Section 63 – Assessment of Unregistered Persons

- February 07, 2026

Section 63 of CGST Act, 2017 – Assessment of Unregistered Persons

Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant

1. Objective of Section 63

Section 63 empowers the proper officer to assess tax liability of a person who:

Is liable to be registered under GST, but
Fails to obtain registration, or
Whose registration has been cancelled retrospectively

This provision prevents tax evasion by operating outside the GST registration framework.

2. Statutory Provision – Section 63

Where a taxable person fails to obtain registration even though liable to do so, or whose registration has been cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such person to the best of his judgment for the relevant tax periods, and issue an assessment order:

After giving an opportunity of being heard, and
Within a period of five years from the due date of the annual return for the financial year to which the tax not paid relates

3. Persons Covered under Section 63

The following persons are covered:

Persons liable for registration under Section 22 or 24
Persons carrying on taxable supply without registration
Persons whose registration is cancelled retrospectively

It applies to both deliberate and inadvertent non-registration.

4. Nature of Assessment under Section 63

Assessment under Section 63 is:

Best judgment assessment
Based on available evidence
Not return-based (as no returns are filed)

The officer may rely on:

Statements recorded
E-way bills
Bank statements
Purchase data from recipients
Market intelligence

5. Opportunity of Being Heard

Unlike Section 62, Section 63 mandates:

Issuance of show cause notice
Grant of personal hearing

This ensures compliance with principles of natural justice.

6. Time Limit for Passing Assessment Order

The assessment order must be issued:

Within 5 years from the due date of annual return for the relevant financial year

Orders beyond this period are time-barred.

7. Section 63 vs Section 62

Section 62: Registered person who fails to file returns
Section 63: Person not registered or registration cancelled

Section 63 always requires opportunity of hearing.

8. Consequences of Assessment under Section 63

Tax demand with interest
Penalty under Section 122
Initiation of recovery proceedings
Possible prosecution in serious cases

This section often leads to high litigation.

9. Compliance & Defence Strategy

Apply for registration immediately on detection
Produce documentary evidence of turnover
Challenge arbitrary estimations
Seek benefit of composition or exemptions where applicable

Proper representation can significantly reduce liability.

10. Related Provisions

11. Professional Insight

Section 63 is designed to bring unregistered businesses into the tax net. Early voluntary compliance and factual disclosure can prevent excessive best judgment demands and prolonged litigation.

Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Assessment of unregistered persons may involve penalty and recovery proceedings.

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