A customer, bank or other holder of money can receive a GST recovery notice even though the underlying tax default belongs to someone else. Under section 79(1)(c), the recoverable payment is linked to money due, becoming due, held or subsequently held for the defaulter. Rule 145 uses DRC-13 for the direction and DRC-14 for the payment certificate. Start with the served notice and the actual debt; do not pay the supplier first and assume the tax authority will follow the money. See CGST section 79(1)(c) and rule 145 in ICAI’s 2026 bare-law compilation.
Determine capacity, amount and timing
The notice can reach an existing debtor or a person who will owe or hold money later. Section 79(1)(c)(i) allows the specified time, but not before the money becomes due or is held. Its amount language captures so much as is sufficient to meet the government dues, or the whole of the money where that money is equal to or below those dues. Identify the contractual maturity date, admitted debt, payments already made before service and any genuinely disputed component. A ledger label alone does not establish that all booked amounts are presently payable.
The proper officer can amend or revoke the notice or extend payment time. Obtain a written revised direction where facts change; an informal conversation is weak evidence for releasing a blocked payment. Do not infer that a notice reaches unrelated property, every group company’s bank balance or an invoice the recipient does not actually owe. Equally, an amount not yet due is not necessarily outside the statutory reach.
Personal exposure and the no-money defence
Failure to pay under the notice can make the recipient a defaulter for the specified amount. Separately, after service, discharging a liability to the original defaulter creates personal liability to Government up to the lower of that discharge and the defaulter’s tax, interest and penalty liability. These are distinct consequences: an accounts-payable team should not reduce either to a generic late fee.
Section 79(1)(c)(vii) protects a recipient who proves, to the issuing officer’s satisfaction, that the demanded money was not due or held at service and is not likely to become due or be held. Send contracts, reconciliations and bank evidence promptly. A bare denial, a unilateral credit note or a change of ledger description does not by itself establish that defence. Where only part is not owed, identify and support that part rather than refusing the entire notice.
Close the correct balances
Payment in compliance with the notice, credited to Government, discharges the recipient’s liability to the defaulter to the extent specified in the receipt. Rule 145(2) requires the officer’s DRC-14 certificate showing liability discharged. Match notice, remittance, government credit, receipt and certificate before settling the remaining supplier balance. This is recovery of an existing government due, not GST TDS under section 51, and not the DRC-16 debt-attachment process under rule 151. The illustrations assume valid recoverable dues, a properly served notice, no operative stay and the stated admitted debts; they do not adjudicate the original demand.
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Debt smaller than government dues
DRC-13 seeks recovery against government dues of ₹5,00,000. The recipient presently owes the defaulter ₹1,80,000 and holds no other money for it. The amount available from this debt is ₹1,80,000, leaving government dues of ₹3,20,000 to be recovered elsewhere. Obtain clarification if the notice asks this recipient for more than the established money relationship supports.
Illustrative example 2: Debt larger than government dues
The admitted debt is ₹7,50,000 and the valid notice requires ₹2,40,000. A compliant ₹2,40,000 payment credited to Government leaves ₹5,10,000 of the commercial debt, subject to other lawful restrictions. Preserve DRC-14 so the supplier cannot obtain the same ₹2,40,000 again from the recipient.
Illustrative example 3: Future debt and the specified date
A notice is served on 5 November 2026 concerning an admitted ₹3,00,000 payable on 30 November 2026. The required amount is ₹1,25,000. Section 79’s timing condition does not require payment before the money becomes due or is held. On the assumed valid 30 November payment direction, remit ₹1,25,000 and retain a ₹1,75,000 commercial balance; diarise the real maturity date and seek clarification of any inconsistent earlier demand.
Illustrative example 4: Part-payment after service
After service, a recipient pays ₹90,000 directly to the defaulter despite an outstanding recovery liability of ₹2,00,000. The separate section 79(1)(c)(vi) exposure on this discharge is the lower of ₹90,000 and ₹2,00,000, namely ₹90,000. This is not erased merely because the remaining supplier balance is still large enough for possible recovery.
Illustrative example 5: Discharge exceeds remaining tax liability
Assume the relevant unpaid government liability is ₹60,000 when a post-service payment of ₹1,00,000 is made to the defaulter. The clause (vi) lower-of calculation is ₹60,000. The excess ₹40,000 does not enlarge this particular statutory measure; other notice-compliance consequences must still be assessed separately.
Illustrative example 6: Evidence reduces the debt claimed
A notice refers to ₹4,00,000, but documents establish that ₹1,50,000 was paid before service and only ₹2,50,000 remains due, with no further amount expected. The supported available debt is ₹2,50,000, not ₹4,00,000. Submit the pre-service bank proof and reconciliation, request the appropriate direction and pay as lawfully required. Do not silently treat the earlier payment as a fresh payment made under the notice.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Authenticate service | Notice, issuing officer, reference and actual service date. |
| 2 | Identify the defaulter | Legal identity and the relationship to the recipient’s debt or held money. |
| 3 | Verify recovery status | Underlying dues and any communicated stay, modification or payment. |
| 4 | Freeze risky releases | Accounts-payable flag preventing direct payment after service without review. |
| 5 | Reconcile admitted debt | Contracts, invoices, pre-service payments and evidence for disputed amounts. |
| 6 | Map future maturity | Due dates and whether money is already held on the defaulter’s account. |
| 7 | Compute the recoverable amount | Notice amount compared with supported debt and outstanding dues. |
| 8 | Present a supported response | Particularised no-money or part-debt evidence; written clarification request. |
| 9 | Pay and obtain discharge proof | Government-credit evidence, receipt and DRC-14 certificate. |
| 10 | Release the residual carefully | Supplier reconciliation, notice amendments and retained recovery file. |
Sixteen practitioner FAQs
1. Must the notice recipient be the tax defaulter?
No. Section 79(1)(c) addresses another person who owes or holds, or will owe or hold, money for the defaulter.
2. Which form communicates rule 145 recovery?
DRC-13 is the prescribed notice to the third person.
3. What does DRC-14 prove?
The officer’s certificate identifies the liability discharged by the third person’s payment under the notice.
4. Can future payments be reached?
Yes. The provision covers money that may become due or may subsequently be held, subject to its timing condition.
5. Can payment be required before the debt becomes due?
The specified payment time cannot precede the money becoming due or being held under clause (i).
6. Is the notice automatically limited to one invoice?
Read its wording and the statutory money relationship. Do not assume an invoice-wise boundary where other covered money is held.
7. What if the recipient owes less than the tax dues?
Reconcile the whole available debt and explain the limit with evidence; the statute’s amount language does not create unrelated money.
8. What if the commercial debt is larger?
A compliant recovery payment discharges the commercial liability to the extent established by the government receipt; reconcile the remainder.
9. Can the supplier insist on direct payment after notice?
Paying it can create personal exposure under clause (vi). Escalate the conflict and follow the lawful notice.
10. Is that exposure always the full tax demand?
Clause (vi) uses the lower of the liability discharged to the defaulter and the relevant tax, interest and penalty liability.
11. What happens if the notice itself is ignored?
Clause (iii) can treat the recipient as a defaulter for the notice amount, with consequential recovery exposure.
12. Can an officer change the notice?
The issuing officer may amend or revoke it or extend payment time under clause (iv). Keep the written direction.
13. What supports a no-money response?
Evidence that money was neither due nor held at service and is not likely to become due or be held, to the officer’s satisfaction.
14. Does a bank need the depositor’s passbook before paying?
Clause (ii) removes that documentary prerequisite for a bank, post office or insurer covered by the notice.
15. Is this the same as GST TDS?
No. It is recovery under section 79 and rule 145, not deduction from contract payments under section 51.
16. Can the supplier balance be closed on bank debit alone?
Obtain government-credit and receipt evidence and the DRC-14 certificate, then reconcile the amount actually discharged.
Conclusion
Handle a GST DRC-13 notice with a debt-and-timing reconciliation, preserve the no-money defence, and obtain DRC-14 evidence before closing the supplier balance.