Section 78 – Initiation of Recovery Proceedings
Section 78 of CGST Act, 2017 – Initiation of Recovery Proceedings
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Objective of Section 78
Section 78 governs the time from which recovery proceedings can be initiated by the GST department after a tax demand is confirmed.
This section balances:
- Revenue interest of the Government, and
- Reasonable time to the taxpayer to make payment
2. Statutory Provision – Section 78
Section 78:
Any amount payable by a taxable person
in pursuance of an order passed under this Act
shall be paid by such person
within a period of three months
from the date of service of such order
failing which recovery proceedings
shall be initiated:
Provided that where the proper officer considers it expedient in the interest of revenue, he may require the taxable person to make such payment within such period as may be specified by him in the order.
3. Normal Rule – 3 Months’ Time
As a general rule:
- Taxpayer gets 3 months from the date of service of order
- To pay tax, interest and penalty
- No recovery action during this period
This applies to orders passed under:
- Section 73
- Section 74
- Other adjudication provisions
4. Exception – Early Recovery in Revenue Interest
The proviso to Section 78 allows:
- Shorter payment period than 3 months
- Only if reasons are recorded
- Only in interest of revenue
Examples where early recovery may be ordered:
- Risk of taxpayer absconding
- Business closure or liquidation
- Serious fraud cases
Mechanical reduction of time is illegal.
5. Meaning of “Service of Order”
The 3-month period is counted from:
- Date of valid service of order
- As per Section 169 (modes of service)
If service is defective, recovery proceedings can be challenged.
6. Section 78 and Appeal Rights
Section 78 does not override:
- Right to file appeal
- Stay of recovery upon pre-deposit
Once appeal is filed with prescribed pre-deposit:
- Recovery is deemed to be stayed
Relevant provision:
7. Section 78 Read with Recovery Provisions
If payment is not made within allowed time, recovery may be initiated under:
Recovery actions include:
- Attachment of bank accounts
- Garnishee proceedings
- Sale of movable / immovable property
8. Judicial Principles on Section 78
Courts have consistently held that:
- 3 months’ time is the rule, not exception
- Early recovery must be supported by reasons
- Appeal rights cannot be frustrated by coercive recovery
Unreasoned invocation of proviso is unsustainable.
9. Practical Compliance Strategy
- Note date of service of order carefully
- Decide appeal vs payment within limitation
- Seek stay by filing appeal with pre-deposit
- Challenge premature recovery action immediately
10. Section 78 vs Section 79
- Section 78: When recovery can start
- Section 79: How recovery is carried out
Section 78 is the gateway to recovery.
11. Related Provisions
- Section 73 – Non-fraud demand
- Section 74 – Fraud demand
- Section 79 – Recovery of tax
- Section 107 – Appeals
12. Professional Insight
Section 78 is the taxpayer’s breathing space. Recovery without respecting this section or appeal rights is legally vulnerable. Immediate action at this stage often decides the fate of GST litigation.
Disclaimer: This article is prepared based on the CGST Act, Rules, notifications and prevailing legal position as applicable till date. Recovery actions must follow due process and statutory timelines.
Comments