Section 81 – Recovery of Tax in Certain Special Cases

-

Section 81 of CGST Act, 2017 – Transfer of Property to be Void in Certain Cases

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

1. Objective of Section 81

Section 81 is an anti-evasion and revenue protection provision. Its purpose is to prevent taxpayers from transferring or disposing of property with the intention of defeating recovery of GST dues.

It ensures that Government dues are not frustrated by artificial or sham transfers.

2. Statutory Provision – Section 81

Section 81:
Where a person, after any amount has become due from him under this Act, creates a charge on or parts with the property belonging to him or transfers the property with the intention of defrauding the Government revenue, such charge or transfer shall be void as against any claim in respect of such tax or other sum payable.

3. When Does Section 81 Apply?

Section 81 applies only when all conditions below are satisfied:

  • GST dues have already become payable
  • Property belongs to the taxable person
  • Property is transferred or charged
  • Intention is to defraud Government revenue

Mere transfer is not enough — intent to defraud is essential.

4. Meaning of “Transfer of Property”

Transfer may include:

  • Sale
  • Gift
  • Mortgage
  • Creation of charge or lien
  • Any arrangement reducing value of recoverable assets

Both movable and immovable property are covered.

5. Effect of Declaring Transfer Void

If Section 81 applies:

  • The transfer is ignored for GST recovery purposes
  • Department can proceed against the property
  • Transferee cannot claim priority over Government dues

The transfer is void only against Government claim, not automatically void for all purposes.

6. Section 81 vs Provisional Attachment

  • Section 81: Applies after dues become payable
  • Section 83 : Provisional attachment during proceedings

Section 81 is a post-liability safeguard, while Section 83 is a preventive measure.

7. Burden of Proof

The burden lies on the department to establish:

  • Existence of tax dues
  • Timing of transfer after dues arose
  • Intent to defraud revenue

Genuine commercial transactions without mala fide intention are not hit by Section 81.

8. Practical Examples

  • Transfer of land to relative after GST demand order
  • Creation of mortgage to avoid bank account attachment
  • Sale of business assets after recovery notice

Such transactions may be examined under Section 81.

9. Judicial Principles

Courts have held that:

  • Section 81 is not automatic
  • Fraudulent intent must be proved
  • Bona fide purchasers for value may be protected

Mechanical invocation of Section 81 is unsustainable.

10. Related Provisions

11. Professional Insight

Section 81 strikes at colourable transactions designed to defeat GST recovery. While genuine business restructuring is allowed, any transfer after tax dues arise must be commercially justified and well documented.

Disclaimer: This article is prepared based on the CGST Act, Rules, notifications and prevailing legal position as applicable till date. Application of Section 81 depends on facts, intent and evidentiary support.

Comments

Post a Comment

Popular posts from this blog

CGST ACT, 2017 (Updated As on 31st Aug 2021)

-
Image
  AS ON 31.08.2021 THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 (12 OF 2017) AS AMENDED BY THE:- ·         THE CENTRAL GOODS AND SERVICES TAX (EXTENSION TO JAMMU AND KASHMIR) ACT, 2017 (NO. 26 OF 2017); ·         THE FINANCE ACT, 2018 (NO. 13 OF 2018); ·         THE CENTRAL GOODS AND SERVICES TAX (AMENDMENT) ACT, 2018 (NO. 31 OF 2018); ·         THE FINANCE (NO. 2) ACT, 2019 (NO. 23 OF 2019); ·         THE FINANCE ACT, 2020 (NO. 12 OF 2020); ·         THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020; ·         THE FINANCE ACT, 2021 (NO. 13 OF 2021). Note: This updated version of the Central Goods and Services Tax Act, 2017 as amend...
Read more

Rate of GST on Works Contract Services w.e.f. 01 Jan 2022

-
  W.e.f. 01 st Jan 2022 the rate of GST on works contract services for specific contract provided to government authority and government entities will be changed.   Tax Rate On or Before 31.12.2021   1.       For Works Mentioned In Item(iii) And (vi) GST Rate Was 12% For Providing Services To Central Government/State Government/Union Territory/Local Authority/ Governmental Authority/ Govt Entity And 18% For Providing Services To Others.   2.       For Works Mentioned In Item (iv) ,(v) And (viii) GST Rate Was 12% For Providing Services To Any Body.     3.       For Works Mentioned In Item (vii) GST Rate Was 5% For Providing Services To Central Government/State Government/Local Authority/ Governmental Authority/ Govt Entity And 18% For Providing Services To Other.   The same is notified by the government vide notification no 11/2017, 20/2017, 24/2017 and 3...
Read more

Input Tax Credit Cannot Be Denied to Bona Fide Buyer Due to Supplier’s Bogus Billing & Retrospective GST Registration Cancellation – Legal Position, Case Laws & Remedies

-
Input Tax Credit Cannot Be Denied to Bona Fide Buyer Due to Supplier’s Bogus Billing & Retrospective GST Registration Cancellation – Legal Position, Case Laws & Remedies Introduction A recurring and high-stakes dispute under GST is denial of Input Tax Credit (ITC) to a genuine recipient merely because the supplier’s GST registration is cancelled retrospectively on allegations of bogus billing / fake invoicing. In many cases: The recipient purchased goods or availed services in the normal course of business Full payment including GST was made through banking channels ITC is reflected in GSTR-2A / GSTR-2B Later, the supplier’s registration is cancelled ab initio alleging fake billing The department issues a Show Cause Notice (SCN) proposing ITC reversal, interest and penalty This article explains: What the CGST Act, 2017 and Rules actually provide Whether ITC can be denied to a bona fide purchaser Supreme Court and High Court jurisprudence (in favour and against) Action steps to ...
Read more