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In any tax administration the provisions for Inspection, Search and Seizure are provided to protect the interest of genuine tax payers (as the Tax evaders, by evading the tax, get an unfair advantage over the genuine tax payers) and as a deterrent for tax evasion. These provisions are also required to safeguard Government’s legitimate dues. Thus, these provisions act as a deterrent and by checking evasion provide a level playing field to genuine tax payers.

It may be mentioned that the options of Inspection, Search and Seizure are exercised, only in exceptional circumstances and as a last resort, to protect the Government Revenue. Therefore, to ensure that these provisions are used properly, effectively and the rights of tax payers are also protected, it is stipulated that Inspection, Search or Seizure can only be carried out when an officer, of the rank of Joint Commissioner or above, has reasons to believe the existence of such exceptional circumstances. In such cases the Joint Commissioner may authorise, in writing, any other officer to cause inspection, search and seizure. However, in case of arrests the same can be carried out only where the person is accused of offences specified for this purpose and the tax amount involved is more than specified limit. Further, the arrests under GST Act can be made only under authorisation from the Commissioner.

During the course of search, inspection or investigation sometimes the taxpayer opt for deposit their GST liability arise during the search, inspection by furnishing DRC 03 voluntarily. Some cases are found by department where taxpayer alleged that officer incharge of the search, inspection forcibly asked to deposit the GST liability by furnishing DRC 03. Some of the tax payers also approached to Hon’ble High court in this regard.

For safeguard, Government issued the instructions on Deposit of tax during the course of search, inspection or investigation.


Title No. Date
GST: Deposit of tax during the course of search, inspection or investigation Instruction No. 01/2022-23 MST – Investigations 25/05/2022

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April 2024