the order is not invalid merely because an objection is filed.

Exam tips

For case-scenario MCQs, locate the trigger first. 'Sold the business' points to section 85, 'proceedings pending' to section 83, and 'unpaid tax on property' to section 82.
Write the one-year limit and the written order in every answer on provisional attachment. These are easy marks.
In a part-transfer problem, split the dues between the part transferred and the rest, and fix the transferee's liability on the transferred part.
Use the form: provision, facts, conclusion. Name who is liable and whether the liability is joint and several.
Mention the Insolvency and Bankruptcy Code, 2016 whenever you discuss priority of tax dues.

Practice questions from Demands and Recovery

Provisional Attachment and Special Recovery Provisions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalAttachment, Adjudication and Confiscation

Provisional Attachment and Special Recovery Provisions: frequently asked questions

Is the transferee of a business liable for GST dues of the transferor?

Yes. If the business is transferred in whole or in part by sale, gift, lease, leave and licence, hire or any other manner, the transferor and transferee are jointly and severally liable. The liability covers dues up to the date of transfer and is limited to the extent of the part transferred in a part transfer.

What does 'first charge on property' mean under section 82 CGST?

It means GST dues, including tax, interest and penalty, rank ahead of other claims on the defaulter's property. The rule applies notwithstanding other laws, except as the Insolvency and Bankruptcy Code, 2016 provides.

For how long can a provisional attachment last?

A provisional attachment under section 83 lapses after one year from the date of the order. The taxpayer can object under Rule 159 of the CGST Rules, and the attachment may end earlier if it is released.

Can GST be recovered from a person in another state?

Yes. Under section 79(4)(c), if the defaulter has property in another state or Union territory, the proper officer sends a certificate of the dues to the proper officer there, who recovers them. If the demand is later modified, recovery continues for the modified amount under section 79(2) and (3), and it ends only if the demand is set aside in full.