March 21, 2023

Knowing about Inspection, search and seizure under GST

Several people may receive notices under Section 74 from the officer for fraudulently claimed excess ITC or underpaid tax. According to a change made on January 1, 2022, an officer may detain and seize items or transportation even after all cases against those responsible for paying specific or overall penalties have been resolved. GST also provides strict procedures to check and investigate business locations for suspected tax evaders, taking into account the anti evasion program. This article shares information on the Inspection, search and seizure under the rules of GST.

Inspection under GST

Inspection is the process of closely scrutinizing something. It is a gentler provision than search in tax/legal terms. It allows officers to enter any place of done by the company or operated by a taxable person, a person involved in the transportation of commodities, or a person who owns or operates a storehouse or godown.

Search under GST

A "search" is an effort to locate something. In tax and legal jargon, a search is an action taken by a government employee (a tax inspector or a policeman, depending on circumstances) to go through or closely inspect a place, person, object, etc. in order to find anything concealed or to find proof of a crime. Only those acting in accordance with legitimate legal authority may conduct searches.

Seizure under GST

In GST, the word "seizure" is not defined in any particular way. Seizure is the procedure of taking possession of something or a person by the use of force and the legal system, such as when evidence is taken away from the location of a crime. It generally connotes regaining possession against the owner's will.

Understanding the arrest under the breach of GST rules

A person may be prosecuted under GST if the Commissioner thinks they have violated Section 132. To learn more about arrests under GST you can get additional information. GST includes provisions for stopping and looking at items as they travel.

When can seizure under GST happen?

A Joint Controller (or an official of greater rank) may have "reasons to believe" that someone has done any of the following in order to dodge taxes:

1. suppressed all supply-related transactions

2. in hand, suppressed stock

3. claimed a surplus of input tax credits

4. violated any rule or regulation

5. Any carrier or owner/operator of a warehousing has retained items that have avoided tax payment or have maintained records and/or preserved goods in a manner that evades tax.

Then, he may give any officer permission to visit the locations of any of the following businesses:

1. the taxpayer,

2. the carrier, or the owner/operator of the warehouse

3. If he deems fit, he is also free to inspect any other location.

What is the meaning of “reasons to believe under GST”

The term "reason to believe" refers to having information about facts that would cause any reasonable person with the same information to draw the same conclusion. A person is deemed to have "reason to believe" something, in accordance with the Indian Criminal Code of 1860, "if he has adequate grounds to believe such an item but not otherwise." Having reason to believe means making a decision after careful inspection and analysis. It differs from an opinion or other purely subjective consideration. This is based on actual information rather than a conclusion drawn from them.

Common questions under the inspection, search and seizure answered

Is a written record of the "reasons to believe" required before issuing a warrant for an inspection, search, or seizure?

The GST Act makes no reference to keeping track of grounds for belief. In reality, the Finance Act of 2017 retroactively changed Sections 132(1) and (1A) of the Income Tax Act to prohibit disclosing a reason to believe to a third party, an authority, or the Appeal Court.

What defines a seizure from a detention?

Detention is the term used when the owner is denied access to the confiscated property due to a court order or notice. Yet, the owner of the items retains ownership and custody of the goods. Whenever it is believed that the commodities are subject to seizure, it is delivered. A seizure is when the department really takes custody of the goods. However the owner still takes control. Only after determining that the items are subject to confiscation may a seizure be performed.

What authority does the search warrant holder have?

The gate of the premises may be sealed by the officer who has been given permission to search. In the event that entry is prohibited, he may also bust open any building's door. Moreover, he has the ability to open any cabinet or box that may contain commodities, books, documents, etc.

What happens if the products cannot be seized?

The appropriate officer will issue a directive to the proprietor not even to remove the commodities without the officer's prior consent if it is not practical to seize them. An order of ban in the form GST INS-03 will be issued by the officer.


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