GST

Power of Inspection, Search, and Seizure under GST

Power of Inspection, Search, and Seizure under GST

GST has been incorporated with a view to provide a simple and streamlined tax flow structure. The intention itself provides a legal backing to various sections of the GST Act that allows the enforcement machinery, that means tax officers, to inspect, search, and seize records for ascertaining the payment of tax and prevent tax evasion. In this article, we shall look at inspection, search, and seizure under GST in detail.

What do you mean by inspection under GST?

 An inspection under GST takes place when a joint commissioner or an officer of higher rank may have reasons to believe that to evade tax, a person has committed the following:

  • Has suppressed any transaction of supply;
  • Has suppressed stock in hand;
  • Has claimed input tax credit in excess;
  • Violated any of the provisions;
  • A transporter or the owner/operator of a warehouse has goods that have escaped the payment of tax or has kept accounts and or goods in a way to evade tax.

Then he may authorize an officer to inspect the place of businesses of the following:

What is “reasons to believe”?

This means having knowledge of facts that would make any reasonable person to reasonably conclude the same. According to the Indian Penal Code, a person is said to have a reason to believe a thing in case he has sufficient reason to believe that thing but not otherwise.

This term is a determination based upon an intelligent examination as well as evaluation.  It is different from purely subjective consideration. It is based upon facts instead of the interpretation of facts.

What do you mean by Search under GST?

Search under GST refers to an attempt to find something. Search, in legal terms, means an action of the government official to go and look through or examine a place, person, object, etc., carefully to find something concealed or to discover any evidence of a crime. It may be noted that a search can only be conducted under proper and valid authority provided under law.

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Who can order for search under GST, and at what time?

Based upon the inspection results or on any other reason, the Joint Commissioner or a superior officer may order for search in case such officer has reasons to believe that:

  • There are goods that are liable to be confiscated;
  • Any document or book or any other thing that will be useful during the proceedings and that they are hidden somewhere.

On the occurrence of the above mentioned situation, such an officer, on his own or by an authorized officer, would search as well as seize the goods and documents.

What do you mean by Seizure under GST?

This term is not specifically defined under GST. In legal terms, seizure refers to an act where something or someone is taken over by force through a legal process. For e.g., the seizure of evidence found at the crime scene. It implies taking possession forcibly against the wishes of the owner.

Seizure under GST should not be confused with detention. Detention is not allowing the owner any access to seized goods without a legal order or notice. However, the ownership, as well as the goods’ possessions, remains with the owner. In the case of a Seizure, it means taking over or actual possession of the goods from the department. A seizure can only be made after an inquiry/investigation that the goods are liable to be confiscated.

What is the Procedure for Seizure under GST?

The proper officer shall issue an order of seizure in Form GST INS-02. The officer who is authorized to search, shall have the authority to seal the door of the premises. He may also break the door of any premises in case the access is denied.

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 In cases where it is not possible to seize goods, the proper officer shall order the owner not to remove the goods without the officer’s permission of the officer. The officer may issue the prohibition order in Form GST INS-03[1].

How long can books/documents remain with the officer?

The officer may keep books/documents as long as required for examination and enquiry purposes. Books that are not relevant with the issue of notice shall be returned within 30 days.

The seized goods can be released on a provisional basis against a bond for the goods value in Form GST INS-04. The owner is also required to furnish a security as a bank guarantee for the amount due. 

What happens after Seizure under GST?

Once a seizure under GST takes place, then:

  • The person whose document has been seized may make copies in the officer’s presence only.
  • In case notice is issued in six months after seizing goods, they would be returned.
  • The government may issue hazardous or perishable goods that can be disposed off as soon as they are seized.
  • The seized goods shall be listed properly by the officer.

It may be noted that the provisions of the Code of Criminal Procedure shall apply to searches and seizures under GST.

Bond and Security for release of the seized goods

It may be noted that seized goods can be released, but on a provisional basis, on the execution of a bond for the value of goods in Form GST INS-04 and on furnishing a security bank guarantee for the amount due. In case the person to whom the goods were released fails to produce the goods at the appointed place and date as prescribed by the officer, the security will be encashed and adjusted against tax, interest, and penalty.

Conclusion

The power of inspection, search, and seizure under GST is a vital power that proves to be an effective tool to ascertain tax payment. It has also helped in preventing tax evasion by taxpayers. Therefore, its importance can never be undermined. However, this power of inspection, search, and seizure under GST should never be abused by officers.

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Frequently Asked Questions

  1. What is inspection under section 67 of the CGST Act?

    When an authorized person is given the power to inspect a taxable person, business place or warehouse, it is inspected under section 67 of the CGST Act.

  2. What is the section of search and Seizure under GST?

    Section 67 is the section for search and Seizure under GST.

  3. What is Section 132 of the GST law?

    Section 132 of the GST law is about the punishments of certain offences.

  4. What are the powers of GST authorities in connection with the inspection, search, and Seizure?

    An officer conducting a search has the authority to look for and seize any items that, in his judgement, will be helpful or relevant to any proceedings brought under the GST Law.

  5. What is the difference between Seizure and detention in GST?

    In detention, the actual possession of the goods is not taken; only access to it is denied. While in Seizure, the actual possession is taken of goods.

  6. What is the penalty for Seizure under GST?

    A fine is to be paid of 100% of the tax, which is payable on the goods for Seizure under GST.

  7. How do I release seized goods in GST?

    Fill out Form GST INS-04 to execute a bond for the value of the goods and provide a bank guarantee as Security for the amount of applicable tax, interest, and penalty that must be paid.

Read our article: All you need to know about Accounts and Records Under GST

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