SARFAESI vs GST: Your Bank Gets Paid First?

Bombay High Court ruled that a bank's SARFAESI charge on property beats an unregistered GST claim. If you've pledged property as loan collateral, your lender legally recovers first — before even government tax dues.

Here's what happened: Bombay High Court ruled that a bank's SARFAESI-registered charge on secured property takes legal priority over an unregistered GST department claim on the same asset.. The court's reasoning: a government tax charge must also be formally perfected (registered) to override a bank's security interest — an informal or unrecorded claim does not automatically win.. This reaffirms that CERSAI registration of a bank's charge is legally decisive — without it, neither lender nor government can claim priority over a secured asset..

What you should do: Check your loan sanction letter to confirm your lender has registered their charge on CERSAI — you can verify free at cersai.org.in using your property details.. If you run a small business with both a secured loan and GST arrears, prioritise EMI payments — your bank can initiate SARFAESI recovery within 60 days of default, which is faster than most tax recovery timelines.. Consult a CA or legal advisor before assuming GST dues can be settled from property sale proceeds — the bank's registered charge means they get paid out first, leaving potentially nothing for tax authorities or unsecured creditors..

CERSAI registration isn't just paperwork — it's your lender's legal weapon. Check your own property's registered charges at cersai.org.in before taking any new loan against it.

If you're considering settling a loan, our loan settlement guide walks through the process.