Section 76 – Tax collected but not paid to Government
Section 76 of CGST Act, 2017 – Tax Collected but Not Paid to the Government
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Objective of Section 76
Section 76 is a special recovery provision which ensures that any tax collected from recipients is deposited with the Government.
This section applies:
- Irrespective of whether tax was actually payable or not
- Even if tax was collected mistakenly
It prevents unjust enrichment by the supplier.
2. Statutory Provision – Section 76
Section 76(1):
Notwithstanding anything to the contrary contained in this Act,
where a registered person
has collected any amount as tax
but has failed to pay the same to the Government,
the proper officer shall issue a notice
requiring him to show cause
why the said amount should not be paid.
Section 76(2):
The proper officer shall issue an order
within one year
from the date of issue of notice
after considering the representation, if any,
and determine the amount to be paid.
3. Scope of Section 76
Section 76 applies where:
- Any amount is collected as GST, and
- The amount is not deposited with Government
It applies even if:
- GST was wrongly charged
- Supply was exempt or non-taxable
Once collected as tax, payment is mandatory.
4. Difference Between Section 76 and Section 73/74
- Section 76: Tax collected but not paid
- Section 73/74: Tax payable but not paid / short paid
Section 76 operates independently and overrides Sections 73 and 74.
5. Interest and Penalty Implications
Under Section 76:
- Collected amount must be paid
- Interest under Section 50 is applicable
- Penalty may be imposed under Section 76 itself
Penalty can be:
- Equal to the amount collected but not paid
6. Refund to Recipient
If tax was collected wrongly:
- Supplier must first deposit the amount with Government
- Refund to recipient can be claimed only under Section 54
Direct adjustment without deposit is not permitted.
7. Time Limit under Section 76
Key timelines:
- Notice issued for recovery of collected tax
- Order must be passed within 1 year from date of notice
This is a strict statutory limit.
8. No Benefit of Section 73 or 74
Under Section 76:
- No benefit of reduced penalty schemes
- No distinction between fraud and non-fraud
Once tax is collected, liability is absolute.
9. Judicial Principles
Courts have consistently held that:
- Tax collected belongs to the Government
- Retention of collected tax is impermissible
- Section 76 applies even to mistaken collection
Equitable arguments generally fail in Section 76 cases.
10. Practical Scenarios
- GST charged on exempt supplies
- GST collected under wrong head and not paid
- Tax collected but return not filed
- Collection from customer but business closed
11. Related Provisions
- Section 50 – Interest
- Section 54 – Refund
- Section 73 – Demand (non-fraud)
- Section 74 – Demand (fraud)
12. Professional Insight
Section 76 treats GST as a trust money. Once collected from the customer, it must reach the Government. Suppliers should never charge GST unless they are certain of taxability and ready to deposit it on time.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Tax collected from customers carries fiduciary responsibility and strict consequences for non-compliance.
Comments