“Explore the provisions of Section 67(1) of the CGST Act, 2017, providing insights into the power of inspection, search, and seizure by authorized GST officials. Learn about the conditions and criteria under which such powers can be invoked, safeguarding the interests of revenue and ensuring compliance.”
Power of Inspection, search and seizure is dealt under section 67, These powers are given to the authorized officers in every law dealing with taxation be it Income Tax Act or Any other Act.
These are very harsh measures and not to be invoked in a casual manner. Reputation of person who is subject to these action/s is at stake and sometimes it pierces the personal privacy of the said person. However, these provisions are necessary to protect the interest of revenue. Looking from another prospective these provisions are also necessary to instill the confidence in the mind of honest taxpayer and fear in the mind of persons who are engaged in the evasion of taxes.
Section 67(1) of CGST Act, 2017 deals with “Inspection of any place of business of taxable person” which can be read as under:
1. Where the proper officer, not below the rank of Joint Commissioner, has reason to believe that-
(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or
(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business
Thus in order to invoke the power of inspection i.e. section 67 (1) the proper officer of the rank of Joint Commissioner or an officer higher in rank has reason to believe that :
(1) A taxable person has:
(a) Suppressed any transactions relating to supply of goods or services or both :
It shall include
i) not recording the transactions in the books of account or
ii) recording of transactions at value less than transactional value or
iii)recording in an incorrect manner to evade payment of taxes.
(b) Suppressed the stock of goods in hand:
It shall include that the physical stock has already been sold but the same has not been recorded in books of account.
(c) Claimed Input Tax Credit in excess of his entitlement under this Act:
It can happen in many situations to quote,
i) claiming blocked credit under section 17(5);
ii) claiming credit of tax paid on supplies exclusively used for making exempted supplies or;
ii) not reversing the credit of tax paid on supplies used for making both taxable and exempted supplies.
(d) Indulged in contravention of any of the provisions of this act or the rules made thereunder to evade tax under this Act
The scope of this term is very wide as it covers any action or activity carried out which is in contradiction to the provisions of the Act. The only restriction is that such non-compliance is made to evade tax and not under Bona fide mistake.
(2) This clause is also applicable to any person engaged in business of transportation of goods or owner or operator of warehouse or godown or any other place for keeping goods which have escaped payment of tax or kept its accounts or goods in a manner to evade tax.
Thus, in such case proper officer may authorise in writing to any other officer to inspect :
i) Any place of business of the taxable person; or
ii) Any places of business of the person engaged in the business of transporting goods; or
iii) Any places of business of owner or the operator of warehouse or godown; or
iv) Any other place.
Power of Inspection by the proper officer is a softer provision than search to enable them to access any place of business of taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of warehouse or godown by issuing Form GST INS-01 authorising any other officer subordinate to him (i.e. Joint commissioner) to conduct inspection as per Rule 139(1) of CGST Rules, 2017.
Conclusion:
On Inspection under 67(1), assessee must make the following checks:
a) INS-01 issued by JOINT COMMISSIONER or above.
b) Reason To Believe for suppression of transaction, suppression of stock, wrong or excess claim of Input tax credit.
c) Indulgence of Taxable person in any activity in contravention of the provisions of the Act.
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