The Goods and Services Tax (GST) department possesses wide-ranging enforcement powers, including the ability to temporarily freeze the bank accounts of registered taxpayers during investigations involving alleged tax evasion or fraud. This authority, derived from Section 83 of the Central GST Act, 2017 and Rule 159 of the GST Rules, is intended to be a protective measure—used sparingly and only in exceptional circumstances where government revenue may be at risk. Officials stress that provisional attachment is not meant to be a routine coercive action but a financial safeguard applied when serious irregularities are suspected.
Bank Accounts blocked
According to the GST framework, bank account attachment is most commonly invoked in cases involving fake Input Tax Credit (ITC) claims, issuance of invoices without the actual supply of goods or services, collection of GST but failure to deposit it with the government, detection of shell entities, discrepancies uncovered during audits, or non-cooperation with investigating officers. Such directions are typically issued by the Directorate General of GST Intelligence (DGGI), anti-evasion wings, or jurisdictional GST authorities.
An tax expert explains that the GST law grants the department the right to attach a taxpayer’s property—including bank accounts—when proceedings against the taxpayer indicate potential risks to revenue. “This power is not random or arbitrary. It must be supported by prima facie material showing that provisional attachment is necessary to protect the Revenue’s interest,” he said. In addition to safeguarding dues, attachments may be imposed when authorities believe that tax demands may not be recoverable later, when there is evidence suggesting that a taxpayer or company officials may abscond, or when taxpayers fail to respond to repeated departmental notices.
Taxpayers generally become aware of a freeze through their bank or after failed payment attempts. He notes that, legally, the department must issue a formal attachment order and upload it to the taxpayer’s GST portal, as well as send it to the registered email of the authorised signatory. Banks receive the same order from GST authorities and are obligated to immediately restrict outgoing transactions. The impact is visible through bounced cheques, blocked online transfers or declined debit transactions.
How a frozen account can be released
Once attached, there are several routes available to get a bank account unfrozen. The first step is to respond directly to the notice through the GST portal, clarifying the taxpayer’s position and providing supporting documents such as reconciliations or proof of tax payments. If authorities are satisfied, they issue Form GST DRC-23—an official release order directing the bank to lift the freeze.
Taxpayers may also request partial relief by offering alternative safeguards, such as a bank guarantee, escrow arrangement or partial deposit of the disputed amount. In cases where the attachment appears excessive or unjustified, approaching the High Court remains an option. Courts have routinely intervened when attachments were considered arbitrary or disproportionately harmful to business operations.
Section 83 of the CGST Act provides the legal foundation for such attachments, enabling authorities to freeze property—including bank accounts—if deemed necessary to protect government revenue. Rule 159 lays down procedures for imposing and lifting attachments.
Taxpayers can contest the move by filing objections in Form GST DRC-22A within seven days of receiving the order. Objections supported by evidence—such as corrections of errors, proof of cooperation, or offers of security—strengthen the likelihood of release. If departmental remedies fail, taxpayers can escalate the matter to higher authorities or the High Court through a writ petition.
While GST authorities maintain that provisional bank account attachment is essential for preventing revenue leakage, legal experts emphasise that due process, proportionality and timely communication are critical to ensure that enforcement does not unnecessarily disrupt legitimate business operations.
