Section 76: Tax Collected but Not Paid, and the One-Year Clock

Section 76 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

An amount collected as tax belongs to the Government from the moment it is collected. Section 76 says so in the strongest terms in the Act, and it does not care whether the supply was taxable at all.

Section 76(1): notwithstanding anything to the contrary in any order or direction of any Appellate Authority, Appellate Tribunal or court, or in any other provision of the Act, rules or any other law, every person who has collected from any other person any amount as representing the tax under the Act and has not paid it to the Government shall forthwith pay it, irrespective of whether the supplies in respect of which such amount was collected are taxable or not. 76(2): a show cause notice for the amount and a penalty equivalent to that amount. 76(4): interest under s.50 from the date of collection. 76(6): the order shall issue within one year from the date of the notice.

The three features that make it unusual

1. The non obstante clause is exceptionally wide. It overrides orders and directions of appellate authorities, the Tribunal and courts, other provisions of the Act and rules, and any other law in force. Nothing else in Chapter XV is drafted this broadly.

2. Taxability is irrelevant. "Irrespective of whether the supplies in respect of which such amount was collected are taxable or not."

So the section catches the exempt supplier who charged tax, the person outside the levy who collected it, and the supplier who charged 18% where 5% applied — the excess in that last case being an amount collected as representing tax and not paid over.

3. The obligation is "forthwith". Not by a due date, not with the next return. The moment an amount is collected as tax and not paid over, it is payable.

The procedure

76(2) — where the amount has not been paid, the proper officer may serve a notice requiring the person to show cause why the amount should not be paid to the Government and why a penalty equivalent to the amount specified in the notice should not be imposed.

76(3) — the officer shall, after considering the representation, determine the amount due and the person shall pay it.

76(5) — an opportunity of hearing shall be granted where a request is received in writing.

76(6) — the officer shall issue an order within one year from the date of issue of the notice.

76(7) — where the issuance of the order is stayed by a court or the Appellate Tribunal, the period of the stay is excluded from the one year.

76(8) — the officer, in his order, shall set out the relevant facts and the basis of his decision.

Rule 142 applies: the notice is summarised in DRC-01, the representation is in DRC-06 under Rule 142(4), and the order is summarised in DRC-07. Rule 142 →

The penalty is 100%, and there is no concessional window

Section 76(2) contemplates a penalty equivalent to the amount specified in the notice.

Unlike s.74A, there is no pre-notice payment window and no sixty-day window reducing the penalty. Sections 73(5), 74(5) and 74A(8)/(9) operate on their own sections; s.76 has no equivalent.

The only real mitigation is to pay before a notice issues. The obligation under s.76(1) is to pay forthwith; where an amount is identified and paid over before any notice, there is nothing for a s.76(2) notice to be issued about. Once the notice issues, the 100% penalty is in play.

So the operational rule is: any amount identified as collected as tax and not paid should be paid immediately, with interest, and intimated in writing — not held pending a view on whether the supply was taxable, because taxability is irrelevant under s.76(1).

Interest runs from collection

76(4): the person shall, in addition to the amount, be liable to pay interest at the rate specified under s.50 from the date such amount was collected to the date it is paid to the Government.

Note the start date. Not the due date of the return, not the date of the order — the date of collection.

For an amount collected over several years, that produces a materially larger interest figure than a s.50 computation from return due dates would. The interest calculation should be checked invoice by invoice against actual collection dates.

What happens to the money

The section then does something unusual: it traces the amount to the person who actually bore it.

76(9) — the amount paid to the Government under (1) or (3) shall be adjusted against the tax payable, if any, by the person in relation to the supplies concerned.

So where the supply was taxable and the tax was payable anyway, the amount paid under s.76 discharges that liability. There is no double payment.

76(10) — where a surplus is left after that adjustment, it shall be either credited to the Fund — the Consumer Welfare Fund — or refunded to the person who has borne the incidence of the amount.

76(11) — the person who has borne the incidence may apply for refund in accordance with s.54.

The logic is unjust enrichment: the Government does not keep money that was never tax, but nor does the collector get it back. It goes to the person who paid it, or to the Fund. Section 54(8) and unjust enrichment → Consumer Welfare Fund →

Where section 76 typically bites

• An exempt or nil-rated supply invoiced with tax, which is then not reported or paid.
• A rate error in the customer's favour reversed too late — 18% charged and collected, 5% paid over.
• A composition dealer collecting tax, which s.10(4) forbids.
• Tax charged on a transaction that is not a supply at all — a recovery, a deposit, a damages claim — and retained.
• Amounts described as "GST" on a document by a person not registered, which also engages s.32. Section 32 bar →
• Cancelled or credit-noted invoices where the tax was collected from the customer and the credit note was taken without refunding it.

That last one is the most common and the least noticed: a credit note reduces the supplier's liability, but only where the recipient's amount has been refunded or adjusted. Taking the credit while keeping the money leaves an amount collected as tax and not paid over.

Key takeaways

• Section 76 applies to any amount collected as representing tax and not paid over, whether or not the supply was taxable.
• The obligation is to pay forthwith; the non obstante clause overrides orders, other provisions and other laws.
• The penalty is equal to the amount, with no concessional windows.
• Interest under s.50 runs from the date of collection.
• The order must issue within one year of the notice, excluding any period of stay.
• Any surplus goes to the Consumer Welfare Fund or is refunded to the person who bore the incidence under s.54.

Read next

• Rule 142: The DRC Forms From 01A to 08
• Collecting Tax on an Exempt Supply: The Section 32 Bar
• Section 54(8): Unjust Enrichment and the Exceptions
• Consumer Welfare Fund: Sections 57 and 58

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition).